# § 26. Limitation based on tax liability; definition of tax liability
**(a)** **Limitation based on amount of tax** The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of—
**(1)** the taxpayer’s regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27, and
**(2)** the tax imposed by section 55(a) for the taxable year.
**(b)** **Regular tax liability** For purposes of this part—
**(1)** **In general** The term “regular tax liability” means the tax imposed by this chapter for the taxable year.
**(2)** **Exception for certain taxes** For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:
**(A)** section 55 (relating to minimum tax),
**(B)** section 59A (relating to base erosion and anti-abuse tax),
**(C)** subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),
**(D)** section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),
**(E)** section 530(d)(4) (relating to additional tax on certain distributions from Coverdell education savings accounts),
**(F)** section 531 (relating to accumulated earnings tax),
**(G)** section 541 (relating to personal holding company tax),
**(H)** section 1351(d)(1) (relating to recoveries of foreign expropriation losses),
**(I)** section 1374 (relating to tax on certain built-in gains of S corporations),
**(J)** section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),
**(K)** subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),
**(L)** sections 871(a) and 881 (relating to certain income of nonresident aliens and foreign corporations),
**(M)** section 860E(e) (relating to taxes with respect to certain residual interests),
**(N)** section 884 (relating to branch profits tax),
**(O)** sections 453(*l*)(3) and 453A(c) (relating to interest on certain deferred tax liabilities),
**[(P)** Repealed. Pub. L. 115–141, div. U, title IV, § 401(b)(2), Mar. 23, 2018, 132 Stat. 1201.]
**(Q)** section 220(f)(4) (relating to additional tax on Archer MSA distributions not used for qualified medical expenses),
**(R)** section 138(c)(2) (relating to penalty for distributions from Medicare Advantage MSA not used for qualified medical expenses if minimum balance not maintained),
**(S)** sections 106(e)(3)(A)(ii), 223(b)(8)(B)(i)(II), and 408(d)(9)(D)(i)(II) (relating to certain failures to maintain high deductible health plan coverage),
**(T)** section 170(*o*)(3)(B) (relating to recapture of certain deductions for fractional gifts),
**(U)** section 223(f)(4) (relating to additional tax on health savings account distributions not used for qualified medical expenses),
**(V)** subsections (a)(1)(B)(i) and (b)(4)(A) of section 409A (relating to interest and additional tax with respect to certain deferred compensation),
**(W)** section 36(f) (relating to recapture of homebuyer credit),
**(X)** section 457A(c)(1)(B) (relating to determinability of amounts of compensation),
**(Y)** section 529A(c)(3)(A) (relating to additional tax on ABLE account distributions not used for qualified disability expenses), and
**(Z)** section 24(j)(2) (relating to excess advance payments).
**(c)** **Tentative minimum tax** For purposes of this part, the term “tentative minimum tax” means the amount determined under section 55(b)(1).
---
