# § 3201. Rate of tax
**(a)** **Tier 1 tax** In addition to other taxes, there is hereby imposed on the income of each employee a tax equal to the applicable percentage of the compensation received during any calendar year by such employee for services rendered by such employee. For purposes of the preceding sentence, the term “applicable percentage” means the percentage equal to the sum of the rates of tax in effect under subsections (a) and (b) of section 3101 for the calendar year.
**(b)** **Tier 2 tax** In addition to other taxes, there is hereby imposed on the income of each employee a tax equal to the percentage determined under section 3241 for any calendar year of the compensation received during such calendar year by such employee for services rendered by such employee.
**(c)** **Cross reference** For application of different contribution bases with respect to the taxes imposed by subsections (a) and (b), see section 3231(e)(2).
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**Source Credit**: (Aug. 16, 1954, ch. 736, 68A Stat. 431; Aug. 31, 1954, ch. 1164, pt. II, § 206(a), 68 Stat. 1040; Pub. L. 86–28, pt. II, § 201(a), May 19, 1959, 73 Stat. 28; Pub. L. 88–133, title II, § 201, Oct. 5, 1963, 77 Stat. 221; Pub. L. 89–97, title I, §§ 105(b)(1), 111(c)(1), July 30, 1965, 79 Stat. 335, 342; Pub. L. 89–212, §§ 4, 5(a), Sept. 29, 1965, 79 Stat. 861; Pub. L. 89–699, title III, § 301(a), Oct. 30, 1966, 80 Stat. 1078; Pub. L. 89–700, title III, § 301(v), (vi), Oct. 30, 1966, 80 Stat. 1088, 1089; Pub. L. 93–69, title I, § 102(a), July 10, 1973, 87 Stat. 162; Pub. L. 94–93, title II, § 201, Aug. 9, 1975, 89 Stat. 466; Pub. L. 94–455, title XIX, § 1903(a)(6), Oct. 4, 1976, 90 Stat. 1807; Pub. L. 97–34, title VII, § 741(a), Aug. 13, 1981, 95 Stat. 347; Pub. L. 98–76, title II, §§ 211(a), 221, Aug. 12, 1983, 97 Stat. 419, 420; Pub. L. 100–203, title IX, § 9031(a), Dec. 22, 1987, 101 Stat. 1330–296; Pub. L. 101–508, title V, § 5125(a), Nov. 5, 1990, 104 Stat. 1388–285; Pub. L. 107–90, title II, § 204(c), Dec. 21, 2001, 115 Stat. 892; Pub. L. 113–295, div. A, title II, § 221(a)(100)(A), Dec. 19, 2014, 128 Stat. 4052.)
## Editorial Notes
### Amendments
2014—Subsec. (b). amended subsec. (b) generally. Prior to amendment, subsec. (b) consisted of pars. (1) and (2) establishing the tier 2 tax and its applicable percentage.
2001—Subsec. (b). amended heading and text of subsec. (b) generally. Prior to amendment, text read as follows: “In addition to other taxes, there is hereby imposed on the income of each employee a tax equal to 4.90 percent of the compensation received during any calendar year by such employee for services rendered by such employee.”
1990—Subsec. (a). substituted “applicable” for “following” before “percentage of the” and provision defining the term “applicable percentage” for provision specifying that in the case of compensation received during 1985 the rate of tax was 7.05 percent, for 1986 or 1987 the rate was 7.15 percent, for 1988 or 1989 the rate was 7.51 percent, and 1990 or thereafter the rate was 7.65 percent.
1987—Subsec. (b). amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: “In addition to other taxes, there is hereby imposed on the income of each employee a tax equal to the following percentage of the compensation received during any calendar year by such employee for services rendered by such employee:
| “In the case of compensation received during: | The rate shall be: |
| --- | --- |
| 1985 | 3.50 |
| 1986 or thereafter | 4.25.” |
1983—, amended section generally, substituting a two tiered tax system with accompanying tax rate tables and a cross reference to , for provisions which had taxed an employee at 2.75 percent of so much of the compensation paid in any calendar month to such employee for services rendered by him as was not in excess of an amount equal to one-twelfth of the current maximum annual taxable “wages” as defined in section 3121 for any month and which had provided that the rate of tax imposed by subsection (a) be increased by the rate of the tax imposed with respect to wages by section 3101(a) plus the rate imposed by section 3101(b) of so much of the compensation paid in any calendar month to such employee for services rendered by him as was not in excess of an amount equal to one-twelfth of the current maximum annual taxable “wages” as defined in section 3121 for any month.
, substituted “2.75 percent” for “2.0 percent”.
1981—Subsec. (a). added subsec. (a).
Subsec. (b). designated existing provisions as subsec. (b) and substituted “The rate of tax imposed by subsection (a) shall be increased by” for “In addition to other taxes, there is hereby imposed on the income of every employee a tax rate equal to”.
