REMOVAL OF SPECIAL LIMITATIONS WITH RESPECT TO DEDUCTIBILITY OF CONTRIBUTIONS TO PENSION PLANS BY SELF-EMPLOYED INDIVIDUALS.

SEC. 204. REMOVAL OF SPECIAL LIMITATIONS WITH RESPECT TO DEDUCTIBILITY OF CONTRIBUTIONS TO PENSION PLANS BY SELF-EMPLOYED INDIVIDUALS. (a) Removal of Special Limitations.— Paragraph (10) of section 404(a) (relating to special limitation on amount allowed as deduction for self-employed individuals for contributions to certain pension, etc., plans) is repealed. (b) Conforming Amendments.— (1) Each of the following provisions of section 401 is amended by striking out “(determined without regard to section 404(a)(10))” each place it appears: (A) Subsection (a)(10)(A)(ii). (B) Subparagraphs (A) and (B) of subsection (d)(5). (C) Subparagraph (A) of subsection (d)(6). (D) Subparagraphs (A) and (B)(i) of subsection (e)(1). (E) Subparagraphs (B) and (C) and the last sentence of subsection (e)(3). (2) Subparagraph (A) of section 404(e)(2) is amended by striking out “(determined without regard to subsection (a)(10))”. (3) Paragraph (1) and subparagraph (B) of paragraph (2) of section 404(e) are each amended by striking out “(determined without regard to paragraph (10) thereof)”. (c) Definition of Earned Income.— Section 401(c)(2) (relating to definition of earned income for certain pension and profit-sharing plans) is amended by striking out subparagraphs (A) and (B) and inserting in lieu thereof the following: 80 Stat. 1578 “(A) In general.— The term ‘earned income’ means the net earnings from self-employment (as defined in section 1402(a)), but such net earnings shall be determined— “(i) only with respect to a trade or business in which personal services of the taxpayer are a material income-producing factor, “(ii) without regard to paragraphs (4) and (5) of section 1402 (c), “(iii) in the case of any individual who is treated as an employee under sections 3121(d)(3)(A), (C), or (D), without regard to paragraph (2) of section 1402(c), and “(iv) without regard to items which are not included in gross income for purposes of this chapter, and the deductions properly allocable to or chargeable against such items. For purposes of this subparagraph, section 1402, as in effect for a taxable year ending on December 31, 1962, shall be treated as having been in effect for all taxable years ending before such date.” (d) Effective Date.— The amendments made by subsections (a) and (b) shall apply with respect to taxable years beginning after December 31, 1967.