**Source Credit**: (Added § 25, renumbered § 26, Pub. L. 98–369, div. A, title IV, § 472, title VI, § 612(a), July 18, 1984, 98 Stat. 827, 905; amended Pub. L. 99–499, title V, § 516(b)(1)(A), Oct. 17, 1986, 100 Stat. 1770; Pub. L. 99–514, title II, § 261(c), title VI, § 632(c)(1), title VII, § 701(c)(1), Oct. 22, 1986, 100 Stat. 2214, 2277, 2340; Pub. L. 100–647, title I, §§ 1006(t)(16)(C), 1007(g)(1), 1011A(c)(10), 1012(q)(8), title IV, § 4005(g)(4), title V, § 5012(b)(2), Nov. 10, 1988, 102 Stat. 3425, 3434, 3476, 3524, 3650, 3662; Pub. L. 101–239, title VII, §§ 7811(c)(1), (2), 7821(a)(4)(A), Dec. 19, 1989, 103 Stat. 2406, 2407, 2424; Pub. L. 104–188, title I, § 1621(b)(1), Aug. 20, 1996, 110 Stat. 1866; Pub. L. 105–34, title II, § 213(e)(1), title XVI, § 1602(a)(1), Aug. 5, 1997, 111 Stat. 817, 1093; Pub. L. 105–277, div. J, title II, § 2001(a), Oct. 21, 1998, 112 Stat. 2681–901; Pub. L. 106–170, title V, § 501(a), Dec. 17, 1999, 113 Stat. 1918; Pub. L. 106–554, § 1(a)(7) [title II, § 202(a)(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A–628; Pub. L. 107–16, title II, §§ 201(b)(2)(D), 202(f)(2)(C), title VI, § 618(b)(2)(C), June 7, 2001, 115 Stat. 46, 49, 108; Pub. L. 107–22, § 1(b)(2)(A), July 26, 2001, 115 Stat. 197; Pub. L. 107–147, title IV, §§ 415(a), 417(23)(B), title VI, § 601(a), Mar. 9, 2002, 116 Stat. 54, 57, 59; Pub. L. 108–311, title III, § 312(a), title IV, §§ 401(a)(1), 408(a)(5)(A), Oct. 4, 2004, 118 Stat. 1181, 1183, 1191; Pub. L. 109–135, title IV, §§ 403(hh)(1), 412(c), Dec. 21, 2005, 119 Stat. 2631, 2636; Pub. L. 109–222, title III, § 302(a), May 17, 2006, 120 Stat. 353; Pub. L. 110–166, § 3(a), Dec. 26, 2007, 121 Stat. 2461; Pub. L. 110–172, § 11(a)(3), Dec. 29, 2007, 121 Stat. 2484; Pub. L. 110–289, div. C, title I, § 3011(b)(1), July 30, 2008, 122 Stat. 2891; Pub. L. 110–343, div. B, title I, § 106(e)(2)(D), title II, § 205(d)(1)(D), div. C, title I, § 101(a), title VIII, § 801(b), Oct. 3, 2008, 122 Stat. 3817, 3839, 3863, 3931; Pub. L. 111–5, div. B, title I, §§ 1004(b)(3), 1011(a), 1142(b)(1)(D), 1144(b)(1)(D), Feb. 17, 2009, 123 Stat. 314, 319, 330, 332; Pub. L. 111–148, title X, § 10909(b)(2)(E), (c), Mar. 23, 2010, 124 Stat. 1023; Pub. L. 111–312, title I, § 101(b)(1), title II, § 202(a), Dec. 17, 2010, 124 Stat. 3298, 3299; Pub. L. 112–240, title I, § 104(c)(1), Jan. 2, 2013, 126 Stat. 2321; Pub. L. 113–295, div. A, title II, § 221(a)(12)(B), div. B, title I, § 102(e)(1), Dec. 19, 2014, 128 Stat. 4038, 4062; Pub. L. 115–97, title I, § 14401(c), Dec. 22, 2017, 131 Stat. 2233; Pub. L. 115–141, div. U, title IV, § 401(b)(2), (d)(1)(D)(ii), Mar. 23, 2018, 132 Stat. 1201, 1206; Pub. L. 117–2, title IX, § 9611(b)(4)(A), Mar. 11, 2021, 135 Stat. 150.)
## Editorial Notes
### Amendments
2021—Subsec. (b)(2)(Z). added subpar. (Z).
2018—Subsec. (a)(1). , substituted “section 27” for “section 27(a)”.
Subsec. (b)(2)(P). , struck out subpar. (P) which read as follows: “section 860K (relating to treatment of transfers of high-yield interests to disqualified holders),”.
2017—Subsec. (b)(2)(B). added subpar. (B).
2014—Subsec. (b)(2)(B). , struck out subpar. (B) which read as follows: “section 59A (relating to environmental tax),”.
Subsec. (b)(2)(Y). , added subpar. (Y).
2013—Subsec. (a). amended subsec. (a) generally. Prior to amendment, subsec. (a) related to limitation based on amount of tax with a special rule for taxable years 2000 through 2011.
2010—Subsec. (a)(1). , (c), as amended by , temporarily struck out “23,” before “24,” in introductory provisions. See Effective and Termination Dates of 2010 Amendment note below.
Subsec. (a)(2). , substituted “2011” for “2009” in heading and “2009, 2010, or 2011” for “or 2009” in introductory provisions.
2009—Subsec. (a)(1). , inserted “30B,” after “30,” in introductory provisions.
, inserted “30,” after “25D,” in introductory provisions.
, inserted “25A(i),” after “24,” in introductory provisions.
Subsec. (a)(2). , substituted “2009” for “2008” in heading and “2008, or 2009” for “or 2008” in introductory provisions.
2008—Subsec. (a)(1). , substituted “25D, and 30D” for “and 25D” in introductory provisions.
, substituted “25B, and 25D” for “and 25B” in introductory provisions.
