Page 289

TITLE 26-INTERNAL REVENUE CODE (21) A trust forming part of an employee stock ownership plan which satisfies the re- quirements of section 301(d) of the Tax Re- duction Act of 1975 shall not fail to be consid- ered a permanent program merely because employer contributions under the plan are determined solely by reference to the amount of credit which would be allowable under sec- tion 46(a) if the employer made the transfer described in subsection (d)(6) or (e)(3) of sec- tion 301 of the Tax Reduction Act of 1975. Paragraphs (11), (12), (13), (14), (15), (19), and (20) shall apply only in the case of a plan to which section 411 (relating to minimum vesting standards) applies without regard to subsection (e)(2) of such section. (b) Certain retroactive changes in plan A stock bonus, pension, profit-sharing, or an- nuity plan shall be considered as satisfying the requirements of subsection (a) for the period beginning with the date on which it was put into effect, or for the period beginning with the earlier of the date on which there was adopted or put into effect any amendment which caused the plan to fail to satisfy such requirements, and ending with the time prescribed by law for filing the return of the employer for his tax- able year in which such plan or amendment was adopted (including extensions thereof) or such later time as the Secretary may designate, if all provisions of the plan which are necessary to satisfy such requirements are in effect by the end of such period and have been made ef- fective for all purposes for the whole of such period. (c) Definitions and rules relating to self-r.mpioyed in- dividuals and owner-employees For purposes of this section- (1) Employee The term "employee" includes, for any tax- able year, an individual who has earned income (as defined in paragrah (2)) for the taxable year. To the extent provided in regu- lations prescribed by the Secretary, such term also includes, for any taxable year- (A) an individual who would be an em- ployee within the meaning of the preceding sentence but for the fact that the trade or business carried on by such Individual did not have net profits for the taxable year, and (B) an individual who has been an em- ployee within the meaning of the preceding sentence for any prior taxable year. (2) Earned income (A) In general The term "earned income" means the net earnings from self-employment (as defined in section 1402(a)), but such net earnings shall be determined- (i) only with respect to a trade or busi- ness in which personal services of the tax- payer are a material income-producing factor, (i) without regard to paragraphs (4) and (5) of section 1402(c), (iii) in the case of any individual who is treated as an employee under sections 3121(d)(3)(A), (C), or (D), without regard to paragraph (2) of section 1402(c), and (iv) without regard to items which are not included In gross income for purposes of this chapter, and the deductions prop- erly allocable to or chargeable against such items. For purposes of this subparagraph, section 1402, as in effect for a taxable year ending on December 31, 1962, shall be treated as having been in effect for all taxable years ending before such date. [(B) Repealed] (C) Income from disposition of certain property For purposes of this section, the term "earned income" includes gains (other than any gain which is treated under any provi- sion of this chapter as gain from the sale or exchange of a capital asset) and net earn- ings derived from the sale or other disposi- tion of, the transfer of any interest In, or the licensing of the use of property (other than good will) by an individual whose per- sonal efforts created such property. (3) Owner-employee The term "owner-employee" means an em- ployee who- (A) owns the entire interest in an unincor- porated trade or business, or (B) in the case of a partnership, is a part- ner who owns more than 10 percent of either the capital interest or the profits in- terest in such partnership. To the extent provided in regulations pre- scribed by the Secretary, such term also means an individual who has been an owner- employee within the meaning of the preced- ing sentence. (4) Employer An individual who owns the entire interest in an unincorporated trade or buisness shall be treated as his own employer. A partner- ship shall be treated as the employer of each partner who is an employee within the mean- ing of paragraph (1). (5) Contributions on behalf of owner-employees The term "contribution on behalf of an owner-employee" includes, except as the con- text otherwise requires, a contribution under a plan- (A) by the employer for an owner-employ- ee, and (B) by an owner-employee as an employ- ee. (d) Additional requirements for qualification of trusts and plans benefiting owner-employees A trust forming part of a pension or profit- sharing plan which provides contributions or benefits for employees some or all of whom are owner-employees shall constitute a qualified trust under this section only if, in addition to meeting the requirements of subsection (a), the following requirements of this subsection are met by the trust and by the plan of which such trust is a part' (1) In the case of a trust which is created on or after October 10, 1962, or which was cre- ated before such date but is not exempt from tax under section 501(a) as an organization described in subsection (a) on the day before such date, the assets thereof are held by a Page 289 § 401