26 U.S.C. § 1402: Definitions

Cases: United States v. Lee, 455 U.S. 252 (1982); Olsen v. Commissioner, 709 F.2d 278 (4th Cir. 1983)

Forms: Form 4361; Form 4029; Form 1040

Final rules 4

(a) Net earnings from self-employment The term “net earnings from self-employment” means the gross income derived by an individual from any trade or business carried on by such individual, less the deductions allowed by this subtitle which are attributable to such trade or business, plus his distributive share (whether or not distributed) of income or loss described in section 702(a)(8) from any trade or business carried on by a partnership of which he is a member; except that in computing such gross income and deductions and such distributive share of partnership ordinary income or loss—

§ 1.1402(a)-1 Definition of net earnings from self-employment.§ 1.1402(a)-2 Computation of net earnings from self-employment.§ 1.1402(a)-3 Special rules for computing net earnings from self-employment.§ 1.1402(a)-4 Rentals from real estate.§ 1.1402(a)-5 Dividends and interest.§ 1.1402(a)-6 Gain or loss from disposition of property.§ 1.1402(a)-7 Net operating loss deduction.§ 1.1402(a)-8 Community income.§ 1.1402(a)-9 Puerto Rico.§ 1.1402(a)-10 Personal exemption deduction.§ 1.1402(a)-11 Ministers and members of religious orders.§ 1.1402(a)-12 Continental shelf and certain possessions of the United States.§ 1.1402(a)-13 Income from agricultural activity.§ 1.1402(a)-14 Options available to farmers in computing net earnings from self-employment for taxable years ending after 1954 and before December 31, 1956.§ 1.1402(a)-15 Options available to farmers in computing net earnings from self-employment for taxable years ending on or after December 31, 1956.§ 1.1402(a)-16 Exercise of option.§ 1.1402(a)-17 Retirement payments to retired partners.§ 1.1402(a)-18 Split-dollar life insurance arrangements.Prop. § 1.1402(a)-1 Proposed 1994 · Prop. § 1.1402(a)-18 Proposed 1994 · Members of certain limited liability companies.

Amended 1954, 1956, 1960, 1965, 1976, 1978, 1987, 1990, 2008

2008 Pub. L. 110-246 Pub. L. 110–246, § 15352(a)(1), in concluding provisions, substituted “the upper limit” for “$2,400” wherever appearing and “the lower limit” for “$1,600” wherever appearing.
1990 Pub. L. 101-508 Pub. L. 101–508, § 5123(a)(3), struck out last undesignated par. which read as follows: “Any income of an individual which results from or is attributable to the performance of services by such individual as a director of a corporation during any taxable year shall be deemed to have been derived (and received) by such individual in that year, at the time the services were performed, regardless of when the income is actually paid to or received by such individual (unless it was actually paid and received prior to that year).”
1987 Pub. L. 100-203 Pub. L. 100–203 inserted par. at end relating to income of an individual which results from or is attributable to the performance of services by such individual as a director of a corporation.
1978 Pub. L. 95-615 Pub. L. 95–615 substituted “(relating to income earned by employees in certain camps)” for “(relating to earned income from sources without the United States)” in par. (8).
1978 Pub. L. 95-600 Pub. L. 95–600, § 703(j)(8)(A), substituted “subsection (h)” for “subsection (i)” wherever appearing in last par.
1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1901(b)(1) (I)(iii), (X), 1906(b)(13)(A), substituted, in provisions preceding par. (1) and in two places in cl. (iv) of provisions extending the application of provisions relating to agricultural labor to trade or business carried on by individuals, self-employed or in partnership, “section 702(a)(8)” for “section 702(a)(9)” and struck out in par. (2) “(other than interest described in section 35)” after “unless such dividends and interest” and in par. (10) “or his delegate” after “Secretary”.
1965 Pub. L. 89-97 Pub. L. 89–97, § 312(b), substituted “2,400” for “$1,800” in cls. (i) to (iv) and “$1,600” for “$1,200” in cls. (ii) and (iv) of second sentence following par. (9), wherever appearing.
1960 Pub. L. 86-778 Pub. L. 86–778, § 103(k), added par. (9) and inserted references to paragraph (9) in cls. (v) and (vi) of last sentence.
1956 Act Aug. 1, 1956, § 201(i), amended generally last two sentences to include those businesses in which the income is computed under an accrual method, and partnerships, to change the method of computation of net earnings for individuals by permitting those whose gross income is not more than $1,800 to deem their net earnings to be 66⅔ percent of such gross income, and those whose gross income is more than $1,800 and the net earnings are less than $1,200, to deem the net earnings to be $1,200, and to provide for the computation of net earnings for members of partnerships.
1954 Act Sept. 1, 1954, § 201(a), (c)(4), in par. (1) clarified the term rentals to indicate that it includes rentals paid in the form of crop shares, struck out par. (2), redesignated pars. (3) to (8) as (2) to (7), respectively, added a new par. (8), and inserted provisions at end establishing an optional method of reporting income for self-employed farmers.

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(1) there shall be excluded rentals from real estate and from personal property leased with the real estate (including such rentals paid in crop shares, and including payments under section 1233(a)(2) of the Food Security Act of 1985 (16 U.S.C. 3833(a)(2)) to individuals receiving benefits under section 202 or 223 of the Social Security Act) together with the deductions attributable thereto, unless such rentals are received in the course of a trade or business as a real estate dealer; except that the preceding provisions of this paragraph shall not apply to any income derived by the owner or tenant of land if (A) such income is derived under an arrangement, between the owner or tenant and another individual, which provides that such other individual shall produce agricultural or horticultural commodities (including livestock, bees, poultry, and fur-bearing animals and wildlife) on such land, and that there shall be material participation by the owner or tenant (as determined without regard to any activities of an agent of such owner or tenant) in the production or the management of the production of such agricultural or horticultural commodities, and (B) there is material participation by the owner or tenant (as determined without regard to any activities of an agent of such owner or tenant) with respect to any such agricultural or horticultural commodity;

Amended 1956, 1974, 2008, 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(197), substituted “section 1233(a)(2)” for “section 1233(2)” and “16 U.S.C. 3833(a)(2)” for “16 U.S.C. 3833(2)”.
2008 Pub. L. 110-246 Pub. L. 110–246, § 15301(a), inserted “, and including payments under section 1233(2) of the Food Security Act of 1985 (16 U.S.C. 3833(2)) to individuals receiving benefits under section 202 or 223 of the Social Security Act” after “crop shares”.
1974 Pub. L. 93-368 Pub. L. 93–368 inserted “(as determined without regard to any activities of an agent of such owner or tenant)” after “material participation by the owner or tenant” wherever appearing.
1956 Act Aug. 1, 1956, § 201(e)(2), struck out from the exclusion income derived by an owner or tenant of land if such income is derived under an arrangement with another individual for the production by such other individual of agricultural or horticultural commodities if such arrangement provides for material participation by the owner or tenant in the production or the management of the production of such commodities, and there is material participation by the owner or tenant with respect to any such commodity.