Subsec. (a)(2). , substituted “2008” for “2007” in heading and “2007, or 2008” for “or 2007” in introductory provisions.
Subsec. (b)(2)(W). added subpar. (W).
Subsec. (b)(2)(X). , added subpar. (X).
2007—Subsec. (a)(2). substituted “2007” for “2006” in heading and “2006, or 2007” for “or 2006” in introductory provisions.
Subsec. (b)(2)(S) to (V). added subpars. (S) and (T) and redesignated former subpars. (S) and (T) as (U) and (V), respectively.
2006—Subsec. (a)(2). substituted “2006” for “2005” in heading and “2005, or 2006” for “or 2005” in introductory provisions.
2005—Subsec. (b)(2)(E). , substituted “section 530(d)(4)” for “section 530(d)(3)”.
Subsec. (b)(2)(T). , added subpar. (T).
2004—Subsec. (a)(2). , substituted “rule for taxable years 2000 through 2005” for “rule for 2000, 2001, 2002, and 2003” in heading and “2003, 2004, or 2005” for “or 2003” in text.
Subsec. (b)(2)(R). , substituted “Medicare Advantage MSA” for “Medicare+Choice MSA”.
Subsec. (b)(2)(S). , added subpar. (S).
2002—Subsec. (a)(1). , amended directory language of . See 2001 Amendment note below.
Subsec. (a)(2). , substituted “rule for 2000, 2001, 2002, and 2003” for “rule for 2000 and 2001” in heading and “during 2000, 2001, 2002, or 2003,” for “during 2000 or 2001,” in introductory provisions.
Subsec. (b)(2)(P), (Q). , which directed striking “and” at end of subpar. (P) and substituting “, and” for the period at the end of subpar. (Q), was executed to subpars. (P) and (Q) as redesignated by , to reflect the probable intent of Congress. See 1997 Amendment notes below.
Subsec. (b)(2)(R). , added subpar. (R).
2001—Subsec. (a)(1). , as amended by , substituted “, 24, and 25B” for “and 24” in introductory provisions.
, substituted “sections 23 and 24” for “section 24” in introductory provisions.
, inserted “(other than section 24)” after “this subpart” in introductory provisions.
Subsec. (b)(2)(E). substituted “Coverdell education savings” for “education individual retirement”.
2000—Subsec. (b)(2)(Q). substituted “Archer MSA” for “medical savings account”.
1999—Subsec. (a). reenacted subsec. heading without change and amended text generally. Prior to amendment, text read as follows: “The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the excess (if any) of—
“(1) the taxpayer’s regular tax liability for the taxable year, over
“(2) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).
For purposes of paragraph (2), the taxpayer’s tentative minimum tax for any taxable year beginning during 1998 shall be treated as being zero.”
1998—Subsec. (a). inserted concluding provisions.
1997—Subsec. (b)(2)(E) to (O). , added subpar. (E) and redesignated former subpars. (E) to (N) as (F) to (O), respectively. Former subpar. (O) redesignated (P).
Subsec. (b)(2)(P). , redesignated subpar. (P) as (Q).
, added subpar. (P).
Subsec. (b)(2)(Q). , redesignated subpar. (P) as (Q).
1996—Subsec. (b)(2)(O). added subpar. (O).
1989—Subsec. (b)(2)(C), (D). , amended subpars. (C) and (D) generally. Prior to amendment, subpars. (C) and (D) read as follows:
“(C) subsection (m)(5)(B) (q), or (v) of section 72 (relating to additional tax on certain distributions),
“(D) section 72(t) (relating to 10-percent additional tax on early distributions from qualified retirement plans),”.
Subsec. (b)(2)(K). , added subpar. (K) and struck out former subpar. (K) which was identical.
Subsec. (b)(2)(L), (M). , added subpars. (L) and (M) and struck out former subpars. (L) and (M) which read as follows:
“(L) section 860E(e) (relating to taxes with respect to certain residual interests), and
“(L) section 884 (relating to branch profits tax), and
“(M) section 143(m) (relating to recapture of portion of federal subsidy from use of mortgage bonds and mortgage credit certificates).”
Subsec. (b)(2)(N). , which directed amendment of subsec. (b)(2) of this section “as amended by section 11811” by adding subpar. (N), was executed as if it directed amendment of subsec. (b)(2) of this section “as amended by section 7811”, to reflect the probable intent of Congress and the renumbering of section 11811 of H.R. 3299 as section 7811 prior to the enactment of H.R. 3299 into law as .
