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Last Updated: January 8, 2012

-STATUTE

(a) In general
      Except as provided in subsection (e) - 
      (1) Application to individuals
        In the case of an individual, there is hereby imposed (in
      addition to any other tax imposed by this subtitle) for each
      taxable year a tax equal to 3.8 percent of the lesser of - 
          (A) net investment income for such taxable year, or
          (B) the excess (if any) of - 
            (i) the modified adjusted gross income for such taxable
          year, over
            (ii) the threshold amount.
      (2) Application to estates and trusts
        In the case of an estate or trust, there is hereby imposed (in
      addition to any other tax imposed by this subtitle) for each
      taxable year a tax of 3.8 percent of the lesser of - 
          (A) the undistributed net investment income for such taxable
        year, or
          (B) the excess (if any) of - 
            (i) the adjusted gross income (as defined in section 67(e))
          for such taxable year, over
            (ii) the dollar amount at which the highest tax bracket in
          section 1(e) begins for such taxable year.
    (b) Threshold amount
      For purposes of this chapter, the term "threshold amount" means -
    
        (1) in the case of a taxpayer making a joint return under
      section 6013 or a surviving spouse (as defined in section 2(a)),
      $250,000,
        (2) in the case of a married taxpayer (as defined in section
      7703) filing a separate return,  1/2  of the dollar amount
      determined under paragraph (1), and
        (3) in any other case, $200,000.
    (c) Net investment income
      For purposes of this chapter - 
      (1) In general
        The term "net investment income" means the excess (if any) of -
      
          (A) the sum of - 
            (i) gross income from interest, dividends, annuities,
          royalties, and rents, other than such income which is derived
          in the ordinary course of a trade or business not described
          in paragraph (2),
            (ii) other gross income derived from a trade or business
          described in paragraph (2), and
            (iii) net gain (to the extent taken into account in
          computing taxable income) attributable to the disposition of
          property other than property held in a trade or business not
          described in paragraph (2), over

          (B) the deductions allowed by this subtitle which are
        properly allocable to such gross income or net gain.
      (2) Trades and businesses to which tax applies
        A trade or business is described in this paragraph if such
      trade or business is - 
          (A) a passive activity (within the meaning of section 469)
        with respect to the taxpayer, or
          (B) a trade or business of trading in financial instruments
        or commodities (as defined in section 475(e)(2)).
      (3) Income on investment of working capital subject to tax
        A rule similar to the rule of section 469(e)(1)(B) shall apply
      for purposes of this subsection.
      (4) Exception for certain active interests in partnerships and S
        corporations
        In the case of a disposition of an interest in a partnership or
      S corporation - 
          (A) gain from such disposition shall be taken into account
        under clause (iii) of paragraph (1)(A) only to the extent of
        the net gain which would be so taken into account by the
        transferor if all property of the partnership or S corporation
        were sold for fair market value immediately before the
        disposition of such interest, and
          (B) a rule similar to the rule of subparagraph (A) shall
        apply to a loss from such disposition.
      (5) Exception for distributions from qualified plans
        The term "net investment income" shall not include any
      distribution from a plan or arrangement described in section
      401(a), 403(a), 403(b), 408, 408A, or 457(b).
      (6) Special rule
        Net investment income shall not include any item taken into
      account in determining self-employment income for such taxable
      year on which a tax is imposed by section 1401(b).
    (d) Modified adjusted gross income
      For purposes of this chapter, the term "modified adjusted gross
    income" means adjusted gross income increased by the excess of - 
        (1) the amount excluded from gross income under section
      911(a)(1), over
        (2) the amount of any deductions (taken into account in
      computing adjusted gross income) or exclusions disallowed under
      section 911(d)(6) with respect to the amounts described in
      paragraph (1).
    (e) Nonapplication of section
      This section shall not apply to - 
        (1) a nonresident alien, or
        (2) a trust all of the unexpired interests in which are devoted
      to one or more of the purposes described in section 170(c)(2)(B).

-SOURCE

(Added Pub. L. 111-152, title I, Sec. 1402(a)(1), Mar. 30, 2010,
    124 Stat. 1061.)

-MISC1

EFFECTIVE DATE                          
      Pub. L. 111-152, title I, Sec. 1402(a)(4), Mar. 30, 2010, 124
    Stat. 1063, provided that: "The amendments made by this subsection
    [enacting this chapter and amending section 6654 of this title]
    shall apply to taxable years beginning after December 31, 2012."