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(2) there shall be excluded dividends on any share of stock, and interest on any bond, debenture, note, or certificate, or other evidence of indebtedness, issued with interest coupons or in registered form by any corporation (including one issued by a government or political subdivision thereof), unless such dividends and interest are received in the course of a trade or business as a dealer in stocks or securities;

(3) there shall be excluded any gain or loss—

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(A) which is considered as gain or loss from the sale or exchange of a capital asset,

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(B) from the cutting of timber, or the disposal of timber, coal, or iron ore, if section 631 applies to such gain or loss, or

Amended 1964

1964 Pub. L. 88-272 Pub. L. 88–272 inserted reference to iron ore.

(i) stock in trade or other property of a kind which would properly be includible in inventory if on hand at the close of the taxable year, nor

(ii) property held primarily for sale to customers in the ordinary course of the trade or business;

(4) the deduction for net operating losses provided in section 172 shall not be allowed;

(5) if—

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(A) any of the income derived from a trade or business (other than a trade or business carried on by a partnership) is community income under community property laws applicable to such income, the gross income and deductions attributable to such trade or business shall be treated as the gross income and deductions of the spouse carrying on such trade or business or, if such trade or business is jointly operated, treated as the gross income and deductions of each spouse on the basis of their respective distributive share of the gross income and deductions; and

Amended 2004

2004 Pub. L. 108-203 Pub. L. 108–203 substituted “the gross income and deductions attributable to such trade or business shall be treated as the gross income and deductions of the spouse carrying on such trade or business or, if such trade or business is jointly operated, treated as the gross income and deductions of each spouse on the basis of their respective distributive share of the gross income and deductions; and” for “all of the gross income and deductions attributable to such trade or business shall be treated as the gross income and deductions of the husband unless the wife exercises substantially all of the management and control of such trade or business, in which case all of such gross income and deductions shall be treated as the gross income and deductions of the wife; and”.

(B) any portion of a partner’s distributive share of the ordinary income or loss from a trade or business carried on by a partnership is community income or loss under the community property laws applicable to such share, all of such distributive share shall be included in computing the net earnings from self-employment of such partner, and no part of such share shall be taken into account in computing the net earnings from self-employment of the spouse of such partner;

(6) a resident of Puerto Rico shall compute his net earnings from self-employment in the same manner as a citizen of the United States but without regard to section 933;

(7) the deduction for personal exemptions provided in section 151 shall not be allowed;

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(8) an individual who is a duly ordained, commissioned, or licensed minister of a church or a member of a religious order shall compute his net earnings from self-employment derived from the performance of service described in subsection (c)(4) without regard to section 107 (relating to rental value of parsonages), section 119 (relating to meals and lodging furnished for the convenience of the employer), and section 911 (relating to citizens or residents of the United States living abroad), but shall not include in such net earnings from self-employment the rental value of any parsonage or any parsonage allowance (whether or not excludable under section 107) provided after the individual retires, or any other retirement benefit received by such individual from a church plan (as defined in section 414(e)) after the individual retires;

Amended 1956, 1957, 1972, 1981, 1986, 1996

1996 Pub. L. 104-188 Pub. L. 104–188 inserted before semicolon at end “, but shall not include in such net earnings from self-employment the rental value of any parsonage or any parsonage allowance (whether or not excludable under section 107) provided after the individual retires, or any other retirement benefit received by such individual from a church plan (as defined in section 414(e)) after the individual retires”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1272(d)(8), inserted “and” after “of the employer),” and struck out “and section 931 (relating to income from sources within possessions of the United States)” after “living abroad)”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 111(b)(3), substituted “relating to citizens or residents of the United States living abroad” for “relating to income earned by employees in certain camps”.
1972 Pub. L. 92-603 Pub. L. 92–603, §§ 121(b)(1), 124(b), 140(b), in par. (8), struck out limitation under which provisions authorizing the computation of net earnings without regard to sections 911 and 931 were limited to citizens of the United States performing religious service as employees of an American employer or as ministers in a foreign country having a congregation predominantly of citizens of the United States, added par. (11), and extended the application of provisions relating to agricultural labor to trade or business carried on by individuals, self-employed or in partnership, with certain exceptions.
1957 Pub. L. 85-239 Pub. L. 85–239, § 5(b), permitted computation of net earnings without regard to sections 107 and 119 of this title.
1956 Act Aug. 1, 1956, § 201(g), included citizens of the United States who are ministers in foreign countries and have congregations composed predominantly of citizens of the United States.

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(9) the exclusion from gross income provided by section 931 shall not apply;

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1272(d)(9), amended par. (9) generally. Prior to amendment, par. (9) read as follows: “the term ‘possession of the United States’ as used in sections 931 (relating to income from sources within possessions of the United States) and 932 (relating to citizens of possessions of the United States) shall be deemed not to include the Virgin Islands, Guam, or American Samoa;”.

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(10) there shall be excluded amounts received by a partner pursuant to a written plan of the partnership, which meets such requirements as are prescribed by the Secretary, and which provides for payments on account of retirement, on a periodic basis, to partners generally or to a class or classes of partners, such payments to continue at least until such partner’s death, if—

Amended 1968

1968 Pub. L. 90-248 Pub. L. 90–248, § 118(a), added par. (10).

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(A) such partner rendered no services with respect to any trade or business carried on by such partnership (or its successors) during the taxable year of such partnership (or its successors), ending within or with his taxable year, in which such amounts were received, and

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(B) no obligation exists (as of the close of the partnership’s taxable year referred to in subparagraph (A)) from the other partners to such partner except with respect to retirement payments under such plan, and

(C) such partner’s share, if any, of the capital of the partnership has been paid to him in full before the close of the partnership’s taxable year referred to in subparagraph (A);

(11) the exclusion from gross income provided by section 911(a)(1) shall not apply;

Amended 1972, 1981, 1983

1983 Pub. L. 98-21 Pub. L. 98–21, § 323(b)(1), struck out “in the case of an individual described in section 911(d)(1)(B),” before “the exclusion”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 111(b)(5), substituted “in the case of an individual described in section 911(d)(1)(B), the exclusion from gross income provided by section 911(a)(1) shall not apply” for “in the case of an individual who has been a resident of the United States during the entire taxable year, the exclusion from gross income provided by section 911(a)(2) shall not apply”.
1972 Pub. L. 92-603 Pub. L. 92–603, §§ 121(b)(1), 124(b), 140(b), in par. (8), struck out limitation under which provisions authorizing the computation of net earnings without regard to sections 911 and 931 were limited to citizens of the United States performing religious service as employees of an American employer or as ministers in a foreign country having a congregation predominantly of citizens of the United States, added par. (11), and extended the application of provisions relating to agricultural labor to trade or business carried on by individuals, self-employed or in partnership, with certain exceptions.

(12) in lieu of the deduction provided by section 164(f) (relating to deduction for one-half of self-employment taxes), there shall be allowed a deduction equal to the product of—

Amended 1977, 1983

1983 Pub. L. 98-21 Pub. L. 98–21, § 124(c)(2), added par. (12) and redesignated former par. (12) as (13).
1977 Pub. L. 95-216 Pub. L. 95–216 added par. (12).

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(A) the taxpayer’s net earnings from self-employment for the taxable year (determined without regard to this paragraph), and

(B) one-half of the sum of the rates imposed by subsections (a) and (b) of section 1401 for such year (determined without regard to the rate imposed under paragraph (2) of section 1401(b));

Amended 2010

2010 Pub. L. 111-148 Pub. L. 111–148 inserted “(determined without regard to the rate imposed under paragraph (2) of section 1401(b))” after “for such year”.

(13) there shall be excluded the distributive share of any item of income or loss of a limited partner, as such, other than guaranteed payments described in section 707(c) to that partner for services actually rendered to or on behalf of the partnership to the extent that those payments are established to be in the nature of remuneration for those services;

Amended 1983

1983 Pub. L. 98-21 Pub. L. 98–21, § 124(c)(2), added par. (12) and redesignated former par. (12) as (13).

(14) in the case of church employee income, the special rules of subsection (j)(1) shall apply;

Amended 1984, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1882(b)(1)(B)(i), amended par. (14) generally. Prior to amendment, par. (14) read as follows: “with respect to remuneration for services which are treated as services in a trade or business under subsection (c)(2)(G)—
“(A) no deduction for trade or business expenses provided under this Code (other than the deduction under paragraph (12)) shall apply;
“(B) the provisions of subsection (b)(2) shall not apply; and
“(C) if the amount of such remuneration from an employer for the taxable year is less than $100, such remuneration from that employer shall not be included in self-employment income.”
1984 Pub. L. 98-369 Pub. L. 98–369, § 2603(d)(2), added par. (14).

(15) in the case of a member of an Indian tribe, the special rules of section 7873 (relating to income derived by Indians from exercise of fishing rights) shall apply;

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 3043(c)(1), added par. (15).

(16) the deduction provided by section 199 [OLRC note: See References in Text note below.] shall not be allowed; and

Amended 2004

2004 Pub. L. 108-357 Pub. L. 108–357 added par. (16).

(17) notwithstanding the preceding provisions of this subsection, each spouse’s share of income or loss from a qualified joint venture shall be taken into account as provided in section 761(f) in determining net earnings from self-employment of such spouse.

Amended 2007

2007 Pub. L. 110-28 Pub. L. 110–28 added par. (17).

If the taxable year of a partner is different from that of the partnership, the distributive share which he is required to include in computing his net earnings from self-employment shall be based on the ordinary income or loss of the partnership for any taxable year of the partnership ending within or with his taxable year. In the case of any trade or business which is carried on by an individual or by a partnership and in which, if such trade or business were carried on exclusively by employees, the major portion of the services would constitute agricultural labor as defined in section 3121(g)—

(i) in the case of an individual, if the gross income derived by him from such trade or business is not more than the upper limit, the net earnings from self-employment derived by him from such trade or business may, at his option, be deemed to be 66⅔ percent of such gross income; or

(ii) in the case of an individual, if the gross income derived by him from such trade or business is more than the upper limit and the net earnings from self-employment derived by him from such trade or business (computed under this subsection without regard to this sentence) are less than the lower limit, the net earnings from self-employment derived by him from such trade or business may, at his option, be deemed to be the lower limit; and

(iii) in the case of a member of a partnership, if his distributive share of the gross income of the partnership derived from such trade or business (after such gross income has been reduced by the sum of all payments to which section 707(c) applies) is not more than the upper limit, his distributive share of income described in section 702(a)(8) derived from such trade or business may, at his option, be deemed to be an amount equal to 66⅔ percent of his distributive share of such gross income (after such gross income has been so reduced); or

(iv) in the case of a member of a partnership, if his distributive share of the gross income of the partnership derived from such trade or business (after such gross income has been reduced by the sum of all payments to which section 707(c) applies) is more than the upper limit and his distributive share (whether or not distributed) of income described in section 702(a)(8) derived from such trade or business (computed under this subsection without regard to this sentence) is less than the lower limit, his distributive share of income described in section 702(a)(8) derived from such trade or business may, at his option, be deemed to be the lower limit.

For purposes of the preceding sentence, gross income means—

(v) in the case of any such trade or business in which the income is computed under a cash receipts and disbursements method, the gross receipts from such trade or business reduced by the cost or other basis of property which was purchased and sold in carrying on such trade or business, adjusted (after such reduction) in accordance with the provisions of paragraphs (1) through (7) and paragraph (9) of this subsection; and

(vi) in the case of any such trade or business in which the income is computed under an accrual method, the gross income from such trade or business, adjusted in accordance with the provisions of paragraphs (1) through (7) and paragraph (9) of this subsection;

and, for purposes of such sentence, if an individual (including a member of a partnership) derives gross income from more than one such trade or business, such gross income (including his distributive share of the gross income of any partnership derived from any such trade or business) shall be deemed to have been derived from one trade or business.

The preceding sentence and clauses (i) through (iv) of the second preceding sentence shall also apply in the case of any trade or business (other than a trade or business specified in such second preceding sentence) which is carried on by an individual who is self-employed on a regular basis as defined in subsection (h), or by a partnership of which an individual is a member on a regular basis as defined in subsection (h), but only if such individual’s net earnings from self-employment as determined without regard to this sentence in the taxable year are less than the lower limit and less than 66⅔ percent of the sum (in such taxable year) of such individual’s gross income derived from all trades or businesses carried on by him and his distributive share of the income or loss from all trades or businesses carried on by all the partnerships of which he is a member; except that this sentence shall not apply to more than 5 taxable years in the case of any individual, and in no case in which an individual elects to determine the amount of his net earnings from self-employment for a taxable year under the provisions of the two preceding sentences with respect to a trade or business to which the second preceding sentence applies and with respect to a trade or business to which this sentence applies shall such net earnings for such year exceed the lower limit.