1988—Subsec. (b)(2)(C). , struck out “, ()(2),” after “subsection (m)(5)(B)”.
, substituted “(q), or (v)” for “or (q)”.
Subsec. (b)(2)(D). , substituted “72(t) (relating to 10-percent additional tax on early distributions from qualified retirement plans)” for “408(f) (relating to additional tax on income from certain retirement accounts)”.
Subsec. (b)(2)(K). , substituted “corporations).” for “corporations,”.
Subsec. (b)(2)(L). , added subpar. (L) relating to branch profits tax.
, added subpar. (L) relating to taxes with respect to certain residual interests.
Subsec. (b)(2)(M). , added subpar. (M).
1986—Subsec. (a). , amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the taxpayer’s tax liability for such taxable year.”
Subsec. (b). , (v), substituted “Regular tax liability” for “Tax liability” in heading and “this part” for “this section” in introductory provisions.
Subsec. (b)(1). , substituted “regular tax liability” for “tax liability”.
Subsec. (b)(2). added subpar. (B) and redesignated former subpars. (B) to (J) as (C) to (K), respectively.
, substituted “section 55 (relating to minimum tax)” for “section 56 (relating to corporate minimum tax)” in subpar. (A).
, substituted “certain built-in gains” for “certain capital gains” in subpar. (G).
, added subpar. (I).
, added subpar. (J).
Subsec. (c). , amended subsec. (c) generally, substituting provisions relating to tentative minimum tax for provisions referring to for similar rule for alternative minimum tax for taxpayers other than corporations.
## Statutory Notes and Related Subsidiaries
### Effective Date of 2021 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 2017 Amendment
> “The amendments made by this section [enacting
>
> and amending this section and sections 882, 6038A, 6425, and 6655 of this title] shall apply to base erosion payments (as defined in section 59A(d) of the Internal Revenue Code of 1986 [
>
> ], as added by this section) paid or accrued in taxable years beginning after
>
> .”
, , , provided that:
### Effective Date of 2014 Amendment
Amendment by effective , subject to a savings provision, see , set out as a note under .
Amendment by applicable to taxable years beginning after , see , set out as a note under , Government Organization and Employees.
### Effective Date of 2013 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective and Termination Dates of 2010 Amendment
> “The amendments made by this section [amending this section] shall apply to taxable years beginning after
>
> .”
, , , provided that:
Amendment by terminated applicable to taxable years beginning after , and section is amended to read as if such amendment had never been enacted, see , set out as a note under .
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 2009 Amendment
Amendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2009 Amendment note under .
> “The amendments made by this section [amending this section] shall apply to taxable years beginning after
>
> .”
, , , provided that:
Amendment by applicable to vehicles acquired after , see , set out as an Effective and Termination Dates of 2009 Amendment note under .
Amendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2009 Amendment note under .
### Effective Date of 2008 Amendment
Amendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2008 Amendment note under .
Amendment by applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2008 Amendment note under .
> “The amendments made by this section [amending this section] shall apply to taxable years beginning after
>
> .”
, , , provided that:
Amendment by applicable to amounts deferred which are attributable to services performed after , with certain exceptions, see , set out as an Effective Date note under .
> “The amendments made by this section [enacting
>
> , amending this section and
>
> and
>
> , Money and Finance, and renumbering former
>
> as
>
> ] shall apply to residences purchased on or after
>
> , in taxable years ending on or after such date.”
, , , provided that:
### Effective Date of 2007 Amendment
> “The amendments made by this section [amending this section] shall apply to taxable years beginning after
>
> .”
, , , provided that:
### Effective Date of 2006 Amendment
> “The amendments made by this section [amending this section] shall apply to taxable years beginning after
>
> .”
, , , provided that:
### Effective Date of 2005 Amendment
> “The amendments made by this section [see Tables for classification] shall take effect as if included in the provisions of the American Jobs Creation Act of 2004 [
>
> ] to which they relate.”
, , , provided that:
### Effective Date of 2004 Amendment
> “The amendments made by this section [amending this section and
>
> ] shall apply to taxable years beginning after
>
> .”
, , , provided that:
> “The amendments made by subsection (a) [amending this section and
>
> ] shall take effect as if included in section 1201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 [
>
> ].”
