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United States Code (Last Updated: May 24, 2014) |
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Title 26. INTERNAL REVENUE CODE |
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SubTitle A. Income Taxes |
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Chapter 1. NORMAL TAXES AND SURTAXES |
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SubChapter B. Computation of Taxable Income |
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Part III. ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME |
§ 120. Amounts received under qualified group legal services plans
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(a) Exclusion by employee for contributions and legal services provided by employer Gross income of an employee, his spouse, or his dependents, does not include— (1) amounts contributed by an employer on behalf of an employee, his spouse, or his dependents under a qualified group legal services plan (as defined in subsection (b)); or (2) the value of legal services provided, or amounts paid for legal services, under a qualified group legal services plan (as defined in subsection (b)) to, or with respect to, an employee, his spouse, or his dependents. No exclusion shall be allowed under this section with respect to an individual for any taxable year to the extent that the value of insurance (whether through an insurer or self-insurance) against legal costs incurred by the individual (or his spouse or dependents) provided under a qualified group legal services plan exceeds $70. (b) Qualified group legal services plan For purposes of this section, a qualified group legal services plan is a separate written plan of an employer for the exclusive benefit of his employees or their spouses or dependents to provide such employees, spouses, or dependents with specified benefits consisting of personal legal services through prepayment of, or provision in advance for, legal fees in whole or in part by the employer, if the plan meets the requirements of subsection (c).
(c) Requirements (1) Discrimination The contributions or benefits provided under the plan shall not discriminate in favor of employees who are highly compensated employees (within the meaning of section 414(q)).
(2) Eligibility The plan shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees who are described in paragraph (1). For purposes of this paragraph, there shall be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that group legal services plan benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.
(3) Contribution limitation Not more than 25 percent of the amounts contributed under the plan during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer.
(4) Notification The plan shall give notice to the Secretary, in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of the status of a qualified group legal services plan.
(5) Contributions Amounts contributed under the plan shall be paid only (A) to insurance companies, or to organizations or persons that provide personal legal services, or indemnification against the cost of personal legal services, in exchange for a prepayment or payment of a premium, (B) to organizations or trusts described in section 501(c)(20), (C) to organizations described in section 501(c) which are permitted by that section to receive payments from an employer for support of one or more qualified group legal services plan or plans, except that such organizations shall pay or credit the contribution to an organization or trust described in section 501(c)(20), (D) as prepayments to providers of legal services under the plan, or (E) a combination of the above.
(d) Other definitions and special rules For purposes of this section— (1) Employee The term “employee” includes, for any year, an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
(2) Employer An individual who owns the entire interest in an unincorporated trade or business shall be treated as his own employer. A partnership shall be treated as the employer of each partner who is an employee within the meaning of paragraph (1).
(3) Allocations Allocations of amounts contributed under the plan shall be made in accordance with regulations prescribed by the Secretary and shall take into account the expected relative utilization of benefits to be provided from such contributions or plan assets and the manner in which any premium or other charge was developed.
(4) Dependent The term “dependent” has the meaning given to it by section 152 (determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof).
(5) Exclusive benefit In the case of a plan to which contributions are made by more than one employer, in determining whether the plan is for the exclusive benefit of an employer’s employees or their spouses or dependents, the employees of any employer who maintains the plan shall be considered to be the employees of each employer who maintains the plan.
(6) Attribution rules For purposes of this section— (A) ownership of stock in a corporation shall be determined in accordance with the rules provided under subsections (d) and (e) of section 1563 (without regard to section 1563(e)(3)(C)), and (B) the interest of an employee in a trade or business which is not incorporated shall be determined in accordance with regulations prescribed by the Secretary, which shall be based on principles similar to the principles which apply in the case of subparagraph (A). (7) Time of notice to Secretary A plan shall not be a qualified group legal services plan for any period prior to the time notification was provided to the Secretary in accordance with subsection (c)(4), if such notice is given after the time prescribed by the Secretary by regulations for giving such notice.
(e) Termination This section and section 501(c)(20) shall not apply to taxable years beginning after
June 30, 1992 .(f) Cross reference For reporting and recordkeeping requirements, see section 6039D.
Prior Provisions
A prior section 120, act Aug. 16, 1954, ch. 736, 68A Stat. 39, related to statutory subsistence allowance received by police, prior to repeal by Pub. L. 85–866, title I, § 3(a), (c),
Amendments
2004—Subsec. (d)(4). Pub. L. 108–311 inserted “(determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof)” after “section 152”.
1991—Subsec. (e). Pub. L. 102–227 substituted “
1990—Subsec. (e). Pub. L. 101–508 substituted “
1989—Subsec. (b). Pub. L. 101–140, § 203(a)(1), amended subsec. (b) to read as if amendments by Pub. L. 99–514, § 1151(c)(3), had not been enacted, see 1986 Amendment note below.
Subsec. (c)(2). Pub. L. 101–140, § 203(a)(2), amended par. (2) to read as if amendments by Pub. L. 100–647, § 1011B(a)(31)(B), had not been enacted, see 1988 Amendment note below.
Pub. L. 101–140, § 203(a)(1), amended par. (2) to read as if amendments by Pub. L. 99–514, § 1151(g)(1), had not been enacted, see 1986 Amendment note below.
Subsec. (e). Pub. L. 101–239 substituted “taxable years beginning after
1988—Subsec. (a). Pub. L. 100–647, § 4002(b)(1), inserted at end “No exclusion shall be allowed under this section with respect to an individual for any taxable year to the extent that the value of insurance (whether through an insurer or self-insurance) against legal costs incurred by the individual (or his spouse or dependents) provided under a qualified group legal services plan exceeds $70.”
Subsec. (c)(2). Pub. L. 100–647, § 1011B(a)(31)(B), substituted “there shall” for “there may” and “who are” for “who may be”.
Subsec. (e). Pub. L. 100–647, § 4002(a), substituted “1988” for “1987”.
1986—Subsec. (b). Pub. L. 99–514, § 1151(c)(3), amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: “For purposes of this section, a qualified group legal services plan is a separate written plan of an employer for the exclusive benefit of his employees or their spouses or dependents to provide such employees, spouses, or dependents with specified benefits consisting of personal legal services through prepayment of, or provision in advance for, legal fees in whole or in part by the employer, if the plan meets the requirements of subsection (c).”
Subsec. (c)(1). Pub. L. 99–514, § 1114(b)(3)(A), substituted “highly compensated employees (within the meaning of section 414(q))” for “officers, shareholders, self-employed individuals, or highly compensated”.
Subsec. (c)(2). Pub. L. 99–514, § 1151(g)(1), substituted “For purposes of this paragraph, there may be excluded from consideration employees who may be excluded from consideration under section 89(h).” for “For purposes of this paragraph, there shall be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that group legal services plan benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.”
Subsec. (d)(1). Pub. L. 99–514, § 1114(b)(3)(B), struck out reference to self-employed individuals in heading, and substituted “The” for “The term ‘self-employed individual’ means, and the” in text.
Subsec. (e). Pub. L. 99–514, § 1162(b), substituted “
1984—Subsec. (e). Pub. L. 98–612, § 1(a), substituted “
Subsec. (f). Pub. L. 98–612, § 1(b)(3)(A), added subsec. (f).
1983—Subsec. (e). Pub. L. 97–448 substituted “This section and section 501(c)(20) shall not apply” for “This section shall not apply”.
1981—Subsec. (e). Pub. L. 97–34 added subsec. (e).
Effective Date Of Amendment
Amendment by Pub. L. 108–311 applicable to taxable years beginning after
Pub. L. 102–227, title I, § 104(b),
Pub. L. 101–508, title XI, § 11404(c),
Pub. L. 101–239, title VII, § 7102(b),
Amendment by Pub. L. 101–140 effective as if included in section 1151 of Pub. L. 99–514, see section 203(c) of Pub. L. 101–140, set out as a note under section 79 of this title.
Amendment by section 1011B(a)(31)(B) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Pub. L. 100–647, title IV, § 4002(c),
Amendment by section 1114(b)(3) of Pub. L. 99–514 applicable to years beginning after
Amendment by section 1151(c)(3), (g)(1) of Pub. L. 99–514 applicable, with certain qualifications and exceptions, to years beginning after
Pub. L. 99–514, title XI, § 1162(c),
Pub. L. 98–612, § 1(d)(1),
Amendment by section 1(b)(3)(A) of Pub. L. 98–612 effective
Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.
Effective Date
Pub. L. 94–455, title XXI, § 2134(e),
Miscellaneous
Secretary of the Treasury or his delegate to issue before
Pub. L. 102–227, title I, § 104(a)(2),
Pub. L. 101–239, title VII, § 7102(a)(2),
No monies appropriated by Pub. L. 101–136 to be used to implement or enforce section 1151 of Pub. L. 99–514 or the amendments made by such section, see section 528 of Pub. L. 101–136, set out as a note under section 89 of this title.
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after
Pub. L. 94–455, title XXI, § 2134(d),