1976— struck out “of the Internal Revenue Code of 1954” after “wages by section 3101(a)”, “of such Code” after “rate imposed by section 3101(b)”, “after ,” after “for services rendered by him”, “of the Internal Revenue Code of 1954” after “as defined in section 3121”, and “after ” after “for any month”.
1975— inserted “in any calendar month” after “compensation paid”.
1973— substituted new tax rate provisions on income of employee for services rendered after , for former provisions which prescribed 6¼, 6½, 7, 7¼, and 7½ percent on income for services rendered after , , , , and , respectively, as is not in excess of (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable “wages” as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any month after : , That the rate of tax imposed by this section shall be increased, with respect to compensation paid for services rendered after , by a number of percentage points (including fractional points) equal at any given time to the number of percentage points (including fractional points) by which the rate of the tax imposed with respect to wages by section 3101(a) plus the rate imposed by section 3101(b) at such time exceeds 2¾ percent (the rate provided by paragraph (2) of section 3101 as amended by the Social Security Amendments of 1956).
1966— substituted “rendered after ” for “rendered after ”, and “(i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable ‘wages’ as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any month after ” for “$400 for any calendar month before the calendar month next following the month in which this provision was amended in 1963, or $450 for any calendar month after the month in which this provision was so amended and before the calendar month next following the calendar month in which this provision was amended in 1965, or (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable ‘wages’ as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any month after the month in which this provision was so amended”.
substituted “7 percent” for “6¾ percent” in subd. (3), “7¼ percent” for “7 percent” in subd. (4), and “7½ percent” for “7¼ percent” in subd. (5).
1965— substituted pars. (1) to (5) for former pars. (1) and (2) which imposed a tax equal to 6¾ percent of so much of the compensation paid to such employee for services rendered by him after the month in which this provision was amended in 1959, and before , and 7¼ percent of so much of the compensation paid to such employee for services rendered by him after , and inserted “and before the calendar month next following the calendar month in which this provision was amended in 1965, or (i) $450, or (ii) an amount equal to one-twelfth of the current maximum annual taxable ‘wages’ as defined in section 3121 of the Internal Revenue Code of 1954, whichever is greater, for any month after the month in which this provision was so amended”.
substituted “the rate of the tax imposed with respect to wages by section 3101(a) at such time exceeds 2¾ percent (the rate provided by paragraph (2) of section 3101 as amended by the Social Security Amendments of 1956)” for “the rate of the tax imposed with respect to wages by section 3101 at such time exceeds the rate provided by paragraph (2) of such section 3101 as amended by the Social Security Amendments of 1956” and inserted “plus the rate imposed by section 3101(b)” after “section 3101(a)”, respectively.
1963— limited existing taxable compensation base of $400 to any calendar month before Nov. 1963 and increased such base to $450 for any calendar month after Oct. 1963.
1959— increased tax from 6¼ percent of compensation not in excess of $350 for any calendar month to 6¾ percent of the compensation not in excess of $400 for any calendar month for services rendered before , and to 7¼ percent for services rendered after , and required an increase in the rate of tax with respect to compensation paid for services rendered after , by a number of percentage points equal at any given time to the number of percentage points by which the rate of tax imposed by at such time exceeds the rate provided by par. (2) of such section 3101 as amended by the Social Security Amendments of 1956.
1954—Act , substituted “$350” for “$300”.
## Statutory Notes and Related Subsidiaries
### Effective Date of 2014 Amendment
Amendment by effective , subject to a savings provision, see , set out as a note under .
### Effective Date of 2001 Amendment
Amendment by applicable to calendar years beginning after , see , set out as a note under .
### Effective Date of 1987 Amendment
> “The amendment made by this section [amending this section] shall apply with respect to compensation received after
>
> .”
, , , provided that:
### Effective and Termination Dates of 1983 Amendment
> “The amendments made by this part [part I (§§ 211, 212) of subtitle A of title II of
>
> , amending this section, sections 3211 and 3221 of this title, and
>
> , The Public Health and Welfare] shall apply to compensation paid for services rendered after
>
> , and before
>
> .”
, , , provided that:
> “The amendments made by sections 221, 222, 223, and 225 [amending this section and sections 3202, 3211, 3221, and 3231 of this title and
>
> ] shall apply to remuneration paid after
>
> .”
, , , provided that:
### Effective Date of 1981 Amendment
> “The amendments made by this section [amending this section and sections 3211, 3221, and 3231 of this title and
>
> , The Public Health and Welfare] shall apply to compensation paid for services rendered after
>
> .”
, , , provided that:
### Effective Date of 1976 Amendment
Amendment by applicable with respect to compensation paid for services rendered after , see , set out as a note under .