, , , provided that:
### Effective Date of 2002 Amendment
> “The amendment made by this section [amending this section] shall take effect as if included in section 4006 of the Balanced Budget Act of 1997 [
>
> ].”
, , , provided that:
> “The amendments made by this section [amending this section and
>
> ] shall apply to taxable years beginning after
>
> .”
, , , provided that:
### Effective Date of 2001 Amendment
Amendment by inapplicable to taxable years beginning during 2004 or 2005, see , set out as a note under .
Amendment by inapplicable to taxable years beginning during 2002 and 2003, see , set out as a note under .
> “The amendments made by this section [amending this section and sections 72, 135, 529, 530, 4973, 4975, and 6693 of this title] shall take effect on the date of the enactment of this Act [
>
> ].”
, , , provided that:
Amendment by applicable to taxable years beginning after , see , set out as a note under .
Amendment by applicable to taxable years beginning after , see , set out as a note under .
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 1999 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 1998 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 1997 Amendment
> “The amendments made by this section [enacting
>
> and amending this section and sections 135, 4973, 4975, and 6693 of this title] shall apply to taxable years beginning after
>
> .”
, , , provided that:
> “The amendments made by this section [amending this section and sections 162, 220, 264, 877, 2107, 2501, 4975, 6050Q, 6652, 6693, 6724, and 7702B of this title, renumbering
>
> as
>
> , and amending provisions set out as a note under
>
> ] shall take effect as if included in the provisions of the Health Insurance Portability and Accountability Act of 1996 [
>
> ] to which such amendments relate.”
, , , provided that:
### Effective Date of 1996 Amendment
> “The amendments made by this section [enacting sections 860H to 860L of this title and amending this section and sections 56, 382, 582, 856, 860G, 1202, and 7701 of this title] shall take effect on
>
> .”
, , , provided that:
### Effective Date of 1989 Amendment
Amendment by section 7811(c)(1), (2) of effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, , to which such amendment relates, see , set out as a note under .
> “Except as otherwise provided in this part [part II (§§ 7821–7823) of subtitle H of title VII of
>
> , amending this section and sections 453A, 842, 1503, 6427, 6655, 6863, 7519, 7611, 9502, 9503, and 9508 of this title and enacting provisions set out as notes under sections 56 and 7519 of this title], any amendment made by this part shall take effect as if included in the provision of the 1987 Act [
>
> ] to which such amendment relates.”
, , , provided that:
### Effective Date of 1988 Amendment
Amendment by applicable, with certain exceptions, to transfers after , and to excess inclusions for periods after , see section 1006(t)(16)(D)(ii)–(iv) of , set out as a note under .
Amendment by sections 1007(g)(1), 1011A(c)(10), and 1012(q)(8) of effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .
Amendment by applicable, with certain exceptions, to financing provided, and mortgage credit certificates issued, after , see , set out as a note under .
Amendment by applicable to contracts entered into on or after , with special rule where death benefit increases by more than $150,000, certain other material changes taken into account, and certain exchanges permitted, see , set out as an Effective Date note under .
### Effective Date of 1986 Amendment
Amendment by applicable to taxable years beginning after , see , set out as an Effective Date note under .
Amendment by applicable to taxable years beginning after , but only in cases where the return for the taxable year is filed pursuant to an S election made after , see , as amended, set out as an Effective Date note under .
Amendment by not applicable in the case of certain transactions, see , as amended, set out as an Effective Date of 1984 Amendment note under .
Amendment by applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as an Effective Date note under .
> “The amendments made by this section [enacting
>
> and amending this section and sections 164, 275, 936, 1561, 6154, 6425, and 6655 of this title] shall apply to taxable years beginning after
>
> .”
, , , provided that:
### Effective Date
Section applicable to taxable years beginning after , and to carrybacks from such years, see , set out as an Effective Date of 1984 Amendment note under .
### Savings Provision
For provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .
### Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by notwithstanding any treaty obligation of the United States in effect on , with provision that for such purposes any amendment by title I of be treated as if it had been included in the provision of to which such amendment relates, see section 1012(aa)(2), (4) of , set out as a note under .
### Treatment of Tax Imposed Under Former Section 409(c)
> “For purposes of section 26(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this Act), any tax imposed by section 409(c) of such Code (as in effect before its repeal by this section) shall be treated as a tax imposed by section 408(f) of such Code.”
, , , as amended by , , , provided that: