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TITLE 26-INTERNAL REVENUE CODE (1) Section 72(d) (relating to employees' an- nuities). (2) Section 72(f) (relating to special rules for computing employees' contributions). (3) Section 101(b) (relating to employees' death benefits). (4) Section 2039 (relating to annuities). (5) Section 2517 (relating to certain annu- ities under qualified plans). (Added Pub. L. 88-272, title II, § 220(a), Feb. 26, 1964, 78 Stat. 58, and amended Pub. L. 91-172, tltle V, § 515(c)(2), Dec. 30, 1069, 83 Stat. 645; Pub. L. 93-406, title II, §§ 1016(a)(4), 2005(c)(12), Sept. 2, 1974, 88 Stat. 929, 992; Pub. L. 94-455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (b)(2)(A). Pub. L. 94-455 struck out "or his delegate" following "Secretary". 1974-Subsec. (b)(1). Pub. L. 93-406, § 1016(a)(4), substituted "section 401(a)(4) and section 410(b) (with- out regard to paragraph (1)(A) thereof)" for "para- graphs (3)(B) and (4) of section 401(a)". Subsec. (c). Pub. L. 93-406. § 2005(c)(12), substituted "subsections (a)(2) and (e) of section 402" for "section 72(n), section 402(a)(2)". 1969-Subsec. (c). Pub. L. 91-172 substituted "provi- sions and limitation of tax" for "provisions" in subsec. catchline, substituted "section 72(n), section 402(a)(2)," for "section 402(a)(2)". EFFECTIVE DATE OF 1974 AMENDMENT Amendment by section 1016(a)(4) of Pub. L. 93-406 applicable, except as otherwise provided in section 1017(c) through (h) of Pub. L. 93-406, for plan years beginning after Sept. 2, 1974, but, In the case of plans in existence on Jan. 1, 1974, amendment by Pub. L. 93- 406 applicable for plan years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93-406, set out as an Effective Date: Transition of Rules note under section 410 of this title. Amendment of subsec. (c) of this section by section 2005(c)(12) of Pub. L. 93-406 applicable only with re- spect to distributions or payments made after Dec. 31, 1973, in taxable years beginning after Dec. 31, 1973, see section 2005(d) of Pub. L. 93-406, set out as an Ef- fective Date of 1974 Amendments note under section 402 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91-172 applicable to taxable years ending after Dec. 31, 1969, see section 515(d) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendments note under section 402 of this title. EFFECTIVE DATE Section 220(d) of Pub. L. 88-272 provided that: "The amendments made by subsections (a) [adding this sec- tion), (b) [adding section 407 of this title], and (c)(1) [to the analysis preceding section 401 of this title] shall apply to taxable years ending after December 31, 1963. The amendments made by subsections (c)(2) [to section 3121(a)(5) of this title] and (3) [to section 409(e) of Title 42, Public Health and Welfare] shall apply to remuneration paid after December 31, 1962." § 407. Certain employees of domestic subsidiaries en- gaged in business outside the United States (a) Treatment as employees of domestic parent corpo- ration (1) In general For purposes of applying this part with re- spect to a pension, profit-sharing, or stock bonus plan described in section 401(a), an an- nuity plan described in section 403(a), or a bond purchase plan described in section 405(a), of a domestic parent corporation, an individual who is a citizen of the United States and who is an employee of a domestic subsidiary (within the meaning of paragraph (2)) )f such domestic parent corporaiton shall be treated as an employee of such domestic parent corporation, if- (A) the plan of such domestic parent cor- poration expressly provides for contribu- tions or benefits for individuals who are citizens of the United States and who are employees of its domestic subsidiaries; and (B) contributions under a funded plan of deferred compensation (whether or not a plan described in section 401(a), 403(a), or 405(a)) are not provided by any other person with respect to the remuneration paid to such individual by the domestic sub- sidiary. (2) Definitions For purposes of this section- (A) Domestic subsidiary A corporation shall be treated as a domes- tic subsidiary for any taxable year only if- (I) such corporation is a domestic corpo- ration 80 percent or more of the outstand- ing voting stock of which is owned by an- other domestic corporation; (ii) 95 percent or more of its gross income for the three-year period immedi- ately preceding the close of its taxable year which ends on or before the close of the taxable year of such other domestic corporation (or for such part of such period during which the corporation was in existence), was derived from sources without the United States; and (iii) 90 percent or more of its gross income for such period (or such part) was derived from the active conduct of a trade or business. If for the period (or part thereof) referred to in clauses (ii) and (iII) such corporation has no gross income, the provisions of clauses (ii) and (iii) shall be treated as satis- fied if it is reasonable to anticipate that, with respect to the first taxable year there- after for which such corporation has gross income, the provisions of such clauses will be satisfied. (B) Domestic parent corporation The domestic parent corporation of any domestic subsidiary is the domestic corpora- tion which owns 80 percent or more of the outstanding voting stock of such domestic subsidiary. (b) Special rules for application of section 401(a) (1) Nondiscrimination requirements For purposes of applying section 401(a)(4) and section 410(b) (without regard to para- graph (1)(A) thereof) with respect to an indi- vidual who is treated as an employee of a do- mestic parent corporation under subsection (a)- (A) if such individual is an officer, share- holder, or person whose principal duties consist in supervising the work of other em- ployees of a domestic subsidiary, he shall be Page 315 §4,07