(b) Self-employment income The term “self-employment income” means the net earnings from self-employment derived by an individual (other than a nonresident alien individual, except as provided by an agreement under section 233 of the Social Security Act) during any taxable year; except that such term shall not include—

§ 1.1402(b)-1 Self-employment income.

Amended 1954, 1960, 1968, 1975, 1982, 1983, 1986, 1990, 1993, 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(198), substituted “3211.” for “3211,.” in concluding provisions.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13207(b)(1)(C), (D), in concluding provisions, inserted “and” after “section 3121(b),” and struck out “and (C) includes, but only with respect to the tax imposed by section 1401(b), remuneration paid for medicare qualified government employment (as defined in section 3121(u)(3)) which is subject to the taxes imposed by sections 3101(b) and 3111(b)” after “section 3201 or 3211,”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 5130(a)(2), amended directory language of Pub. L. 98–21, § 322(b)(2). See 1983 Amendment note below.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1882(b)(1)(B)(ii), (iii), substituted “paragraph” for “clause” in second sentence and inserted at end “In the case of church employee income, the special rules of subsection (j)(2) shall apply for purposes of paragraph (2).”
1986 Pub. L. 99-509 Pub. L. 99–509 struck out “under an agreement entered into pursuant to the provisions of section 218 of the Social Security Act (relating to coverage of State employees), or” after “services included” in second sentence.
1986 Pub. L. 99-272 Pub. L. 99–272 substituted “medicare qualified government employment (as defined in section 3121(u)(3))” for “medicare qualified Federal employment (as defined in section 3121(u)(2))”.
1983 Pub. L. 98-21 Pub. L. 98–21, § 322(b)(2), as amended by Pub. L. 101–508, § 5130(a)(2), inserted “, except as provided by an agreement under section 233 of the Social Security Act” in text preceding par. (1).
1983 Pub. L. 98-21 Pub. L. 98–21, § 321(e)(3), substituted “employees of foreign affiliates of American employers” for “employees of foreign subsidiaries of domestic corporations” in cl. (A) of provisions following par. (2).
1982 Pub. L. 97-248 Pub. L. 97–248 struck out “and” before “(B)” and inserted “, and (C) includes, but only with respect to the tax imposed by section 1401(b), remuneration paid for medicare qualified Federal employment (as defined in section 3121(u)(2)) which is subject to the taxes imposed by sections 3101(b) and 3111(b)”.
1975 Pub. L. 94-92 Pub. L. 94–92 struck out from item B of second sentence the limitation of “wages” to include “compensation” solely with respect to the tax imposed by section 1401(b).
1968 Pub. L. 90-248 Pub. L. 90–248, § 502(b)(1), designated existing provisions of second sentence respecting “wages” as item “A” and added item “B”.
1960 Pub. L. 86-778 Pub. L. 86–778, § 103(l), substituted “the Commonwealth of Puerto Rico, the Virgin Islands, Guam, or American Samoa” for “the Virgin Islands or a resident of Puerto Rico” in last sentence.
1954 Act Sept. 1, 1954, § 201(b), increased the limitation on self-employment income subject to tax, for taxable years ending after 1954, from $3,600 to $4,200 and included as “wages”, for purposes of computing “self-employment income,” remuneration of United States citizens employed by a foreign subsidiary of a domestic corporation which has agreed to have the Social Security insurance system extended to service performed by such citizens.

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(1) in the case of the tax imposed by section 1401(a), that part of the net earnings from self-employment which is in excess of (i) an amount equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) which is effective for the calendar year in which such taxable year begins, minus (ii) the amount of the wages paid to such individual during such taxable years; or

Amended 1958, 1965, 1968, 1971, 1972, 1973, 1976, 1990, 1993

1993 Pub. L. 103-66 Pub. L. 103–66, § 13207(b)(1)(A), (B), substituted “in the case of the tax imposed by section 1401(a), that part of the net” for “that part of the net” and “contribution and benefit base (as determined under section 230 of the Social Security Act)” for “applicable contribution base (as determined under subsection (k))”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11331(b)(1), substituted “the applicable contribution base (as determined under subsection (k))” for “the contribution and benefit base (as determined under section 230 of the Social Security Act)”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(a)(155)(A), among other changes, struck out provisions spelling out fixed Social Security contributions and benefit base limits on wages paid during taxable years between 1955 through 1974.
1973 Pub. L. 93-233 Pub. L. 93–233 substituted “$13,200” for “$12,600”.
1973 Pub. L. 93-66 Pub. L. 93–66 substituted “$12,600” for “$12,000”.
1972 Pub. L. 92-336 Pub. L. 92–336, § 203(b)(1)(A), inserted “and before 1973” after “1971”.
1972 Pub. L. 92-336 Pub. L. 92–336, § 203(b)(1)(B), added subpars. (G) to (I).
1971 Pub. L. 92-5 Pub. L. 92–5, § 203(b)(1)(A), inserted “and beginning before 1972” after “1967” and substituted “; and” for “; or”.
1971 Pub. L. 92-5 Pub. L. 92–5, § 203(b)(1)(B), added subpar. (F).
1968 Pub. L. 90-248 Pub. L. 90–248, § 108(b)(1)(A), inserted “and before 1968” after “1965”.
1968 Pub. L. 90-248 Pub. L. 90–248, § 108(b)(1)(B), added subpar. (E).
1965 Pub. L. 89-97 Pub. L. 89–97, § 320(b)(1)(C), inserted “and before 1966” after “1958” and substituted “and” for “or” after the semicolon.
1965 Pub. L. 89-97 Pub. L. 89–97, § 320(b)(1)(B), added subpar. (D).
1958 Pub. L. 85-840 Pub. L. 85–840, § 402(a), increased limitation on self-employment income subject to tax, for taxable years ending after 1958, from $4,200 to $4,800.

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(2) the net earnings from self-employment, if such net earnings for the taxable year are less than $400.

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For purposes of paragraph (1), the term “wages” (A) includes such remuneration paid to an employee for services included under an agreement entered into pursuant to the provisions of section 3121(l) (relating to coverage of citizens of the United States who are employees of foreign affiliates of American employers), as would be wages under section 3121(a) if such services constituted employment under section 3121(b), and (B) includes compensation which is subject to the tax imposed by section 3201 or 3211. An individual who is not a citizen of the United States but who is a resident of the Commonwealth of Puerto Rico, the Virgin Islands, Guam, or American Samoa shall not, for purposes of this chapter be considered to be a nonresident alien individual. In the case of church employee income, the special rules of subsection (j)(2) shall apply for purposes of paragraph (2).

(c) Trade or business The term “trade or business”, when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 (relating to trade or business expenses), except that such term shall not include—

§ 1.1402(c)-1 Trade or business.§ 1.1402(c)-2 Public office.§ 1.1402(c)-3 Employees.§ 1.1402(c)-4 Individuals under Railroad Retirement System.§ 1.1402(c)-5 Ministers and members of religious orders.§ 1.1402(c)-6 Members of certain professions.§ 1.1402(c)-7 Members of religious groups opposed to insurance.

Amended 1954, 1965, 1968

1968 Pub. L. 90-248 Pub. L. 90–248, § 115(b)(1), substituted “such order) performed by an individual unless an exemption under subsection (e) is effective with respect to him” for “such order performed by an individual during the period for which a certificate filed by him under subsection (e) is in effect” in last sentence.
1965 Pub. L. 89-97 Pub. L. 89–97, §§ 311(b)(1), (2), 319(a), struck out from par. (5) “doctor of medicine, or” before and “; or the performance of such service by a partnership” after “Christian Science practitioner,” added par. (6), and consolidated into one sentence former last two sentences.
1954 Act Sept. 1, 1954, § 201(c)(2), inserted two sentences at end making the provisions of par. (4) inapplicable to service performed during the period for which a certificate filed under subsec. (e) is in effect.

Cited by 23

(1) the performance of the functions of a public office, other than the functions of a public office of a State or a political subdivision thereof with respect to fees received in any period in which the functions are performed in a position compensated solely on a fee basis and in which such functions are not covered under an agreement entered into by such State and the Commissioner of Social Security pursuant to section 218 of the Social Security Act;

Amended 1968, 1984, 1994

1994 Pub. L. 103-296 Pub. L. 103–296, § 108(h)(1), substituted “Commissioner of Social Security” for “Secretary of Health and Human Services”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 2663(j)(5)(B), substituted “Secretary of Health and Human Services” for “Secretary of Health, Education, and Welfare”.
1968 Pub. L. 90-248 Pub. L. 90–248, § 122(b)(1), excepted from exclusion from definition of “trade or business” the functions of a public office of a State or a political division thereof with respect to fees received in any period in which the functions are performed in a position compensated solely on a fee basis and in which such functions are not covered under an agreement entered by such State and the Secretary pursuant to section 218 of the Social Security Act [section 418 of Title 42, The Public Health and Welfare].

(2) the performance of service by an individual as an employee, other than—

Amended 1954, 1956, 1960

1960 Pub. L. 86-778 Pub. L. 86–778, § 106(b), excluded service described in section 3121(b)(11), (12), or (15) performed in the United States (as defined in section 3121(e)(2)) by a citizen of the United States.
1956 Act Aug. 1, 1956, § 201(e)(3), included within “trade or business” service described in section 3121(b)(16) of this title.
1954 Act Sept. 1, 1954, § 201(c)(1), inserted “and other than service described in paragraph (4) of this subsection” after “18”.

Cited by 2

(A) service described in section 3121(b)(14)(B) performed by an individual who has attained the age of 18,

(B) service described in section 3121(b)(16),

(C) service described in section 3121(b)(11), (12), or (15) performed in the United States (as defined in section 3121(e)(2)) by a citizen of the United States, except service which constitutes “employment” under section 3121(y),

Amended 1994

1994 Pub. L. 103-296 Pub. L. 103–296, § 319(a)(4), inserted at end “except service which constitutes ‘employment’ under section 3121(y),”.

(D) service described in paragraph (4) of this subsection,

(E) service performed by an individual as an employee of a State or a political subdivision thereof in a position compensated solely on a fee basis with respect to fees received in any period in which such service is not covered under an agreement entered into by such State and the Commissioner of Social Security pursuant to section 218 of the Social Security Act,

Amended 1968, 1984, 1994

1994 Pub. L. 103-296 Pub. L. 103–296, § 108(h)(1), substituted “Commissioner of Social Security” for “Secretary of Health and Human Services”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 2663(j)(5)(B), substituted “Secretary of Health and Human Services” for “Secretary of Health, Education, and Welfare”.
1968 Pub. L. 90-248 Pub. L. 90–248, § 122(b)(2), added subpar. (E).

Cited by 2

(F) service described in section 3121(b) (20), and

Amended 1976

1976 Pub. L. 94-455 Pub. L. 94–455, § 1207(e)(1)(B), added subpar. (F).

(G) service described in section 3121(b)(8)(B);

Amended 1984, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1883(a)(11)(A), realigned margin of subpar. (G).
1984 Pub. L. 98-369 Pub. L. 98–369, § 2603(c)(2), added subpar. (G).

(3) the performance of service by an individual as an employee or employee representative as defined in section 3231;

(4) the performance of service by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order;

Cited by 10

(5) the performance of service by an individual in the exercise of his profession as a Christian Science practitioner; or

Amended 1954, 1956

1956 Act Aug. 1, 1956, § 201(f), struck out exclusion of lawyers, dentists, osteopaths, veterinarians, chiropractors, naturopaths, and optometrists.
1954 Act Sept. 1, 1954, § 201(c)(5), struck out exclusions from self-employment tax in the case of architects, certified public accountants, accountants registered or licensed as accountants under State or municipal law, full-time practicing public accountants, funeral directors and professional engineers.

Cited by 6

(6) the performance of service by an individual during the period for which an exemption under subsection (g) is effective with respect to him.

Amended 1978

1978 Pub. L. 95-600 Pub. L. 95–600, § 703(j)(8)(B), substituted “subsection (g)” for “subsection (h)”.

Cited by 5

The provisions of paragraph (4) or (5) shall not apply to service (other than service performed by a member of a religious order who has taken a vow of poverty as a member of such order) performed by an individual unless an exemption under subsection (e) is effective with respect to him.

(d) Employee and wages The term “employee” and the term “wages” shall have the same meaning as when used in chapter 21 (sec. 3101 and following, relating to Federal Insurance Contributions Act).

§ 1.1402(d)-1 Employee and wages.

Cited by 1

(e) Ministers, members of religious orders, and Christian Science practitioners

§ 1.1402(e)-1A Application of regulations under section 1402(e).§ 1.1402(e)-2A Ministers, members of religious orders and Christian Science practitioners; application for exemption from self-employment tax.§ 1.1402(e)-3A Time limitation for filing application for exemption.§ 1.1402(e)-4A Period for which exemption is effective.§ 1.1402(e)-5A Applications for exemption from self-employment taxes filed after December 31, 1986, by ministers, certain members of religious orders, and Christian Science practitioners.§ 1.1402(e)(1)-1 Election by ministers, members of religious orders, and Christian Science practitioners for self-employment coverage.§ 1.1402(e)(2)-1 Time limitation for filing waiver certificate.§ 1.1402(e)(3)-1 Effective date of waiver certificate.§ 1.1402(e)(4)-1 Treatment of certain remuneration paid in 1955 and 1956 as wages.§ 1.1402(e)(5)-1 Optional provision for certain certificates filed before April 15, 1962.§ 1.1402(e)(5)-2 Optional provisions for certain certificates filed on or before April 17, 1967.§ 1.1402(e)(6)-1 Certificates filed by fiduciaries or survivors on or before April 15, 1962.

Amended 1954, 1960, 1961, 1965, 1968

1968 Pub. L. 90-248 Pub. L. 90–248, § 115(b)(2), substituted provisions allowing clergymen, members of religious orders who have not taken a vow of poverty, and Christian Science practitioners to secure an exemption from social security self-employment tax upon meeting requirements of pars. (1) to (3) respecting such exemption, time for filing application, and effective date of exemption for provisions of former pars. (1) to (5) permitting such persons to secure social security coverage by filing a waiver certificate, prescribing time for filing certificate, effective date of certificate treatment of certain remuneration paid in 1955 and 1956 as wages, and optional provision for certain certificates filed on or before April 15, 1967.
1965 Pub. L. 89-97 Pub. L. 89–97, § 331(a), extended applicability of section to earnings in taxable years beyond those ending before 1960, extended until April 15, 1966, the last date for filing a certificate by an individual and until Apr. 15, 1967, the last date for filing a supplemental certificate by an individual, provided for filing of the certificate on or before Apr. 15, 1967, if the individual died on or before April 15, 1966, and extended to Apr. 15, 1967, the date on or before which the tax under section 1401 had been paid, or the overpayment, including interest under section 6611, had been repaid.
1965 Pub. L. 89-97 Pub. L. 89–97, § 331(a), struck out par. (6) which dealt with filing of certificates by fiduciaries or survivors on or before April 15, 1962.
1961 Pub. L. 87-64 Pub. L. 87–64 added par. (6).
1960 Pub. L. 86-778 Pub. L. 86–778, § 101(c), added par. (5).
1954 Act Sept. 1, 1954, § 201(c)(3), added subsec. (e).

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(1) Exemption Subject to paragraph (2), any individual who is (A) a duly ordained, commissioned, or licensed minister of a church or a member of a religious order (other than a member of a religious order who has taken a vow of poverty as a member of such order) or (B) a Christian Science practitioner, upon filing an application (in such form and manner, and with such official, as may be prescribed by regulations made under this chapter) together with a statement that either he is conscientiously opposed to, or because of religious principles he is opposed to, the acceptance (with respect to services performed by him as such minister, member, or practitioner) of any public insurance which makes payments in the event of death, disability, old age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act) and, in the case of an individual described in subparagraph (A), that he has informed the ordaining, commissioning, or licensing body of the church or order that he is opposed to such insurance, shall receive an exemption from the tax imposed by this chapter with respect to services performed by him as such minister, member, or practitioner. Notwithstanding the preceding sentence, an exemption may not be granted to an individual under this subsection if he had filed an effective waiver certificate under this section as it was in effect before its amendment in 1967.

Amended 1965, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1704(a)(1), (2)(A), substituted “Subject to paragraph (2), any individual” for “Any individual” and inserted “and, in the case of an individual described in subparagraph (A), that he has informed the ordaining, commissioning, or licensing body of the church or order that he is opposed to such insurance”.
1965 Pub. L. 89-97 Pub. L. 89–97, § 311(b)(3)(A), substituted “extended to service described in subsection (c)(4) or (c)(5) performed by him” for “extended to service described in subsection (c)(4), or service described in subsection (c)(5) insofar as it relates to the performance of service by an individual in the exercise of his profession as a Christian Science practitioner, as the case may be performed by him”.

Cited by 7

(2) Verification of application The Secretary may approve an application for an exemption filed pursuant to paragraph (1) only if the Secretary has verified that the individual applying for the exemption is aware of the grounds on which the individual may receive an exemption pursuant to this subsection and that the individual seeks exemption on such grounds. The Secretary (or the Commissioner of Social Security under an agreement with the Secretary) shall make such verification by such means as prescribed in regulations.

Amended 1957, 1960, 1964, 1965, 1986, 1994

1994 Pub. L. 103-296 Pub. L. 103–296, § 108(h)(1), substituted “Commissioner of Social Security” for “Secretary of Health and Human Services”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1704(a)(2)(B), (C), added par. (2) and redesignated former pars. (2) and (3) as (3) and (4), respectively.
1965 Pub. L. 89-97 Pub. L. 89–97, § 311(b)(3)(B), substituted “(computed without regard to subsections (c)(4) and (c)(5) of $400 or more, any part of which was derived from the performance of service described in subsection (c)(4) or (c)(5)” for “(computed, in the case of an individual referred to in paragraph (1)(A), without regard to subsection (c)(4), and, in the case of an individual referred to in paragraph (1)(B), without regard to subsection (c)(5) insofar as it relates to the performance of service by an individual in the exercise of his profession as a Christian Science practitioner) of $400 or more, any part of which was derived from the performance of service described in subsection (c)(4), or from the performance of service described in subsection (c)(5) insofar as it relates to the performance of service by an individual in the exercise of his profession as a Christian Science practitioner, as the case may be”.
1965 Pub. L. 89-97 Pub. L. 89–97, § 341(a), substituted “his second taxable year ending after 1963” for “his second taxable year ending after 1962”.
1964 Pub. L. 88-650 Pub. L. 88–650, § 2(a), substituted “his second taxable year ending after 1962” for “his second taxable year ending after 1959”.
1960 Pub. L. 86-778 Pub. L. 86–778, § 101(a), substituted “1959” for “1956”.
1957 Pub. L. 85-239 Pub. L. 85–239, § 1(a), permitted a person to file a certificate on or before the due date of the return (including any extension thereof) for his second taxable year ending after 1956.

Cited by 4

(3) Time for filing application Any individual who desires to file an application pursuant to paragraph (1) must file such application on or before the due date of the return (including any extension thereof) for the second taxable year for which he has net earnings from self-employment (computed without regard to subsections (c)(4) and (c)(5)) of $400 or more, any part of which was derived from the performance of service described in subsection (c)(4) or (c)(5).

