Cases: Dowell v. United States, 522 F.2d 708 (5th Cir. 1975); Danville Plywood Corp. v. United States, 899 F.2d 3 (Fed. Cir. 1990); Recklitis v. Commissioner, 91 T.C. 874 (1988)
Forms: Form 2106
Final rules 13
(a) Entertainment, amusement, recreation, or qualified transportation fringes
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(c)(1)(A), substituted “recreation, or qualified transportation fringes” for “or recreation” in heading.
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(1) In general No deduction otherwise allowable under this chapter shall be allowed for any item—
(A) Activity With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(1)(A), struck out “unless the taxpayer establishes that the item was directly related to, or, in the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), that such item was associated with, the active conduct of the taxpayer’s trade or business,” after “or recreation,”.
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(B) Facility With respect to a facility used in connection with an activity referred to in subparagraph (A).
Amended 1978, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(1)(B), struck out concluding provisions which read as follows: “In the case of an item described in subparagraph (A), the deduction shall in no event exceed the portion of such item which meets the requirements of subparagraph (A).”
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 361(a), substituted provisions allowing no deduction for expenses paid or incurred with respect to a facility which is used in conjunction with an activity which is of a type generally considered to constitute entertainment, amusement, or recreation for provisions allowing a deduction for expenses paid or incurred with respect to a facility if the facility used is primarily for the furtherance of the taxpayer’s business, and the expense is “directly related” to the active conduct of taxpayer’s business.
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(2) Special rules For purposes of applying paragraph (1)—
Amended 1978, 1980, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(1)(C), struck out subpar. (C) which read as follows: “In the case of a club, paragraph (1)(B) shall apply unless the taxpayer establishes that the facility was used primarily for the furtherance of the taxpayer’s trade or business and that the item was directly related to the active conduct of such trade or business.”
- 1980 Pub. L. 96-222 Pub. L. 96–222, § 103(a)(10)(A), struck out “country” after “the case of a”.
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 361(b), as amended by Pub. L. 96–222, § 103(a)(10)(B), added subpar. (C).
(A) Dues or fees to any social, athletic, or sporting club or organization shall be treated as items with respect to facilities.
(B) An activity described in section 212 shall be treated as a trade or business.
(3) Denial of deduction for club dues Notwithstanding the preceding provisions of this subsection, no deduction shall be allowed under this chapter for amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or other social purpose.
Amended 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13210(a), added par. (3).
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(4) Qualified transportation fringes No deduction shall be allowed under this chapter for the expense of any qualified transportation fringe (as defined in section 132(f)) provided to an employee of the taxpayer.
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(c)(1)(B), added par. (4).
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(b) Gifts
Amended 1981, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 122(c)(4), struck out par. (3) relating to qualified plan award, defining such term in subpar. (A), and providing for average amount of awards in subpar. (B) and maximum amount per item in subpar. (C).
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 265(b), added par. (3).
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(1) Limitation No deduction shall be allowed under section 162 or section 212 for any expense for gifts made directly or indirectly to any individual to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the same taxable year, exceeds $25. For purposes of this section, the term “gift” means any item excludable from gross income of the recipient under section 102 which is not excludable from his gross income under any other provision of this chapter, but such term does not include—
Amended 1981, 1986, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1018(u)(2), related to execution of amendment by Pub. L. 99–514, § 122(c)(2), see 1986 Amendment note below.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 122(c)(1)–(3), and Pub. L. 100–647, § 1018(u)(2), made conforming amendments to subpars. (A) and (B) and struck out subpar. (C) which read as follows: “an item of tangible personal property which is awarded to an employee by reason of length of service, productivity, or safety achievement, but only to the extent that—
“(i) the cost of such item to the taxpayer does not exceed $400, or
“(ii) such item is a qualified plan award.”
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 265(a), excluded from term “gift” an award for productivity, designated existing provisions as cl. (i), and as so designated, increased the limitation to $400 from $100, and added cl. (ii).
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(A) an item having a cost to the taxpayer not in excess of $4.00 on which the name of the taxpayer is clearly and permanently imprinted and which is one of a number of identical items distributed generally by the taxpayer, or
(B) a sign, display rack, or other promotional material to be used on the business premises of the recipient.
(2) Special rules
(A) In the case of a gift by a partnership, the limitation contained in paragraph (1) shall apply to the partnership as well as to each member thereof.
(B) For purposes of paragraph (1), a husband and wife shall be treated as one taxpayer.
(c) Certain foreign travel
Amended 1964
- 1964 Pub. L. 88-272 Pub. L. 88–272 limited subsec. (c) to individuals traveling outside the United States.
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(1) In general In the case of any individual who travels outside the United States away from home in pursuit of a trade or business or in pursuit of an activity described in section 212, no deduction shall be allowed under section 162 or section 212 for that portion of the expenses of such travel otherwise allowable under such section which, under regulations prescribed by the Secretary, is not allocable to such trade or business or to such activity.
Amended 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
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(2) Exception Paragraph (1) shall not apply to the expenses of any travel outside the United States away from home if—
(A) such travel does not exceed one week, or
(B) the portion of the time of travel outside the United States away from home which is not attributable to the pursuit of the taxpayer’s trade or business or an activity described in section 212 is less than 25 percent of the total time on such travel.
(3) Domestic travel excluded For purposes of this subsection, travel outside the United States does not include any travel from one point in the United States to another point in the United States.
(d) Substantiation required No deduction or credit shall be allowed—
Amended 1976, 1984, 1985, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(A)(ii), in concluding provisions, struck out “, entertainment, amusement, recreation, or use of the facility or property,” after “travel” and substituted “(D) the business relationship to the taxpayer of the person receiving the benefit” for “(D) the business relationship to the taxpayer of persons entertained, using the facility or property, or receiving the gift”.
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(A)(i), redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out former par. (2) which read as follows: “for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity,”.
- 1985 Pub. L. 99-44 Pub. L. 99–44, § 2(a), inserted at end “This subsection shall not apply to any qualified nonpersonal use vehicle (as defined in subsection (i)).”
- 1985 Pub. L. 99-44 Pub. L. 99–44, § 1(a), substituted “adequate records or by sufficient evidence corroborating the taxpayer’s own statement” for “adequate contemporaneous records”, and provided that the Internal Revenue Code of 1954 [now 1986] [this title] shall be applied as if “contemporaneous” had not been added to subsec. (d). See Effective Date of 1985 Amendment note below.
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 179(b), substituted, in introductory provisions, “No deduction or credit” for “No deduction” and, in provisions following par. (4), “adequate contemporaneous records” for “adequate records or by sufficient evidence corroborating his own statement” and “the facility or property” for “the facility” in two places, and added par. (4).
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
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(1) under section 162 or 212 for any traveling expense (including meals and lodging while away from home),
(2) for any expense for gifts, or
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(A)(i), redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out former par. (2) which read as follows: “for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity,”.
(3) with respect to any listed property (as defined in section 280F(d)(4)),
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(A)(i), redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out former par. (2) which read as follows: “for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity,”.
unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating the taxpayer’s own statement (A) the amount of such expense or other item, (B) the time and place of the travel or the date and description of the gift, (C) the business purpose of the expense or other item, and (D) the business relationship to the taxpayer of the person receiving the benefit. The Secretary may by regulations provide that some or all of the requirements of the preceding sentence shall not apply in the case of an expense which does not exceed an amount prescribed pursuant to such regulations. This subsection shall not apply to any qualified nonpersonal use vehicle (as defined in subsection (i)).
(e) Specific exceptions to application of subsection (a) Subsection (a) shall not apply to—
Amended 1980, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated pars. (5) to (10) as pars. (4) to (9), respectively.
- 1980 Pub. L. 96-605 Pub. L. 96–605 and Pub. L. 96–598 made identical amendments by adding par. (10).
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(1) Food and beverages for employees Expenses for food and beverages (and facilities used in connection therewith) furnished on the business premises of the taxpayer primarily for his employees.
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated par. (2) as (1) and struck out former par. (1), business meals, which read as follows: “Expenses for food and beverages furnished to any individual under circumstances which (taking into account the surroundings in which furnished, the taxpayer’s trade, business, or income-producing activity and the relationship to such trade, business, or activity of the persons to whom the food and beverages are furnished) are of a type generally considered to be conducive to a business discussion.”
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(2) Expenses treated as compensation
Amended 1986, 2004
- 2004 Pub. L. 108-357 Pub. L. 108–357 reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Expenses for goods, services, and facilities, to the extent that the expenses are treated by the taxpayer, with respect to the recipient of the entertainment, amusement, or recreation, as compensation to an employee on the taxpayer’s return of tax under this chapter and as wages to such employee for purposes of chapter 24 (relating to withholding of income tax at source on wages).”
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated par. (3) as (2). Former par. (2) redesignated (1).
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(A) In general Except as provided in subparagraph (B), expenses for goods, services, and facilities, to the extent that the expenses are treated by the taxpayer, with respect to the recipient of the entertainment, amusement, or recreation, as compensation to an employee on the taxpayer’s return of tax under this chapter and as wages to such employee for purposes of chapter 24 (relating to withholding of income tax at source on wages).
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(B) Specified individuals
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(i) In general In the case of a recipient who is a specified individual, subparagraph (A) and paragraph (9) shall each be applied by substituting “to the extent that the expenses do not exceed the amount of the expenses which” for “to the extent that the expenses”.