### Effective Date of 1975 Amendment
> “The amendments made by sections 201 through 205 of this title [amending this section and sections 3211, 3221, and 3231 of this title] shall apply for taxable years ending on or after the date of the enactment of this Act [
>
> ] and for taxable years ending before the date of the enactment of this Act as to which the period for assessment and collection of tax or the filing of a claim for credit or refund has not expired on the date of enactment of this Act. The amendment made by
>
> [amending
>
> ] shall apply for taxable years beginning on or after the date of enactment of this Act:
>
> , That with respect to payment made prior to the date of enactment of this Act, the employee may file a written request under section 206 within six months after the enactment of this Act.”
, , , provided that:
### Effective Date of 1973 Amendment
> “The amendments made by section 102 of this Act [amending this section and sections 3202, 3211, and 3221 of this title] shall become effective on
>
> , and shall apply only with respect to compensation paid for services rendered on or after that date:
>
> , That such amendments shall not be applicable to any dock company, common carrier railroad, or railway labor organization described in section 1(a) of the Railroad Retirement Act of 1937 [
>
> , Railroads], with respect to those of its employees covered as of
>
> , by a private supplemental pension plan established through collective bargaining, where a moratorium in an agreement made on or before
>
> , is applicable to changes in rates of pay contained in the current collective-bargaining agreement covering such employees, until the earlier of (1) the date as of which such moratorium expires, or (2) the date as of which such dock company, common carrier railroad, or railway labor organization agrees through collective bargaining to make the provisions of such amendments applicable.”
, , , provided that:
### Effective Date of 1965 Amendments
> “The amendments made by sections 1 and 3 of this Act [amending sections 228b, 228c, and 228e of Title 45, Railroads] shall take effect with respect to annuities accruing and deaths occurring in months after the month in which this Act is enacted [September 1965], and shall apply also to annuities paid in lump sums equal to their commuted value because of a reduction in such annuities under section 2(e) of the Railroad Retirement Act of 1937 [
>
> ], as in effect before the amendments made by this Act, as if such annuities had not been paid in such lump sums:
>
> , That the amounts of such annuities which were paid in lump sums equal to their commuted value shall not be included in the amount of annuities which become payable by reason of section 1 of this Act [amending
>
> ]. The amendments made by section 2 of this Act [amending sections 3203, 3231, 3402, 6053, and 6652 of this title, and
>
> ] shall apply only with respect to tips received after 1965. The amendments made by section 4 of this Act [amending this section and sections 3202, 3211, and 3221 of this title] shall apply only with respect to calendar months after the month in which this Act is enacted. The amendments made by section 5 of this Act [amending this section and sections 3211 and 3221 of this title] shall apply only with respect to compensation paid for services rendered after
>
> .”
, , , provided that:
> “The amendments made by this subsection [amending this section and sections 3211 and 3221 of this title] shall be effective with respect to compensation paid for services rendered after
>
> .”
, , , provided that:
Amendment by applicable to calendar year 1966, or to any subsequent calendar year but only if by October 1 immediately preceding such calendar year the Railroad Retirement Tax Act [this chapter] provides for a maximum amount of monthly compensation taxable under such Act during all months of such calendar year equal to one-twelfth of maximum wages which Federal Insurance Contributions Act [section 3101 et seq. of this title] provides may be counted for such calendar year, see , set out as an Effective Date note under , The Public Health and Welfare.
### Effective Date of 1959 Amendment
> “The amendments made by section 201 [amending this section and sections 3202, 3211, and 3221 of this title] shall, except as otherwise provided in such amendments, be effective as of the first day of the calendar month next following the month in which this Act was enacted [May, 1959], and shall apply only with respect to compensation paid after the month of such enactment, for services rendered after such month of enactment.”
, , , provided that:
### Effective Date of 1954 Amendment
> “The amendments to the Internal Revenue Code of 1986 [formerly I.R.C. 1954] made by section 206 [amending this section and sections 3202, 3211, 3221, and 3231 of this title] shall become effective as if enacted as a part of the Internal Revenue Code of 1986.”
, pt. IV, § 407, , as amended by act , , , provided that:
### Separability
> “If any provision of this Act [amending this section, sections 3202, 3211, and 3221 of this title, sections 228b, 228c, and 228e of Title 45, Railroads, and section 15a of former Title 49, and enacting provisions set out as notes under this section, and sections 228b, 228c, 228f, and 228
>
> of Title 45] or the application thereof to any person or circumstances should be held invalid, the remainder of such Act or the application of such provision to other persons or circumstances shall not be affected thereby.”
, , , provided that:
### Penalties and Interest Not Assessed for Failure To Make Timely Payment During Period January 1, 1982, to June 30, 1982, of Taxes Attributable to Amendments by Pub. L. 97–123
For provision that no penalties or interest shall be assessed on account of any failure to make timely payment of taxes imposed by subsec. (b) of this section with respect to payments made for the period , and ending , to the extent that such taxes are attributable to or the amendments made by that section, see , set out as a note under .