Amended 1957, 1960, 1964, 1965, 1966, 1986, 2014

2014 Pub. L. 113-295 Pub. L. 113–295 struck out “whichever of the following dates is later: (A)” after “before” and “; or (B) the due date of the return (including any extension thereof) for his second taxable year ending after 1967” after “or (c)(5)”. Amendment was executed to reflect the probable intent of Congress notwithstanding an extra closing quotation mark in the directory language.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1704(a)(2)(B), (C), added par. (2) and redesignated former pars. (2) and (3) as (3) and (4), respectively.
1966 Pub. L. 89-368 Pub. L. 89–368 added subpar. (E).
1965 Pub. L. 89-97 Pub. L. 89–97, § 341(b), added subpar. (D).
1964 Pub. L. 88-650 Pub. L. 88–650, § 2(b), added subpar. (C).
1960 Pub. L. 86-778 Pub. L. 86–778, § 101(b), designated existing provisions as cl. (A), struck out provisions which related to certificates for prior taxable years which have now become inapplicable, and added cl. (B).
1957 Pub. L. 85-239 Pub. L. 85–239, § 1(b), provided for the effective date of certificates filed after August 30, 1957, but on or before the due date of the return (including any extension thereof) for the second taxable year ending after 1956, for certificates filed on or before August 30, 1957, which are effective only for the third or fourth taxable year ending after 1954 and all succeeding taxable years, and for certificates filed after the due date of the return (including any extension thereof) for the second taxable year ending after 1956.

Cited by 3

(4) Effective date of exemption An exemption received by an individual pursuant to this subsection shall be effective for the first taxable year for which he has net earnings from self-employment (computed without regard to subsections (c)(4) and (c)(5)) of $400 or more, any part of which was derived from the performance of service described in subsection (c)(4) or (c)(5), and for all succeeding taxable years. An exemption received pursuant to this subsection shall be irrevocable.

Amended 1957, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1704(a)(2)(B), (C), added par. (2) and redesignated former pars. (2) and (3) as (3) and (4), respectively.
1957 Pub. L. 85-239 Pub. L. 85–239, § 2, added par. (4).

(f) Partner’s taxable year ending as the result of death In computing a partner’s net earnings from self-employment for his taxable year which ends as a result of his death (but only if such taxable year ends within, and not with, the taxable year of the partnership), there shall be included so much of the deceased partner’s distributive share of the partnership’s ordinary income or loss for the partnership taxable year as is not attributable to an interest in the partnership during any period beginning on or after the first day of the first calendar month following the month in which such partner died. For purposes of this subsection—

§ 1.1402(f)-1 Computation of partner's net earnings from self-employment for taxable year which ends as result of his death.

Amended 1958

1958 Pub. L. 85-840 Pub. L. 85–840, § 403(a), added subsec. (f).

Cited by 5

(1) in determining the portion of the distributive share which is attributable to any period specified in the preceding sentence, the ordinary income or loss of the partnership shall be treated as having been realized or sustained ratably over the partnership taxable year; and

(2) the term “deceased partner’s distributive share” includes the share of his estate or of any other person succeeding, by reason of his death, to rights with respect to his partnership interest.

(g) Members of certain religious faiths

§ 1.1402(g)-1 Treatment of certain remuneration erroneously reported as net earnings from self-employment.

Amended 1960, 1976, 1986, 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 8007(c), struck out par. (2) which related to time for filing applications, struck out par. (4) which related to application by fiduciaries or survivors, and redesignated pars. (3) and (5) as (2) and (3), respectively.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1882(a), added par. (5).
1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1901(a)(155)(B), (C), 1906(b)(13)(A), redesignated subsec. (h) as (g), and as so redesignated, struck out in par. (1)(A) “or his delegate” after “Secretary” and in par. (2) provisions relating to individuals who have self-employment income for taxable years ending before Dec. 31, 1967, on or before Dec. 31, 1968, and substituted in par. (2) reference to for which the individual has self-employment income (determined without regard to this subsection or subsection (c)(6)) for reference to ending on or after Dec. 31, 1967 for which he has self-employment income (as so determined). Former subsec. (g), which related to treatment of certain remunerations erroneously reported as net earnings from self-employment, was struck out.
1960 Pub. L. 86-778 Pub. L. 86–778, § 105(c)(1), added subsec. (g).

Cases: Droz v. Commissioner, 48 F.3d 1120 (9th Cir. 1995)

Cited by 2

(1) Exemption Any individual may file an application (in such form and manner, and with such official, as may be prescribed by regulations under this chapter) for an exemption from the tax imposed by this chapter if he is a member of a recognized religious sect or division thereof and is an adherent of established tenets or teachings of such sect or division by reason of which he is conscientiously opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act). Such exemption may be granted only if the application contains or is accompanied by—

Amended 1984, 1994

1994 Pub. L. 103-296 Pub. L. 103–296, § 108(h)(1), substituted “Commissioner of Social Security” for “Secretary of Health and Human Services”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 2663(j)(5)(B), substituted “Secretary of Health and Human Services” for “Secretary of Health, Education, and Welfare”.

Cited by 8

(A) such evidence of such individual’s membership in, and adherence to the tenets or teachings of, the sect or division thereof as the Secretary may require for purposes of determining such individual’s compliance with the preceding sentence, and

Cited by 2

(B) his waiver of all benefits and other payments under titles II and XVIII of the Social Security Act on the basis of his wages and self-employment income as well as all such benefits and other payments to him on the basis of the wages and self-employment income of any other person,

Cited by 5

and only if the Commissioner of Social Security finds that—

Cited by 1

(D) it is the practice, and has been for a period of time which he deems to be substantial, for members of such sect or division thereof to make provision for their dependent members which in his judgment is reasonable in view of their general level of living, and

(E) such sect or division thereof has been in existence at all times since December 31, 1950.

An exemption may not be granted to any individual if any benefit or other payment referred to in subparagraph (B) became payable (or, but for section 203 or 222(b) of the Social Security Act, would have become payable) at or before the time of the filing of such waiver.

(2) Period for which exemption effective An exemption granted to any individual pursuant to this subsection shall apply with respect to all taxable years beginning after December 31, 1950, except that such exemption shall not apply for any taxable year—

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 8007(c), struck out par. (2) which related to time for filing applications, struck out par. (4) which related to application by fiduciaries or survivors, and redesignated pars. (3) and (5) as (2) and (3), respectively.

Cited by 2

(A) beginning (i) before the taxable year in which such individual first met the requirements of the first sentence of paragraph (1), or (ii) before the time as of which the Commissioner of Social Security finds that the sect or division thereof of which such individual is a member met the requirements of subparagraphs (C) and (D), or

Amended 1994

1994 Pub. L. 103-296 Pub. L. 103–296, § 108(h)(1), substituted “Commissioner of Social Security” for “Secretary of Health and Human Services”.

(B) ending (i) after the time such individual ceases to meet the requirements of the first sentence of paragraph (1), or (ii) after the time as of which the Commissioner of Social Security finds that the sect or division thereof of which he is a member ceases to meet the requirements of subparagraph (C) or (D).

Amended 1994

1994 Pub. L. 103-296 Pub. L. 103–296, § 108(h)(1), substituted “Commissioner of Social Security” for “Secretary of Health and Human Services”.

(3) Subsection to apply to certain church employees This subsection shall apply with respect to services which are described in subparagraph (B) of section 3121(b)(8) (and are not described in subparagraph (A) of such section).

Amended 1984, 1988, 1989

1989 Pub. L. 101-239 Pub. L. 101–239 substituted “to apply” for “not to apply” in heading and “shall apply” for “shall not apply” in text.
1988 Pub. L. 100-647 Pub. L. 100–647, § 8007(c), struck out par. (2) which related to time for filing applications, struck out par. (4) which related to application by fiduciaries or survivors, and redesignated pars. (3) and (5) as (2) and (3), respectively.
1984 Pub. L. 98-369 Pub. L. 98–369, § 2663(j)(5)(B), substituted “Secretary of Health and Human Services” for “Secretary of Health, Education, and Welfare”.

(h) Regular basis An individual shall be deemed to be self-employed on a regular basis in a taxable year, or to be a member of a partnership on a regular basis in such year, if he had net earnings from self-employment, as defined in the first sentence of subsection (a), of not less than $400 in at least two of the three consecutive taxable years immediately preceding such taxable year from trades or businesses carried on by such individual or such partnership.

§ 1.1402(h)-1 Members of certain religious groups opposed to insurance.

Amended 1965, 1968, 1976

1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(a)(155)(B), redesignated subsec. (i) as (h). Former subsec. (h) redesignated (g).
1968 Pub. L. 90-248 Pub. L. 90–248, § 501(a), substituted “December 31, 1967” and “December 31, 1968” for “December 31, 1965” and “April 15, 1966”, respectively, in subpar. (A) and “December 31, 1967” for “December 31, 1965” in subpar. (B) and inserted in such subpar. (B) exception provision as to when an application shall be deemed timely filed.
1965 Pub. L. 89-97 Pub. L. 89–97, § 319(c), added subsec. (h).

Cited by 10

(i) Special rules for options and commodities dealers

Amended 1972, 1976, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 102(c)(1), added subsec. (i).
1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(a)(155)(B), redesignated subsec. (i) as (h). Former subsec. (h) redesignated (g).
1972 Pub. L. 92-603 Pub. L. 92–603, § 121(b)(2), added subsec. (i).

(1) In general Notwithstanding subsection (a)(3)(A), in determining the net earnings from self-employment of any options dealer or commodities dealer, there shall not be excluded any gain or loss (in the normal course of the taxpayer’s activity of dealing in or trading section 1256 contracts) from section 1256 contracts or property related to such contracts.

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 301(b)(12), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “In determining the net earnings from self-employment of any options dealer or commodities dealer—
“(A) notwithstanding subsection (a)(3)(A), there shall not be excluded any gain or loss (in the normal course of the taxpayer’s activity of dealing in or trading section 1256 contracts) from section 1256 contracts or property related to such contracts, and
“(B) the deduction provided by section 1202 shall not apply.”

(2) Definitions For purposes of this subsection—

(A) Options dealer The term “options dealer” has the meaning given such term by section 1256(g)(8).

(B) Commodities dealer The term “commodities dealer” means a person who is actively engaged in trading section 1256 contracts and is registered with a domestic board of trade which is designated as a contract market by the Commodities Futures Trading Commission.

Textual readingALL OF= a commodities dealer

“a person who is actively engaged in trading section 1256 contracts”

“is registered with a domestic board of trade which is designated as a contract market by the Commodities Futures Trading Commission”

(j) Special rules for certain church employee income

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1882(b)(1)(A), added subsec. (j).

(1) Computation of net earnings In applying subsection (a)—

Cited by 2

(A) church employee income shall not be reduced by any deduction;

(B) church employee income and deductions attributable to such income shall not be taken into account in determining the amount of other net earnings from self-employment.

(2) Computation of self-employment income

Cited by 1

(A) Separate application of subsection (b)(2) Paragraph (2) of subsection (b) shall be applied separately—

(i) to church employee income, and

(ii) to other net earnings from self-employment.

(B) $100 floor In applying paragraph (2) of subsection (b) to church employee income, “$100” shall be substituted for “$400”.

(3) Coordination with subsection (a)(12) Paragraph (1) shall not apply to any amount allowable as a deduction under subsection (a)(12), and paragraph (1) shall be applied before determining the amount so allowable.

(4) Church employee income defined For purposes of this section, the term “church employee income” means gross income for services which are described in section 3121(b)(8)(B) (and are not described in section 3121(b)(8)(A)).

Textual readingALL OF= church employee income

“gross income for services which are described in section 3121(b)(8)(B)”

“are not described in section 3121(b)(8)(A)”

(k) Codification of treatment of certain termination payments received by former insurance salesmen Nothing in subsection (a) shall be construed as including in the net earnings from self-employment of an individual any amount received during the taxable year from an insurance company on account of services performed by such individual as an insurance salesman for such company if—

Amended 1990, 1993, 1997

1997 Pub. L. 105-34 Pub. L. 105–34 added subsec. (k).
1993 Pub. L. 103-66 Pub. L. 103–66, § 13207(b)(2), struck out subsec. (k) which defined parameters of the applicable contribution base under this chapter.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11331(b)(2), added subsec. (k).

(1) such amount is received after termination of such individual’s agreement to perform such services for such company,

(2) such individual performs no services for such company after such termination and before the close of such taxable year,

(3) such individual enters into a covenant not to compete against such company which applies to at least the 1-year period beginning on the date of such termination, and

(4) the amount of such payment—

(A) depends primarily on policies sold by or credited to the account of such individual during the last year of such agreement or the extent to which such policies remain in force for some period after such termination, or both, and

(B) does not depend to any extent on length of service or overall earnings from services performed for such company (without regard to whether eligibility for payment depends on length of service).

(l) Upper and lower limits For purposes of subsection (a)—

Amended 2008

2008 Pub. L. 110-246 Pub. L. 110–246, § 15352(a)(2), added subsec. (l).

(1) Lower limit The lower limit for any taxable year is the sum of the amounts required under section 213(d) of the Social Security Act for a quarter of coverage in effect with respect to each calendar quarter ending with or within such taxable year.

(2) Upper limit The upper limit for any taxable year is the amount equal to 150 percent of the lower limit for such taxable year.