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(ii) Specified individual For purposes of clause (i), the term “specified individual” means any individual who—
(I) is subject to the requirements of section 16(a) of the Securities Exchange Act of 1934 with respect to the taxpayer or a related party to the taxpayer, or
(II) would be subject to such requirements if the taxpayer (or such related party) were an issuer of equity securities referred to in such section.
Amended 2005
- 2005 Pub. L. 109-135 Pub. L. 109–135, § 403(mm)(1), (2), inserted “or a related party to the taxpayer” after “with respect to the taxpayer” in subcl. (I), “(or such related party)” after “the taxpayer” in subcl. (II), and “For purposes of this clause, a person is a related party with respect to another person if such person bears a relationship to such other person described in section 267(b) or 707(b).” at end.
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For purposes of this clause, a person is a related party with respect to another person if such person bears a relationship to such other person described in section 267(b) or 707(b).
(3) Reimbursed expenses Expenses paid or incurred by the taxpayer, in connection with the performance by him of services for another person (whether or not such other person is his employer), under a reimbursement or other expense allowance arrangement with such other person, but this paragraph shall apply—
Amended 1982, 1983, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2), redesignated par. (4) as (3) and substituted “paragraph (2)” for “paragraph (3)” in subpar. (A). Former par. (3) redesignated (2).
- 1983 Pub. L. 98-67 Pub. L. 98–67, § 102(a), repealed amendments made by Pub. L. 97–248. See 1982 Amendment note below.
- 1982 Pub. L. 97-248 Pub. L. 97–248 provided that, applicable to payments of interest, dividends, and patronage dividends paid or credited after June 30, 1983, par. (3) is amended by inserting “subchapter A of” before “chapter 24”. Section 102(a), (b) of Pub. L. 98–67, title I, Aug. 5, 1983, 97 Stat. 369, repealed subtitle A (§§ 301–308) of title III of Pub. L. 97–248 as of the close of June 30, 1983, and provided that the Internal Revenue Code of 1954 [now 1986] [this title] shall be applied and administered (subject to certain exceptions) as if such subtitle A (and the amendments made by such subtitle A) had not been enacted.
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(A) where the services are performed for an employer, only if the employer has not treated such expenses in the manner provided in paragraph (2), or
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(B) where the services are performed for a person other than an employer, only if the taxpayer accounts (to the extent provided by subsection (d)) to such person.
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(4) Recreational, etc., expenses for employees Expenses for recreational, social, or similar activities (including facilities therefor) primarily for the benefit of employees (other than employees who are highly compensated employees (within the meaning of section 414(q))). For purposes of this paragraph, an individual owning less than a 10-percent interest in the taxpayer’s trade or business shall not be considered a shareholder or other owner, and for such purposes an individual shall be treated as owning any interest owned by a member of his family (within the meaning of section 267(c)(4)). This paragraph shall not apply for purposes of subsection (a)(3).
Amended 1986, 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13210(b), inserted at end “This paragraph shall not apply for purposes of subsection (a)(3).”
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1114(b)(6), which directed the substitution of “highly compensated employees (within the meaning of section 414(q))” for “officers, shareholders or other owners, or highly compensated employees” in par. (5) was executed to par. (4) to reflect the probable intent of Congress, in view of the redesignation of par. (5) as (4) by section 142(a)(2)(A) of Pub. L. 99–514.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated par. (5) as (4). Former par. (4) redesignated (3).
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(5) Employees, stockholder, etc., business meetings Expenses incurred by a taxpayer which are directly related to business meetings of his employees, stockholders, agents, or directors.
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated pars. (5) to (10) as pars. (4) to (9), respectively.
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(6) Meetings of business leagues, etc. Expenses directly related and necessary to attendance at a business meeting or convention of any organization described in section 501(c)(6) (relating to business leagues, chambers of commerce, real estate boards, and boards of trade) and exempt from taxation under section 501(a).
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated pars. (5) to (10) as pars. (4) to (9), respectively.
(7) Items available to public Expenses for goods, services, and facilities made available by the taxpayer to the general public.
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated pars. (5) to (10) as pars. (4) to (9), respectively.
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(8) Entertainment sold to customers Expenses for goods or services (including the use of facilities) which are sold by the taxpayer in a bona fide transaction for an adequate and full consideration in money or money’s worth.
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated pars. (5) to (10) as pars. (4) to (9), respectively.
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(9) Expenses includible in income of persons who are not employees Expenses paid or incurred by the taxpayer for goods, services, and facilities to the extent that the expenses are includible in the gross income of a recipient of the entertainment, amusement, or recreation who is not an employee of the taxpayer as compensation for services rendered or as a prize or award under section 74. The preceding sentence shall not apply to any amount paid or incurred by the taxpayer if such amount is required to be included (or would be so required except that the amount is less than $600) in any information return filed by such taxpayer under part III of subchapter A of chapter 61 and is not so included.
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(2)(A), redesignated pars. (5) to (10) as pars. (4) to (9), respectively.
