26 U.S.C. § 4972: Tax on nondeductible contributions to qualified employer plans

In the case of any qualified employer plan, there is hereby imposed a tax equal to 10 percent of the nondeductible contributions under the plan (determined as of the close of the taxable year of the employer). The tax imposed by this section shall be paid by the employer making the contributions. the amount contributed for the taxable year by the employer to or under such plan, over the amount allowable as a deduction under section 404 for such contributions (determined without regard to subsection (e) thereof), and the portion of the amount so determined returned to the employer during the taxable year, and the portion of the amount so determined deductible under section 404 for the taxable year (determined without regard to subsection (e) thereof). first from carryforwards to such taxable year from preceding taxable years (in order of time), and then from contributions made during such taxable year. In determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account any contribution for such taxable year which is distributed to the employer in a distribution described in section 4980(c)(2)(B)(ii) if such distribution is made on or before the last day on which a contribution may be made for such taxable year under section 404(a)(6). the amount which is required to be contributed to a plan under section 412 on behalf of an individual who is an employee (within the meaning of section 401(c)(1)), exceeds the earned income (within the meaning of section 404(a)(8)) of such individual derived from the trade or business with respect to which such plan is established, The term “nondeductible contribution” shall not include any contribution made for a taxable year beginning before January 1, 1987 . so much of the contributions to 1 or more defined contribution plans which are not deductible when contributed solely because of section 404(a)(7) as does not exceed the amount of contributions described in section 401(m)(4)(A), or so much of the contributions to a simple retirement account (within the meaning of section 408(p)), a simple plan (within the meaning of section 401(k)(11)), or a simplified employee pension (within the meaning of section 408(k)) which are not deductible when contributed solely because such contributions are not made in connection with a trade or business of the employer. In determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan except, in the case of a multiemployer plan, to the extent that such contributions exceed the full-funding limitation (as defined in section 431(c)(6)). For purposes of this paragraph, the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to defined contribution plans and then to amounts described in this paragraph. If an employer makes an election under this paragraph for a taxable year, paragraph (6) shall not apply to such employer for such taxable year. any plan meeting the requirements of section 401(a) which includes a trust exempt from tax under section 501(a), an annuity plan described in section 403(a), any simplified employee pension (within the meaning of section 408(k)), and any simple retirement account (within the meaning of section 408(p)). The term “qualified employer plan” does not include a plan described in subparagraph (A) or (B) of section 4980(c)(1). In the case of a plan which provides contributions or benefits for employees some or all of whom are self-employed individuals within the meaning of section 401(c)(1), the term “employer” means the person treated as the employer under section 401(c)(4). The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act [ Dec. 29, 2022 ]. Nothing in the amendments made by this section shall be construed to infer the proper treatment under section 4972(c)(6) of the Internal Revenue Code of 1986 of nondeductible contributions to which the amendments made by this section [amending this section] do not apply.” Section 4972(c)(6)(A) of the Internal Revenue Code of 1986 (as added by this section) shall apply to taxable years ending on or after the date of enactment of this Act [ Dec. 8, 1994 ]. Section 4972(c)(6)(B) of such Code (as added by this section) shall apply to taxable years ending on or after December 31, 1992 .” the liabilities of such plan (determined as if the plan had terminated as of such time), exceed the assets of such plan.”