[Code of Federal Regulations]
[Title 26, Volume 5]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.404(c)-1]

[Page 461]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.404(c)-1  Certain negotiated plans; effect of section 404(c).

    (a) Section 404(a) does not apply to deductions for contributions 
paid by an employer under a negotiated plan which meets the following 
conditions:
    (1) The contributions under the plan are held in trust for the 
purpose of paying, either from principal or income or both, for the 
benefit of employees and their families, at least medical or hospital 
care, and pensions on retirement or death of employees; and
    (2) Such plan was established before January 1, 1954, as a result of 
an agreement between employee representatives and the Government of the 
United States during a period of Government operation, under seizure 
powers, of a major part of the productive facilities of the industry in 
which such employer is engaged.


If these conditions are met, such contributions shall be deductible 
under section 162, to the extent that they constitute ordinary and 
necessary business expenses.
    (b) The term ``as a result of an agreement'' is intended primarily 
to cover a trust established under the terms of an agreement referred to 
in paragraph (a)(2) of this section. It will also include a trust 
established under a plan of an employer, or group of employers, who are 
in competition with the employers whose facilities were seized by reason 
of producing the same commodity, and who would therefore be expected to 
establish such a trust as a reasonable measure to maintain a sound 
position in the labor market producing the commodity. Thus, for example, 
if a trust was established under such an agreement in the bituminous 
coal industry, a similar trust established about the same time in the 
anthracite coal industry would be covered by this provision.
    (c) If any such trust becomes qualified for exemption under section 
501(a), the deductibility of contributions by an employer to such trust 
on or after the date of such qualification would no longer be governed 
by section 404(c), even though the trust may later lose its exemption 
under section 501(a).

[T.D. 6500, 25 FR 11690, Nov. 26, 1960]