26 U.S.C. § 419: Treatment of funded welfare benefit plans

shall not be deductible under this chapter, but if they would otherwise be deductible, shall (subject to the limitation of subsection (b)) be deductible under this section for the taxable year in which paid. The amount of the deduction allowable under subsection (a)(2) for any taxable year shall not exceed the welfare benefit fund’s qualified cost for the taxable year. the qualified direct cost for such taxable year, and subject to the limitation of section 419A(b), any addition to a qualified asset account for the taxable year. In the case of any welfare benefit fund, the qualified cost for any taxable year shall be reduced by such fund’s after-tax income for such taxable year. such benefits were provided directly by the employer, and the employer used the cash receipts and disbursements method of accounting. For purposes of subparagraph (A), a benefit shall be treated as provided when such benefit would be includible in the gross income of the employee if provided directly by the employer (or would be so includible but for any provision of this chapter excluding such benefit from gross income). In determining qualified direct costs with respect to any child care facility for purposes of subparagraph (A), in lieu of depreciation the adjusted basis of such facility shall be allowable as a deduction ratably over a period of 60 months beginning with the month in which the facility is placed in service. not of a character subject to depreciation; or located outside the United States. the deductions allowed by this chapter which are directly connected with the production of such gross income, and the tax imposed by this chapter on the fund for the taxable year. contributions and other amounts received from employees shall be taken into account, but contributions from the employer shall not be taken into account. No item may be taken into account more than once in determining the qualified cost of any welfare benefit fund. the amount of the contributions paid (or deemed paid under this subsection) by the employer during any taxable year to a welfare benefit fund, exceeds the limitation of subsection (b), which is part of a plan of an employer, and through which the employer provides welfare benefits to employees or their beneficiaries. section 83(h) applies, section 404 applies (determined without regard to section 404(b)(2)), or section 404A applies. any organization described in paragraph (7), (9), or (17) of section 501(c), any trust, corporation, or other organization not exempt from the tax imposed by this chapter, and to the extent provided in regulations, any account held for an employer by any person. such contract is a life insurance contract described in section 264(a)(1), or such contract is a qualified nonguaranteed contract. there is no guarantee of a renewal of such contract, and other than insurance protection, the only payments to which the employer or employees are entitled are experience rated refunds or policy dividends which are not guaranteed and which are determined by factors other than the amount of welfare benefits paid to (or on behalf of) the employees of the employer or their beneficiaries. In the case of any qualified nonguaranteed contract, subparagraph (A) shall not apply unless the amount of any experience rated refund or policy dividend payable to an employer with respect to a policy year is treated by the employer as received or accrued in the taxable year in which the policy year ends. there is no plan, but there is a method or arrangement of employer contributions or benefits which has the effect of a plan, this section shall apply as if there were such a relationship, and any reference in this section to the employer shall be treated as a reference to the person for whom services are provided, and any reference in this section to an employee shall be treated as a reference to the person providing the services. Except as otherwise provided in this subsection, the amendments made by this section [enacting this subpart] shall apply to contributions paid or accrued after December 31, 1985 , in taxable years ending after such date. between employee representatives and 1 or more employers, and in effect on July 1, 1985 (or ratified on or before such date), For purposes of paragraph (2), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination of such collective bargaining agreement. any contribution after June 22, 1984 , of a facility to a welfare benefit fund, and any other contribution after June 22, 1984 , to a welfare benefit fund to be used to acquire or improve a facility. which is acquired or improved by the fund (or contributed to the fund) pursuant to a binding contract in effect on June 22, 1984 , and at all times thereafter, or the construction of which by or for the fund began before June 22, 1984 . The amendments made by subsection (b) [amending section 512 of this title ] shall apply with respect to taxable years ending after December 31, 1985 . For purposes of section 15 of the Internal Revenue Code of 1954 [now 1986], such amendments shall be treated as a change in the rate of a tax imposed by chapter 1 of such Code. The amendments made by subsection (c) [enacting section 4976 of this title ] shall apply to benefits provided after December 31, 1985 .”