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For purposes of this subsection, any item referred to in subsection (a) shall be treated as an expense.
(f) Interest, taxes, casualty losses, etc. This section shall not apply to any deduction allowable to the taxpayer without regard to its connection with his trade or business (or with his income-producing activity). In the case of a taxpayer which is not an individual, the preceding sentence shall be applied as if it were an individual.
(g) Treatment of entertainment, etc., type facility For purposes of this chapter, if deductions are disallowed under subsection (a) with respect to any portion of a facility, such portion shall be treated as an asset which is used for personal, living, and family purposes (and not as an asset used in the trade or business).
(h) Attendance at conventions, etc.
Amended 1976, 1980, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(c), struck out “or 212” after “section 162” in introductory provisions of pars. (1), (2), and (5), in closing provisions of par. (2), and in par. (4)(A), struck out “or to an activity described in section 212 and” after “active conduct of his trade or business” in introductory provisions of pars. (1) and (2), and added par. (7).
- 1980 L. 96–608 substituted provision disallowing any deductions for expenses allocable to a convention, seminar, or other similar meeting outside the North American area unless, taking certain factors into account, it is as reasonable for the meeting to be held outside the North American area as within it, disallowing any deductions for a convention, seminar, or similar meeting held on any cruise ship, and defining North American area and cruise ship, for provision allowing deductions with respect to not more than 2 foreign conventions per year, limiting deductible transportation cost to not to exceed the cost of coach or economy air fare, permitting transportation costs to be fully deductible only if at least one-half of the days are devoted to business related activities, disallowing deductions for subsistence expenses unless the individual attends two-thirds of the business activities, limiting deductible subsistence costs to not to exceed the per diem rate for United States civil servants, defining foreign convention and subsistence expenses, providing that if transportation expenses or subsistence expenses are not separately stated or do not reflect the proper allocation all amounts paid be treated as subsistence expenses, and prescribing special reporting and substantiation requirements.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 602(a), added subsec. (h). Former subsec. (h) redesignated (i).
(1) In general In the case of any individual who attends a convention, seminar, or similar meeting which is held outside the North American area, no deduction shall be allowed under section 162 for expenses allocable to such meeting unless the taxpayer establishes that the meeting is directly related to the active conduct of his trade or business and that, after taking into account in the manner provided by regulations prescribed by the Secretary—
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1001(g)(5), substituted “trade or business and that” for “trade or business that”.
(A) the purpose of such meeting and the activities taking place at such meeting,
(B) the purposes and activities of the sponsoring organizations or groups,
(C) the residences of the active members of the sponsoring organization and the places at which other meetings of the sponsoring organization or groups have been held or will be held, and
(D) such other relevant factors as the taxpayer may present,
it is as reasonable for the meeting to be held outside the North American area as within the North American area.
(2) Conventions on cruise ships In the case of any individual who attends a convention, seminar, or other meeting which is held on any cruise ship, no deduction shall be allowed under section 162 for expenses allocable to such meeting, unless the taxpayer meets the requirements of paragraph (5) and establishes that the meeting is directly related to the active conduct of his trade or business and that—
Amended 1983, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1001(g)(5), substituted “trade or business and that” for “trade or business that”.
- 1983 Pub. L. 97-424 Pub. L. 97–424, § 543(a)(1), inserted provisions relating to requirements of par. (5) and the description in section 212, and inserted the $2,000 limit relating to section 162 or 212.
(A) the cruise ship is a vessel registered in the United States; and
(B) all ports of call of such cruise ship are located in the United States or in possessions of the United States.
With respect to cruises beginning in any calendar year, not more than $2,000 of the expenses attributable to an individual attending one or more meetings may be taken into account under section 162 by reason of the preceding sentence.
(3) Definitions For purposes of this subsection—
Amended 1978
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 701(g)(3), substituted “at least one-half” for “more than one-half” in first sentence.
(A) North American area The term “North American area” means the United States, its possessions, and the Trust Territory of the Pacific Islands, and Canada and Mexico.
(B) Cruise ship The term “cruise ship” means any vessel sailing within or without the territorial waters of the United States.
(4) Subsection to apply to employer as well as to traveler
(A) Except as provided in subparagraph (B), this subsection shall apply to deductions otherwise allowable under section 162 to any person, whether or not such person is the individual attending the convention, seminar, or similar meeting.
(B) This subsection shall not deny a deduction to any person other than the individual attending the convention, seminar, or similar meeting with respect to any amount paid by such person to or on behalf of such individual if includible in the gross income of such individual. The preceding sentence shall not apply if the amount is required to be included in any information return filed by such person under part III of subchapter A of chapter 61 and is not so included.
