[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.162-10T]

[Page 782-783]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.162-10T  Questions and answers relating to the deduction of 

employee benefits under the Tax Reform Act of 1984; certain limits 
on amounts deductible (temporary).

    Q-1: How does the amendment of section 404(b) by the Tax Reform Act 
of 1984 affect the deduction of employee benefits under section 162 of 
the Internal Revenue Code?
    A-1: As amended by the Tax Reform Act of 1984, section 404(b) 
clarifies that section 404(a) and (d) (in the case of employees and 
nonemployees, respectively) shall govern the deduction of contributions 
paid or compensation paid or incurred under a plan, or method or 
arrangement, deferring the receipt of compensation or providing for 
deferred benefits. Section 404(a) and (d) requires that such a 
contribution or compensation be paid or incurred for purposes of section 
162 or 212 and satisfy the requirements for deductibility under either 
of these sections. However, notwithstanding the above, section 404 does 
not apply to contributions paid or accrued with respect to a ``welfare 
benefit fund'' (as defined in section 419(e)) after July 18, 1984, in 
taxable years of employers (and payors) ending after that date.
    Also, section 463 shall govern the deduction of vacation pay by a 
taxpayer that has elected the application of such section. Section 
404(b), as amended, generally applies to contributions paid and 
compensation paid or incurred after July 18, 1984, in taxable years of 
employers (and payors) ending after that date. See Q&A-3 of Sec. 
1.404(b)-1T. For rules relating to the deduction of contributions 
attributable to the provision of deferred benefits, see section 404 (a), 
(b) and (d) and Sec. 1.404(a)-1T, Sec. 1.404(b)-1T and Sec. 1.404(d)-
1T. For rules relating to the deduction of contributions paid or accrued 
with respect to a

[[Page 783]]

welfare benefit fund, see section 419, Sec. 1.419-1T and Sec. 1.419A-
2T. For rules relating to the deduction of vacation pay for which an 
election is made under section 463, see Sec. 301.9100-16T of this 
chapter and Sec. 1.463-1T.
    Q-2: How does the enactment of section 419 by the Tax Reform Act of 
1984 affect the deduction of employee benefits under section 162?
    A-2: As enacted by the Tax Reform Act of 1984, section 419 shall 
govern the deduction of contributions paid or accrued by an employer (or 
a person receiving services under section 419(g)) with respect to a 
``welfare benefit fund'' (within the meaning of section 419(e)) after 
December 31, 1985, in taxable years of the employer (or person receiving 
the services) ending after that date. Section 419(a) requires that such 
a contribution be paid or accrued for purposes of section 162 or 212 and 
satisfy the requirements for deductibility under either of those 
sections. Generally, subject to a binding contract exception (as 
described in section 511(e)(5) of the Tax Reform Act of 1984), section 
419 shall also govern the deduction of the contribution of a facility 
(or other contribution used to acquire or improve a facility) to a 
welfare benefit fund after June 22, 1984. See Q&A-11 of Sec. 1.419-1T. 
In the case of a welfare benefit fund maintained pursuant to a 
collective bargaining agreement, section 419 applies to the extent 
provided under the special effective date rule described in Q&A-2 of 
Sec. 1.419-1T and the special rules of Sec. 1.419A-2T. For rules 
relating to the deduction of contributions paid or accrued with respect 
to a welfare benefit fund, see section 419 and Sec. 1.419-1T.

[T.D. 8073, 51 FR 4319, Feb. 4, 1986, as amended by T.D. 8435, 57 FR 
43896, Sept. 23, 1992]