Code of Federal Regulations · Section
§ 1.414(r)-0 — (r)-0 Table Of Contents
26 C.F.R. § 1.414(r)-0
(a) In general. Sections 1.414(r)-1 through 1.414(r)-11 provide rules for determining whether an employer is treated as operating qualified separate lines of business under section 414(r) of the Internal Revenue Code of 1986 as added to the Code by section 1115(a) of the Tax Reform Act of 1986 (Pub. L. No. 99-514), as well as rules for applying the requirements of sections 410(b), 401(a)(26), and 129(d)(8) separately with respect to the employees of each qualified separate line of business of an employer. Paragraph (b) of this section contains a listing of the headings of §§ 1.414(r)-1 through 1.414(r)-11. Paragraph (c) of this section provides a flowchart showing how the major provisions of §§ 1.414(r)-1 through 1.414(r)-6 are applied.
(b) Table of contents. The following is a listing of the headings of §§ 1.414(r)-1 through 1.414(r)-11.
(a) In general.
(b) Conditions under which an employer is treated as operating qualified separate lines of business.
(1) In general.
(2) Qualified separate line of business.
(i) In general.
(ii) Line of business.
(iii) Separate line of business.
(iv) Qualified separate line of business.
(A) In general.
(B) Fifty-employee requirement.
(C) Notice requirement.
(D) Requirement of administrative scrutiny.
(3) Determining the employees of a qualified separate line of business.
(c) Separate application of certain Code requirements to employees of a qualified separate line of business.
(1) In general.
(2) Separate application of section 410(b).
(i) General rule.
(ii) Special rule for employer-wide plans.
(3) Separate application of section 401(a)(26).
(i) General rule.
(ii) Special rule for employer-wide plans.
(4) Separate application of section 129(d)(8). [Reserved]
(5) Separate application of other Code requirements.
(d) Application of requirements.
(1) In general.
(2) Interpretation.
(3) Separate operating units.
(4) Certain mergers and acquisitions.
(5) Governmental and tax-exempt employers.
(i) General rule.
(ii) Additional rules. [Reserved]
(6) Testing year basis of application.
(i) Section 414(r).
(ii) Sections 410(b), 401(a)(26), and 129(d)(8).
(7) Averaging rules.
(8) Definitions.
(9) Effective dates.
(i) General rule.
(ii) Reasonable compliance.
(A) In general.
(B) Determination of reasonable compliance.
(C) Effect on other plans.
(e) Additional rules.
(a) General rule.
(b) Employer determination of its lines of business.
(1) In general.
(2) Property and services provided to customers.
(i) In general.
(ii) Timing of provision of property or services.
(3) Employer designation.
(i) In general.
(ii) Ability to combine unrelated types of property or services in a single line of business.
(iii) Ability to separate related types of property or services into two or more lines of business.
(iv) Affiliated service groups.
(c) Examples.
(1) In general.
(2) Examples illustrating employer designation.
(3) Examples illustrating property and services provided to customers.
(a) General rule.
(b) Separate organization and operation.
(1) In general.
(2) Separate organizational unit.
(3) Separate financial accountability.
(4) Separate employee workforce.
(5) Separate management.
(c) Supplementary rules.
(1) In general.
(2) Determination of separate employee workforce.
(3) Determination of separate management.
(4) Employees taken into account.
(5) Services taken into account.
(i) Provision of services to a separate line of business.
(ii) Period for which services are provided.
(iii) Optional rule for employees who change status.
(A) In general.
(B) Change in employee's status.
(6) Examples of the separate employee workforce requirement.
(7) Examples of the separate management requirement.
(d) Optional rule for vertically integrated lines of business.
(1) In general.
(2) Requirements.
(3) Optional rule.
(i) Treatment of employees.
(ii) Purposes for which optional rule applies.
(4) Examples.
(a) In general.
(b) Fifty-employee requirement.
(c) Notice requirement.
(1) General rule.
(2) Effect of notice.
(a) In general.