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(5) Reporting requirements No deduction shall be allowed under section 162 for expenses allocable to attendance at a convention, seminar, or similar meeting on any cruise ship unless the taxpayer claiming the deduction attaches to the return of tax on which the deduction is claimed—
Amended 1983
- 1983 Pub. L. 97-424 Pub. L. 97–424, § 543(a)(2), added par. (5).
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(A) a written statement signed by the individual attending the meeting which includes—
(i) information with respect to the total days of the trip, excluding the days of transportation to and from the cruise ship port, and the number of hours of each day of the trip which such individual devoted to scheduled business activities,
(ii) a program of the scheduled business activities of the meeting, and
(iii) such other information as may be required in regulations prescribed by the Secretary; and
(B) a written statement signed by an officer of the organization or group sponsoring the meeting which includes—
(i) a schedule of the business activities of each day of the meeting,
(ii) the number of hours which the individual attending the meeting attended such scheduled business activities, and
(iii) such other information as may be required in regulations prescribed by the Secretary.
(6) Treatment of conventions in certain Caribbean countries
Amended 1983
- 1983 Pub. L. 98-67 Pub. L. 98–67, § 227(a), added par. (6).
(A) In general For purposes of this subsection, the term “North American area” includes, with respect to any convention, seminar, or similar meeting, any beneficiary country if (as of the time such meeting begins)—
(i) there is in effect a bilateral or multilateral agreement described in subparagraph (C) between such country and the United States providing for the exchange of information between the United States and such country, and
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(ii) there is not in effect a finding by the Secretary that the tax laws of such country discriminate against conventions held in the United States.
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(B) Beneficiary country For purposes of this paragraph, the term “beneficiary country” has the meaning given to such term by section 212(a)(1)(A) of the Caribbean Basin Economic Recovery Act; except that such term shall include Bermuda.
(C) Authority to conclude exchange of information agreements
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(i) In general The Secretary is authorized to negotiate and conclude an agreement for the exchange of information with any beneficiary country. Except as provided in clause (ii), an exchange of information agreement shall provide for the exchange of such information (not limited to information concerning nationals or residents of the United States or the beneficiary country) as may be necessary or appropriate to carry out and enforce the tax laws of the United States and the beneficiary country (whether criminal or civil proceedings), including information which may otherwise be subject to nondisclosure provisions of the local law of the beneficiary country such as provisions respecting bank secrecy and bearer shares. The exchange of information agreement shall be terminable by either country on reasonable notice and shall provide that information received by either country will be disclosed only to persons or authorities (including courts and administrative bodies) involved in the administration or oversight of, or in the determination of appeals in respect of, taxes of the United States or the beneficiary country and will be used by such persons or authorities only for such purposes.
(ii) Nondisclosure of qualified confidential information sought for civil tax purposes An exchange of information agreement need not provide for the exchange of qualified confidential information which is sought only for civil tax purposes if—
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(I) the Secretary of the Treasury, after making all reasonable efforts to negotiate an agreement which includes the exchange of such information, determines that such an agreement cannot be negotiated but that the agreement which was negotiated will significantly assist in the administration and enforcement of the tax laws of the United States, and
(II) the President determines that the agreement as negotiated is in the national security interest of the United States.
(iii) Qualified confidential information defined For purposes of this subparagraph, the term “qualified confidential information” means information which is subject to the nondisclosure provisions of any local law of the beneficiary country regarding bank secrecy or ownership of bearer shares.
(iv) Civil tax purposes For purposes of this subparagraph, the determination of whether information is sought only for civil tax purposes shall be made by the requesting party.
(D) Coordination with other provisions Any exchange of information agreement negotiated under subparagraph (C) shall be treated as an income tax convention for purposes of section 6103(k)(4). The Secretary may exercise his authority under subchapter A of chapter 78 to carry out any obligation of the United States under an agreement referred to in subparagraph (C).
Amended 1978, 1984
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 801(c), substituted in heading “with other provisions” for “with section 6103” and in text inserted provision that the Secretary may exercise his authority under subchapter A of chapter 78 to carry out any obligations of the United States under an agreement referred to in subpar. (C).
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 701(g)(1), designated existing provisions as cl. (i), inserted introductory phrase “Except as provided in clause (ii)” and substituted “For the purposes” for “For purpose”, and added cl. (ii).
(E) Determinations published in the Federal Register The following shall be published in the Federal Register—
Amended 1978
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 701(g)(2), added subpar. (E).
(i) any determination by the President under subparagraph (C)(ii) (including the reasons for such determination),
(ii) any determination by the Secretary under subparagraph (C)(ii) (including the reasons for such determination), and
(iii) any finding by the Secretary under subparagraph (A)(ii) (and any termination thereof).
(7) Seminars, etc. for section 212 purposes No deduction shall be allowed under section 212 for expenses allocable to a convention, seminar, or similar meeting.
(i) Qualified nonpersonal use vehicle For purposes of subsection (d), the term “qualified nonpersonal use vehicle” means any vehicle which, by reason of its nature, is not likely to be used more than a de minimis amount for personal purposes.
