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TITLE 26-INTERNAL REVENUE CODE § 1348. 50-percent maximum rate on personal service income (a) General rule If for any taxable year an individual has per- sonal service taxable income which exceeds the amount of taxable income specified in para- graph (1), the tax imposed by section 1 for such year shall, unless the taxpayer chooses the benefits of part I (relating to income averag- ing), be the sum of- (1) the tax imposed by section 1 on the highest amount of taxable income on which the rate of tax does not exceed 50 percent, (2) 50 percent of the amount by which his personal service taxable income exceeds the amount of taxable income specified in para- graph (1) of this subsection, and (3) the excess of the tax computed under section 1 without regard to this section over the tax so computed with reference solely to his personal service taxable income. (b) Definitions For purposes of this section- (1) Perse- ,al service income (A) In general The term "personal service income" means any income which is earned income within the meaning of section 401(c)(2)(C) or section 911(b) or which is an amount re- ceived as a pension or annuity. (B) Exceptions The term "personal service income" does not ir.clude any amount- (I) to which section 72(m)(5), 402(a)(2), 402(e), 403(a)(2), 408(e)(2), 408(e)(3), 408(e)(4), 408(e)(5), 408(f), or 409(c) ap- plies; or (ii) which is includible in gross income under section 409(b) because of the re- demption of a bond which was not ten- dered before the close of the taxable year in which the registered owner attained age 70 . (2) Personal service taxable income The personal service taxable income of an individual is the excess of- (A) the amount which bears the same ratio (but not in excess of 100 percent) to his taxable income as his personal service net income bears to his adjusted gross income, over (B) the sum of the items of tax preference (as defined in section 57) for the taxable year. For purposes of subparagraph (A), the term "personal service net income" means personal service income reduced by any deductions al- lowable under section 62 which are properly allocable to or chargeable against such earned income. (c) Married individuals This section shall apply to a married individ- ual only if such individual and his spouse make a single return jointly for the taxable year. (Added Pub. L. 91-172, title VIII, § 804(a), Dec. 30, 1969, 83 Stat. 685, and amended Pub. L. 93- 406, title II, § 2005(c)(14), Sept. 2, 1974, 88 Stat. 992; Pub. L. 94-455, title III, § 302(a), Oct. 4, 1976, 90 Stat. 1554.) ! AMENDMENTS 1976-Subsec. (a). Pub. AL. 94-455 substituted "per- sonal service taxable inoome" for "earned taxable income" wherever appearing, in par. (1) "highest amount" for "lowest amount" and "tax does not exceed 50 percent" for "tax under section 1 exceeds 50 percent", in par. (2) "exceeds the amount" for "ex- ceeds the lowest amountV' and "income specified in paragraph (1) of this subsection" for "income on which the rate of tax under section 1 exceeds 50 per. cent", and struck out provision that "60 percent" be substituted for "50 percent" in applying this subsec. to a taxable year beginning after Dec. 31, 1970 and before Jan. 1, 1972. Subsec. (b)(1). Pub. L. 94-455 substituted in par. catchline "Personal service income" for "Earned income", designated existing provisions as subpars. (A) and (B), and in subpar. (A) as so designated, substitut- ed" 'personal service incon. e' " for" 'earned income' " and inserted "or which is an amount received as a pen- sion or annuity" followingi"911(b)", and in subpar. (B) as so designated, substituted "any amount" for "any distribution", "403(a)(2), 408(e)(2), 408(e)(3), 408(e)(4). 408(e)(5). 408(f), or 409(c) applies" for "or 403(a)(2)(A) applies or any deferred- compensation within the meaning of section 404", added cl. ii. and struck out provision that deferred compensation does not include any amount received before the end of the taxable year following the first taxable year of the recipient in which his right to receive ,such amount is not subject to a substantial risk of forfeiture. Subsec. (b)(2). Pub. L.94-455 substituted in par. catchline "Personal service taxable income" for "Earned taxable income"j, in the provisions preceding subpar. (A) "personal service taxable income" for "earned taxable income", in subpar. (A) "personal ser- vice net income" for "earned net income", in the provi- sions following subpar. (B) "term 'personal service net income' means personal :service income" for "term 'earned net income' means earned income", and in subpar. (B) substituted reference to the sum of the items of tax preference (as defined in section 57) for the taxable year for reference to the amount by which the greater of-(i) one-fifth of the sum of the taxpay- er's items of tax preference referred to in section 57 for the taxable year and the 4 preceding taxable years, or (ii) the sum of the items of tax preference for the taxable year, exceeds $30.000. 1974--Subsec. (b)(1). Pub. L. 93-406 substituted "402 (a)(2), 402(e)" for "72(n), 402(a)(2)". EFFEcTIvE DATE OP 1976 AmENDMENT Section 302(d) of Pub. t. 94-455 provided that: "The amendments made by this section [to this section and section 1304(b)(5) of thistitle] apply to taxable years beginning after December, 31. 1976." EFFECTIVE DATE OF 1974 AmENiwrr Amendment by Pub. L. p3-406 applicable only with respect 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 Effective Date of 1974 Amendment note under sec- tion 402 of this title. ErFEcTivE DATE Section 804(c) of Pub. L'91-172 provided that: "The amendments made by this section [enacting this sec- tion] shall apply to taxable years beginning after De- cember 31, 1970." h SECrIoN REFERRED TO IN OTHER SECTIONS This section is referred to in section 1304 of this title. § 1348 Page 728