(b) Statutory safe harbor.
(1) General rule.
(2) Highly compensated employee percentage ratio.
(3) Employees taken into account.
(4) Ten-percent exception.
(5) Determination based on preceding testing year.
(6) Examples.
(c) Safe harbor for separate lines of business in different industries.
(1) In general.
(2) Optional rule for foreign operations.
(3) Establishment of industry categories.
(4) Examples.
(d) Safe harbor for separate lines of business that are acquired through certain mergers and acquisitions.
(1) General rule.
(2) Employees taken into account.
(3) Transition period.
(4) Examples.
(e) Safe harbor for separate lines of business reported as industry segments.
(1) In general.
(2) Reported as an industry segment in conformity with Form 10-K or Form 20-F.
(3) Timely filing of Form 10-K or 20-F.
(4) Examples.
(f) Safe harbor for separate lines of business that provide same average benefits as other separate lines of business.
(1) General rule.
(2) Separate lines of business benefiting disproportionate number of nonhighly compensated employees.
(i) Applicability of safe harbor.
(ii) Requirement.
(3) Separate lines of business benefiting disproportionate number of highly compensated employees.
(i) Applicability of safe harbor.
(ii) Requirement.
(4) Employees taken into account.
(5) Example.
(g) Safe harbor for separate lines of business that provide minimum or maximum benefits.
(1) In general.
(2) Minimum benefit required.
(i) Applicability.
(ii) Requirement.
(iii) Defined benefit minimum.
(A) In general.
(B) Normal form and equivalent benefits.
(C) Compensation definition.
(D) Average compensation requirement.
(E) Special rules.
(iv) Defined contribution minimum.
(A) In general.
(B) Modified allocation definition for averaging.
(3) Maximum benefit permitted.
(i) Applicability.
(ii) Requirement.
(iii) Defined benefit maximum.
(A) In general.
(B) Determination of defined benefit maximum.
(C) Adjustment for different compensation definitions.
(D) Adjustment for certain subsidies.
(iv) Defined contribution maximum.
(4) Duplication of benefits or contributions.
(i) Plans of the same type.
(ii) Plans of different types.
(iii) Special rule for floor-offset arrangements.
(5) Certain contingency provisions ignored.
(6) Employees taken into account.
(a) In general.
(b) Authority to establish procedures.
(a) Introduction.
(1) In general.
(2) Purposes for which this section applies.
(b) Assignment procedure.
(1) In general.
(2) Assignment for the first testing day.
(3) Assignment of new employees for subsequent testing days.
(4) Special rule for employers using annual option under section 410(b).
(c) Assignment and allocation of residual shared employees.
(1) In general.
(2) Dominant line of business method of allocation.
(i) In general.
(ii) Dominant line of business.
(iii) Employee assignment percentage.
(A) Determination of percentage.
(B) Employees taken into account.
(iv) Option to apply reduced percentage.
(v) Examples.
(3) Pro-rata method of allocation.
(i) In general.
(ii) Allocation procedure.
(iii) Examples.
(4) HCE percentage ratio method of allocation.
(i) In general.
(ii) Highly compensated employee percentage assignment ratio.
(iii) Allocation procedure.
(5) Small group method.
(i) In general.
(ii) Size of group.
(iii) Composition of qualified separate line of business.
(iv) Reasonable allocation.
(a) General rule.
(b) Rules of separate application.
(1) In general.
(2) Satisfaction of section 410(b)(5)(B) on an employer-wide basis.
(i) General rule.
(ii) Application of facts and circumstances requirements under nondiscriminatory classification test.
(iii) Modification of unsafe harbor percentage for plans satisfying ratio percentage test at 90 percent level.
(A) General Rule.
(B) Facts and circumstances alternative.
(3) Satisfaction of section 410(b) on a qualified-separate-line-of-business basis.
(4) Examples.
(c) Coordination of section 401(a)(4) with section 410(b).
(1) General rule.
(2) Examples.
(d) Supplementary rules.
(1) In general.