Amended 1976, 1985
- 1985 Pub. L. 99-44 Pub. L. 99–44, § 2(b), added subsec. (i) and redesignated former subsec. (i) as (j).
- 1976 Pub. L. 94-455 Pub. L. 94–455, §§ 602(a), 1906(b)(13)(A), redesignated former subsec. (h) as (i) and struck out “or his delegate” after “Secretary”.
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(j) Employee achievement awards
Amended 1985, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 122(d), added subsec. (j). Former subsec. (j) redesignated (k).
- 1985 Pub. L. 99-44 Pub. L. 99–44, § 2(b), added subsec. (i) and redesignated former subsec. (i) as (j).
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(1) General rule No deduction shall be allowed under section 162 or section 212 for the cost of an employee achievement award except to the extent that such cost does not exceed the deduction limitations of paragraph (2).
(2) Deduction limitations The deduction for the cost of an employee achievement award made by an employer to an employee—
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(A) which is not a qualified plan award, when added to the cost to the employer for all other employee achievement awards made to such employee during the taxable year which are not qualified plan awards, shall not exceed $400, and
(B) which is a qualified plan award, when added to the cost to the employer for all other employee achievement awards made to such employee during the taxable year (including employee achievement awards which are not qualified plan awards), shall not exceed $1,600.
(3) Definitions For purposes of this subsection—
(A) Employee achievement award
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13310(a), designated text of subpar. (A) as cl. (i) and inserted heading, redesignated former cls. (i) to (iii) as subcls. (I) to (III), respectively, of cl. (i), and added cl. (ii).
(i) In general The term “employee achievement award” means an item of tangible personal property which is—
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(ii) Tangible personal property For purposes of clause (i), the term “tangible personal property” shall not include—
(I) cash, cash equivalents, gift cards, gift coupons, or gift certificates (other than arrangements conferring only the right to select and receive tangible personal property from a limited array of such items pre-selected or pre-approved by the employer), or
(II) vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, other securities, and other similar items.
(B) Qualified plan award
(i) In general The term “qualified plan award” means an employee achievement award awarded as part of an established written plan or program of the taxpayer which does not discriminate in favor of highly compensated employees (within the meaning of section 414(q)) as to eligibility or benefits.
(ii) Limitation An employee achievement award shall not be treated as a qualified plan award for any taxable year if the average cost of all employee achievement awards which are provided by the employer during the year, and which would be qualified plan awards but for this subparagraph, exceeds $400. For purposes of the preceding sentence, average cost shall be determined by including the entire cost of qualified plan awards, without taking into account employee achievement awards of nominal value.
(4) Special rules For purposes of this subsection—
(A) Partnerships In the case of an employee achievement award made by a partnership, the deduction limitations contained in paragraph (2) shall apply to the partnership as well as to each member thereof.
(B) Length of service awards An item shall not be treated as having been provided for length of service achievement if the item is received during the recipient’s 1st 5 years of employment or if the recipient received a length of service achievement award (other than an award excludable under section 132(e)(1)) during that year or any of the prior 4 years.
(C) Safety achievement awards An item provided by an employer to an employee shall not be treated as having been provided for safety achievement if—
(i) during the taxable year, employee achievement awards (other than awards excludable under section 132(e)(1)) for safety achievement have previously been awarded by the employer to more than 10 percent of the employees of the employer (excluding employees described in clause (ii)), or
(ii) such item is awarded to a manager, administrator, clerical employee, or other professional employee.
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(k) Business meals
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(1), added subsec. (k). Former subsec. (k) redesignated (o).
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(1) In general No deduction shall be allowed under this chapter for the expense of any food or beverages unless—
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(A) such expense is not lavish or extravagant under the circumstances, and
(B) the taxpayer (or an employee of the taxpayer) is present at the furnishing of such food or beverages.
(2) Exceptions Paragraph (1) shall not apply to—
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1001(g)(2), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “Paragraph (1) shall not apply to any expense if subsection (a) does not apply to such expense by reason of paragraph (2), (3), (4), (7), (8), or (9) of subsection (e).”
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(A) any expense described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e), and
(B) any other expense to the extent provided in regulations.
(l) Transportation and commuting benefits No deduction shall be allowed under this chapter for any expense incurred for providing any transportation, or any payment or reimbursement, to an employee of the taxpayer in connection with travel between the employee’s residence and place of employment, except as necessary for ensuring the safety of the employee.
Amended 1986, 1990, 2017, 2025
- 2025 Pub. L. 119-21 Pub. L. 119–21, § 70112(c), struck out par. (1) designation and heading before “No deduction” and struck out par. (2). Prior to amendment, text of par. (2) read as follows: “In the case of any qualified bicycle commuting reimbursement (as described in section 132(f)(5)(F)), this subsection shall not apply for any amounts paid or incurred after December 31, 2017, and before January 1, 2026.”
