PUBLIC LAW 100-203—DEC. 22, 1987
101 STAT. 1330-399
(1) IN GENERAL.—Chapter 77 is amended by adding at the end thereof the following new section: "SEC. 7519. REQUIRED PAYMENTS FOR ENTITIES ELECTING NOT TO HAVE REQUIRED TAXABLE YEAR.
26 USC 7519.
"(a) GENERAL RULE.—This section applies to a partnership or S corporation for any taxable year, if^ "(1) an election under section 444 is in effect for the taxable r year, and "(2) the required payment determined under subsection (b) for such taxable year (or any preceding taxable year) exceeds $500. "(b) REQUIRED PAYMENT.—For purposes of this section, the term 'required payment' means, with respect to any applicable election year of a partnership or S corporation, an amount equal to— "(1) the excess of the product of— "(A) the applicable percentage of the adjusted highest section 1 rate, multiplied by "(B) the net base year income of the entity, over .1, „-,« "(2) the amount of the required payment for the preceding applicable election year. For purposes of paragraph (I)(A), the term 'adjusted highest section 1 rate' means the highest rate of tax in effect under section 1 as of the end of the base year plus 1 percentage point (or, in the case of applicable election years beginning in 1987, 36 percent). "(c) REFUND OF PAYMENTS.—If the amount determined under subsection (b)(2) exceeds the amount determined under subsection (b)(1), then the entity shall be entitled to a refund of such excess. "(d) NET BASE YEAR INCOME.—For purposes of this section— "(1) IN GENERAL.—An entity's net base year income shall be equal to the sum of^ "(A) the deferral ratio multiplied by the entity's net income for the base year, plus "(B) the excess (if any) of— "(i) the deferral ratio multiplied by the aggregate amount of applicable payments made by the entity Vf *• during the base year, over "(ii) the aggregate amount of such applicable payments made during the deferral period of the base year. • For purposes of this paragraph, the term 'deferral ratio' means « the ratio which the number of months in the deferral period of •=>. the base year bears to the number of months in the partnership's or S corporation's taxable year. "(2) NET INCOME,—Net income is determined by taking into < account the aggregate amount of the following items— "(A) PARTNERSHIPS.—In the case of a partnership, net income shall be the amount (not below zero) determined by X taking into account the aggregate amount of the partner> ship's items described in section 702(a) (other than credits). t ' (B) S CORPORATIONS.—In the case of an S corporation, f net income shall be the amount (not below zero) determined H. by taking into account the aggregate amount of the S corporation's items described in section 1366(a) (other than credits). If the S corporation was a C corporation for the base year, its taxable income for such year shall be treated V. as its net income for such year. "(C) CERTAIN LIMITATIONS DISREGARDED.—For purposes of
subparagraph (A) or (B), any limitation on the amount of
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