(2) Definition of plan.
(3) Employees of a qualified separate line of business.
(4) Consequences of failure.
(a) General rule.
(b) Requirements applicable to a plan.
(c) Supplementary rules.
(1) In general.
(2) Definition of plan.
(3) Employees of a qualified separate line of business.
(4) Consequences of failure.
(a) In general.
(b) Definitions.
(1) In general.
(2) Substantial-service employee.
(3) Top-paid employee.
(4) Residual shared employee.
(5) Testing year.
(6) Testing day.
(7) First testing day.
(8) Section 401(a)(26) testing day.
(c) Averaging rules.
(1) In general.
(2) Specified provisions.
(3) Averaging of large fluctuations not permitted.
(4) Consistency requirements.
(c) Flowchart. The following is a flowchart showing how the major provisions of §§ 1.414(r)-1 through 1.414(r)-6 are applied.
Authorizing Statute
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Rules and regulations26 U.S.C. § 7805
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Advanced manufacturing production credit26 U.S.C. § 45X
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Alcohol, etc., used as fuel26 U.S.C. § 40
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Gross income defined26 U.S.C. § 61
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Transfers of excess pension assets to retiree health accounts26 U.S.C. § 420
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Partial exclusion for gain from certain small business stock26 U.S.C. § 1202
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Tax treatment of stripped bonds26 U.S.C. § 1286
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Current taxation of income from qualified electing funds26 U.S.C. § 1293
-
Imposition of tax on certain foreign procurement26 U.S.C. § 5000C
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Returns regarding payments of interest26 U.S.C. § 6049
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Signing of returns and other documents26 U.S.C. § 6061
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General requirement of return, statement, or list26 U.S.C. § 6011
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Income from discharge of indebtedness26 U.S.C. § 108
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Indian general welfare benefits26 U.S.C. § 139E
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Bonds must be registered to be tax exempt; other requirements26 U.S.C. § 149
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Trade or business expenses26 U.S.C. § 162
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Accelerated cost recovery system26 U.S.C. § 168
-
Amortizable bond premium26 U.S.C. § 171
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Golden parachute payments26 U.S.C. § 280G
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Distributions of stock and stock rights26 U.S.C. § 305
-
Transfer to corporation controlled by transferor26 U.S.C. § 351
-
Special rules for long-term contracts26 U.S.C. § 460
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Determination of basis of partner’s interest26 U.S.C. § 705
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Taxes of foreign countries and of possessions of United States26 U.S.C. § 901
-
Controlled foreign corporations; United States persons26 U.S.C. § 957
-
New energy efficient home credit26 U.S.C. § 45L
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2-percent floor on miscellaneous itemized deductions26 U.S.C. § 67
-
Certain death benefits26 U.S.C. § 101
-
Qualified business income26 U.S.C. § 199A
-
Installment method26 U.S.C. § 453
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Certain payments for the use of property or services26 U.S.C. § 467
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Partners, not partnership, subject to tax26 U.S.C. § 701
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Extent of recognition of gain or loss on distribution26 U.S.C. § 731
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Capitalization of certain policy acquisition expenses26 U.S.C. § 848
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Special rules for determining source26 U.S.C. § 863
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Income of foreign governments and of international organizations26 U.S.C. § 892
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Definitions and special rules26 U.S.C. § 6241
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Computation and payment of tax26 U.S.C. § 1503
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Adjusted gross income defined26 U.S.C. § 62
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Treatment of loans with below-market interest rates26 U.S.C. § 7872
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Basis to distributees26 U.S.C. § 358
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Minimum participation standards26 U.S.C. § 410
-
Other definitions and special rules26 U.S.C. § 860G
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Adjustments required by changes in method of accounting26 U.S.C. § 481
-
Definitions26 U.S.C. § 7701
-
Insurance income26 U.S.C. § 953
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Returns relating to actions affecting basis of specified securities26 U.S.C. § 6045B