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(B), (c)(2), added subsec. (l) and struck out former subsec. (l) which related to additional limitations on entertainment tickets.
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11802(b)(1), in amending par. (2) generally, struck out “(A) In general” and subpar. (B) which provided for phasein deductions of skybox tickets in the 1987 and 1988 taxable years.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(b), added subsecs. (l) to (n).
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(m) Additional limitations on travel expenses
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(b), added subsecs. (l) to (n).
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(1) Luxury water transportation
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(A) In general No deduction shall be allowed under this chapter for expenses incurred for transportation by water to the extent such expenses exceed twice the aggregate per diem amounts for days of such transportation. For purposes of the preceding sentence, the term “per diem amounts” means the highest amount generally allowable with respect to a day to employees of the executive branch of the Federal Government for per diem while away from home but serving in the United States.
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(B) Exceptions Subparagraph (A) shall not apply to—
(i) any expense allocable to a convention, seminar, or other meeting which is held on any cruise ship, and
(ii) any expense described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e).
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1001(g)(3), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “any expense to which subsection (a) does not apply by reason of paragraph (2), (3), (4), (7), (8), or (9) of subsection (e).”
(2) Travel as form of education No deduction shall be allowed under this chapter for expenses for travel as a form of education.
(3) Travel expenses of spouse, dependent, or others No deduction shall be allowed under this chapter (other than section 217) for travel expenses paid or incurred with respect to a spouse, dependent, or other individual accompanying the taxpayer (or an officer or employee of the taxpayer) on business travel, unless—
Amended 1993
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13272(a), added par. (3).
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(A) the spouse, dependent, or other individual is an employee of the taxpayer,
(B) the travel of the spouse, dependent, or other individual is for a bona fide business purpose, and
(C) such expenses would otherwise be deductible by the spouse, dependent, or other individual.
(n) Only 50 percent of meal expenses allowed as deduction
Amended 1986, 1993, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(C), struck out “and entertainment” after “meal” in heading.
- 1993 Pub. L. 103-66 Pub. L. 103–66, § 13209(a), (b), substituted “50” for “80” in heading and in concluding provisions of par. (1).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(b), added subsecs. (l) to (n).
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(1) In general The amount allowable as a deduction under this chapter for any expense for food or beverages shall not exceed 50 percent of the amount of such expense which would (but for this paragraph) be allowable as a deduction under this chapter.
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(D), amended par. (1) generally. Prior to amendment, par. (1) related to amount allowable as a deduction for meal and entertainment expenses.
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(2) Exceptions Paragraph (1) shall not apply to any expense if—
Amended 1988, 1989, 1990, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(E)(iv), (b)(4), successively amended last sentence of concluding provisions, resulting in substitution of “in subparagraph (B)” for “in subparagraph (D)”.
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(E)(iii), (b)(3), which directed amendment of the “last sentence” of par. (2) by first substituting “of subparagraph (D)” for “of subparagraph (E)” and then “of subparagraph (C)” for “of subparagraph (D)”, were executed by making both substitutions in the first sentence of the concluding provisions, to reflect the probable intent of Congress.
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(E)(ii), redesignated subpar. (E) as (D). Former subpar. (D) redesignated (C).
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11802(b)(2)(A)(ii), (iii), substituted “described in subparagraph (D)” for “described in subparagraph (E)” and “of subparagraph (E)” for “of subparagraph (F)” in concluding provisions.
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11802(b)(2)(A)(i), redesignated subpars. (E) and (F) as (D) and (E), respectively, and struck out former subpar. (D) which read as follows: “in the case of an expense for food or beverages before January 1, 1989, such expense is an integral part of a qualified meeting,”.
- 1989 Pub. L. 101-239 Pub. L. 101–239, § 7816(a), added a new subpar. (E), substantially identical to former subpar. (E), and moved sentence formerly appearing between subpars. (E) and (F) to end of concluding provisions after subpar. (F).
- 1989 Pub. L. 101-239 Pub. L. 101–239, § 7841(d)(18), inserted “any” before “Federal law”.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 6003(a), struck out “or” at end of subpar. (D), substituted “, or” for the period at end of subpar. (E), and added subpar. (F) and flush sentence at end.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1001(g)(4)(A), struck out “or” at end of subpar. (C), substituted “, or” for the period at end of subpar. (D), and added subpar. (E) and flush sentence at end.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1001(g)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “subsection (a) does not apply to such expense by reason of paragraph (2), (3), (4), (7), (8), or (9) of subsection (e),”.
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(A) such expense is described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e),
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(B) in the case of an employer who pays or reimburses moving expenses of an employee, such expenses are includible in the income of the employee under section 82,
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(b)(1), (2), redesignated subpar. (C) as (B) and struck out former subpar. (B) which read as follows: “such expense is excludable from the gross income of the recipient under section 132 by reason of subsection (e) thereof (relating to de minimis fringes),”.
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(E)(i), struck out “in the case of an expense for food or beverages,” before “such expense”.
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(C) such expense is for food or beverages—
(i) required by any Federal law to be provided to crew members of a commercial vessel,
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(ii) provided to crew members of a commercial vessel—
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(I) which is operating on the Great Lakes, the Saint Lawrence Seaway, or any inland waterway of the United States, and
(II) which is of a kind which would be required by Federal law to provide food and beverages to crew members if it were operated at sea,
(iii) provided on an oil or gas platform or drilling rig if the platform or rig is located offshore,
(iv) provided on an oil or gas platform or drilling rig, or at a support camp which is in proximity and integral to such platform or rig, if the platform or rig is located in the United States north of 54 degrees north latitude, or
(v) provided—
Amended 2025
- 2025 Pub. L. 119-21 Pub. L. 119–21, § 70305(b), added cl. (v).
(I) on a fishing vessel, fish processing vessel, or fish tender vessel (as such terms are defined in section 2101 of title 46, United States Code), or
(II) at a facility for the processing of fish for commercial use or consumption which—
(aa) is located in the United States north of 50 degrees north latitude, and
(bb) is not located in a metropolitan statistical area (within the meaning of section 143(k)(2)(B)), or
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(b)(2), redesignated subpar. (D) as (C). Former subpar. (C) redesignated (B).
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(E)(ii), redesignated subpar. (D) as (C) and struck out former subpar. (C) which read as follows: “such expense is covered by a package involving a ticket described in subsection (l)(1)(B),”.
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(D) such expense is—
Amended 1990, 2017, 2020
- 2020 Pub. L. 116-260 Pub. L. 116–260 added subpar. (D).
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(a)(2)(E)(ii), redesignated subpar. (E) as (D). Former subpar. (D) redesignated (C).
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11802(b)(2)(A)(i), redesignated subpars. (E) and (F) as (D) and (E), respectively, and struck out former subpar. (D) which read as follows: “in the case of an expense for food or beverages before January 1, 1989, such expense is an integral part of a qualified meeting,”.
(i) for food or beverages provided by a restaurant, and
(ii) paid or incurred before January 1, 2023.
Clauses (i) and (ii) of subparagraph (C) shall not apply to vessels primarily engaged in providing luxury water transportation (determined under the principles of subsection (m)). In the case of the employee, the exception of subparagraph (A) shall not apply to expenses described in subparagraph (B).
(3) Special rule for individuals subject to Federal hours of service In the case of any expenses for food or beverages consumed while away from home (within the meaning of section 162(a)(2)) by an individual during, or incident to, the period of duty subject to the hours of service limitations of the Department of Transportation, paragraph (1) shall be applied by substituting “80 percent” for “50 percent”.
Amended 1990, 1997, 2014
- 2014 Pub. L. 113-295 Pub. L. 113–295 struck out subpar. (A) designation and heading, substituted “substituting ‘80 percent’ for” for “substituting ‘the applicable percentage’ for”, and struck out subpar. (B) which listed the applicable percentage for taxable years 1998 to 2008 or thereafter.
- 1997 Pub. L. 105-34 Pub. L. 105–34 added par. (3).
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11802(b)(2)(B), struck out par. (3) “Qualified meeting” which read as follows: “For purposes of paragraph (2)(D), the term ‘qualified meeting’ means any convention, seminar, annual meeting, or similar business program with respect to which—
“(A) an expense for food or beverages is not separately stated,
“(B) more than 50 percent of the participants are away from home,
“(C) at least 40 individuals attend, and
“(D) such food and beverages are part of a program which includes a speaker.”
(o) Meals provided at convenience of employer Except in the case of an expense described in subsection (e)(8) or (n)(2)(C), no deduction shall be allowed under this chapter for—
Amended 1986, 2017, 2025
- 2025 Pub. L. 119-21 Pub. L. 119–21, § 70305(a), substituted “Except in the case of an expense described in subsection (e)(8) or (n)(2)(C), no deduction” for “No deduction” in introductory provisions.
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(d), added subsec. (o) and redesignated former subsec. (o) as (p).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 142(a)(1), redesignated former subsec. (k) as (o).
(1) any expense for the operation of a facility described in section 132(e)(2), and any expense for food or beverages, including under section 132(e)(1), associated with such facility, or
(2) any expense for meals described in section 119(a).
(p) Regulatory authority The Secretary shall prescribe such regulations as he may deem necessary to carry out the purposes of this section, including regulations prescribing whether subsection (a) or subsection (b) applies in cases where both such subsections would otherwise apply.
Amended 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13304(d), added subsec. (o) and redesignated former subsec. (o) as (p).