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Information relating to certain trusts and annuity plans26 U.S.C. § 6047
-
Enhanced oil recovery credit26 U.S.C. § 43
-
Energy efficient commercial buildings deduction26 U.S.C. § 179D
-
Redemption through use of related corporations26 U.S.C. § 304
-
Certain stock purchases treated as asset acquisitions26 U.S.C. § 338
-
Special limitations on certain excess credits, etc.26 U.S.C. § 383
-
Optional treatment of elective deferrals as Roth contributions26 U.S.C. § 402A
-
General rule for taxable year of inclusion26 U.S.C. § 451
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Qualified ABLE programs26 U.S.C. § 529A
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Charitable remainder trusts26 U.S.C. § 664
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Nonrecognition of gain or loss on contribution26 U.S.C. § 721
-
Investment of earnings in United States property26 U.S.C. § 956
-
Definitions and special rule26 U.S.C. § 1377
-
Relief from joint and several liability on joint return26 U.S.C. § 6015
-
Return of S corporation26 U.S.C. § 6037
-
Notice of certain transfers to foreign persons26 U.S.C. § 6038B
-
Information at source26 U.S.C. § 6041
-
Imposition of accuracy-related penalty on underpayments26 U.S.C. § 6662
-
Tax imposed26 U.S.C. § 1
-
Railroad track maintenance credit26 U.S.C. § 45G
-
Zero-emission nuclear power production credit26 U.S.C. § 45U
-
Rehabilitation credit26 U.S.C. § 47
-
Clean electricity investment credit26 U.S.C. § 48E
-
Special rules26 U.S.C. § 52
-
Election to expense certain depreciable business assets26 U.S.C. § 179
-
Individual retirement accounts26 U.S.C. § 408
-
Special rules for nondealers26 U.S.C. § 453A
-
Deductions limited to amount at risk26 U.S.C. § 465
-
Exemption from tax on corporations, certain trusts, etc.26 U.S.C. § 501
-
Definition of regulated investment company26 U.S.C. § 851
-
Source rules for personal property sales26 U.S.C. § 865
-
Tax on nonresident alien individuals26 U.S.C. § 871
-
Foreign base company income26 U.S.C. § 954
-
S corporation defined26 U.S.C. § 1361
-
Definitions26 U.S.C. § 1402
-
Distributions of property26 U.S.C. § 301
-
Life insurance contract defined26 U.S.C. § 7702
-
Previously-owned clean vehicles26 U.S.C. § 25E
-
Electricity produced from certain renewable resources, etc.26 U.S.C. § 45
-
Clean fuel production credit26 U.S.C. § 45Z
-
Taxation of employee annuities26 U.S.C. § 403
-
Last-in, first-out inventories26 U.S.C. § 472
-
Allocation of income and deductions among taxpayers26 U.S.C. § 482
-
Definitions applicable to subparts A, B, C, and D26 U.S.C. § 643
-
Taxable years of partner and partnership26 U.S.C. § 706
-
Disposition of investment in United States real property26 U.S.C. § 897
-
Administrative adjustment request by partnership26 U.S.C. § 6227
-
Citizens or residents of the United States living abroad26 U.S.C. § 911
-
Residence and source rules involving possessions26 U.S.C. § 937
-
Rules relating to expatriated entities and their foreign parents26 U.S.C. § 7874
-
Regulations26 U.S.C. § 1502
-
Capitalization and inclusion in inventory costs of certain expenses26 U.S.C. § 263A
-
Foreign corporations26 U.S.C. § 367
-
Roth IRAs26 U.S.C. § 408A
-
Minimum vesting standards26 U.S.C. § 411
-
Partner’s distributive share26 U.S.C. § 704
-
Unrealized receivables and inventory items26 U.S.C. § 751
-
Taxation of residual interests26 U.S.C. § 860C
-
Exclusions from gross income26 U.S.C. § 883
-
Income affected by treaty26 U.S.C. § 894
-
Other definitions and special rules26 U.S.C. § 989
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Special rules26 U.S.C. § 1474
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Returns of brokers26 U.S.C. § 6045
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Information returns of tax return preparers26 U.S.C. § 6060
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Authority to make credits or refunds26 U.S.C. § 6402
-
Failure by individual to pay estimated income tax26 U.S.C. § 6654
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Interest on certain home mortgages26 U.S.C. § 25
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Credit for qualified commercial clean vehicles26 U.S.C. § 45W
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Interest on State and local bonds26 U.S.C. § 103
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Qualified lessee construction allowances for short-term leases26 U.S.C. § 110
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Losses26 U.S.C. § 165
-
Charitable, etc., contributions and gifts26 U.S.C. § 170
-
Incentive stock options26 U.S.C. § 422
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Deemed paid credit for subpart F inclusions26 U.S.C. § 960
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Election of mark to market for marketable stock26 U.S.C. § 1296
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Returns relating to certain life insurance contract transactions26 U.S.C. § 6050Y
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Clean vehicle credit26 U.S.C. § 30D
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Credit for carbon oxide sequestration26 U.S.C. § 45Q
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Amount of credit26 U.S.C. § 46
-
Advanced manufacturing investment credit26 U.S.C. § 48D
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Arbitrage26 U.S.C. § 148
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Amortization of goodwill and certain other intangibles26 U.S.C. § 197
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Interest on education loans26 U.S.C. § 221
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Disallowance of certain entertainment, etc., expenses26 U.S.C. § 274
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Qualifications for tax credit employee stock ownership plans26 U.S.C. § 409
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Unrelated debt-financed income26 U.S.C. § 514
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Rules for allocation of basis26 U.S.C. § 755
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Rules for certain reserves26 U.S.C. § 807
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Special rules in case of foreign oil and gas income26 U.S.C. § 907
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Basis of property acquired from a decedent26 U.S.C. § 1014
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Special rules26 U.S.C. § 1298
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Definitions26 U.S.C. § 3401
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Extension of time for filing returns26 U.S.C. § 6081
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Renumbered § 45C]26 U.S.C. § 28
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Credit for production of clean hydrogen26 U.S.C. § 45V
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Energy credit26 U.S.C. § 48
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Limitation on credit26 U.S.C. § 904
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Qualified pension, profit-sharing, and stock bonus plans26 U.S.C. § 401
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Dependent care assistance programs26 U.S.C. § 129
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Special rules for nuclear decommissioning costs26 U.S.C. § 468A
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Mark to market accounting method for dealers in securities26 U.S.C. § 475
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Basis of distributed property other than money26 U.S.C. § 732
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Straddles26 U.S.C. § 1092
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Qualified electing fund26 U.S.C. § 1295
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Averaging of farm income26 U.S.C. § 1301
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Withholdable payments to foreign financial institutions26 U.S.C. § 1471
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Definitions26 U.S.C. § 1504
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Basis information to persons acquiring property from decedent26 U.S.C. § 6035
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Information with respect to certain foreign-owned corporations26 U.S.C. § 6038A
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Returns relating to cash received in trade or business, etc.26 U.S.C. § 6050I
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Credit for increasing research activities26 U.S.C. § 41
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Definitions and special rules26 U.S.C. § 150
-
Passive activity losses and credits limited26 U.S.C. § 469
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Certain expenses for which credits are allowable26 U.S.C. § 280C
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Assumption of liability26 U.S.C. § 357
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Complete liquidations of subsidiaries26 U.S.C. § 332
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Distribution of stock and securities of a controlled corporation26 U.S.C. § 355
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Period for computation of taxable income26 U.S.C. § 441
-
General rule for taxable year of deduction26 U.S.C. § 461
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Special rules for modified guaranteed contracts26 U.S.C. § 817A
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Treatment of variable contracts26 U.S.C. § 817
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Certain reinsurance agreements26 U.S.C. § 845
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Failure to file notice of redetermination of foreign tax26 U.S.C. § 6689
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Branch transactions26 U.S.C. § 987
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Qualified zone property defined26 U.S.C. § 1397D
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Withholdable payments to other foreign entities26 U.S.C. § 1472
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Liquidating, etc., transactions26 U.S.C. § 6043
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Verification of returns26 U.S.C. § 6065
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Mode or time of collection26 U.S.C. § 6302
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Transfer of certain credits26 U.S.C. § 6418
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American Opportunity and Lifetime Learning credits26 U.S.C. § 25A
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Refundable credit for coverage under a qualified health plan26 U.S.C. § 36B
-
Clean electricity production credit26 U.S.C. § 45Y
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Other special rules26 U.S.C. § 50
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Treatment of community income26 U.S.C. § 66
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Basis to corporations26 U.S.C. § 362
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Election of taxable year other than required taxable year26 U.S.C. § 444
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Transactions between partner and partnership26 U.S.C. § 707
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Special allocation rules for certain asset acquisitions26 U.S.C. § 1060
-
Discounted unpaid losses defined26 U.S.C. § 846
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Definitions and special rules26 U.S.C. § 864
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Capital asset defined26 U.S.C. § 1221
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Interest on tax deferral26 U.S.C. § 1291
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Passive foreign investment company26 U.S.C. § 1297
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Withholding of tax on nonresident aliens26 U.S.C. § 1441
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Returns as to interests in foreign partnerships26 U.S.C. § 6046A
-
State and local income tax refunds26 U.S.C. § 6050E
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Returns relating to exchanges of certain partnership interests26 U.S.C. § 6050K
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Returns relating to higher education tuition and related expenses26 U.S.C. § 6050S
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Reporting of health insurance coverage26 U.S.C. § 6055
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Low-income housing credit26 U.S.C. § 42
-
New markets tax credit26 U.S.C. § 45D
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Definitions and special rules26 U.S.C. § 414
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Qualified asset account; limitation on additions to account26 U.S.C. § 419A
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General rule for methods of accounting26 U.S.C. § 446
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Interest on certain deferred payments26 U.S.C. § 483
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Reserves for losses on loans of banks26 U.S.C. § 585
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Certain revocable trusts treated as part of estate26 U.S.C. § 645
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Insurance company taxable income26 U.S.C. § 832
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Income from sources within the United States26 U.S.C. § 861
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Treatment of certain foreign currency transactions26 U.S.C. § 988
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Functional currency26 U.S.C. § 985
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Other definitions and special rules26 U.S.C. § 1275
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Election to extend time for payment of tax on undistributed earnings26 U.S.C. § 1294
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Requirement to maintain minimum essential coverage26 U.S.C. § 5000A
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Returns by exempt organizations26 U.S.C. § 6033
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Information with respect to foreign financial assets26 U.S.C. § 6038D
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Returns relating to the cancellation of indebtedness by certain entities26 U.S.C. § 6050P
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Identifying numbers26 U.S.C. § 6109
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Elective payment of applicable credits26 U.S.C. § 6417
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Certain fringe benefits26 U.S.C. § 132
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Dependent defined26 U.S.C. § 152
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Interest26 U.S.C. § 163
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Bad debts26 U.S.C. § 166
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Special rules for credits and deductions26 U.S.C. § 642
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General rule for inventories26 U.S.C. § 471
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Political organizations26 U.S.C. § 527
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Special rules applicable to sections 661 and 66226 U.S.C. § 663
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Allowance of deductions and credits26 U.S.C. § 874
-
Branch profits tax26 U.S.C. § 884
-
Tax imposed on certain built-in gains26 U.S.C. § 1374
-
Foreign tax-exempt organizations26 U.S.C. § 1443
-
Valuation tables26 U.S.C. § 7520
-
Losses on small business stock26 U.S.C. § 1244
-
Distributions26 U.S.C. § 1368
-
Definitions26 U.S.C. § 1473
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Information with respect to certain fines, penalties, and other amounts26 U.S.C. § 6050X
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Failure by corporation to pay estimated income tax26 U.S.C. § 6655