Alaska Native Settlement Trust Low-Rate Election

§ 646. Tax treatment of electing Alaska Native Settlement Trusts(a) In generalIf an election under this section is in effect with respect to any Settlement Trust, the provisions of this section shall apply in determining the income tax treatment of the Settlement Trust and its beneficiaries with respect to the Settlement Trust. (b) Taxation of income of trustExcept as provided in subsection (f)(1)(B)(ii)—(1) In generalThere is hereby imposed on the taxable income of an electing Settlement Trust, other than its net capital gain, a tax at the lowest rate specified in section 1(c).11 See References in Text note below. (2) Capital gainIn the case of an electing Settlement Trust with a net capital gain for the taxable year, a tax is hereby imposed on such gain at the rate of tax which would apply to such gain if the taxpayer were subject to a tax on its other taxable income at only the lowest rate specified in section 1(c). Any such tax shall be in lieu of the income tax otherwise imposed by this chapter on such income or gain. (c) One-time election(1) In generalA Settlement Trust may elect to have the provisions of this section apply to the trust and its beneficiaries. (2) Time and method of electionAn election under paragraph (1) shall be made by the trustee of such trust—(A) on or before the due date (including extensions) for filing the Settlement Trust’s return of tax for the first taxable year of such trust ending after the date of the enactment of this section, and (B) by attaching to such return of tax a statement specifically providing for such election. (3) Period election in effectExcept as provided in subsection (f), an election under this subsection—(A) shall apply to the first taxable year described in paragraph (2)(A) and all subsequent taxable years, and (B) may not be revoked once it is made. (d) Contributions to trust(1) Beneficiaries of electing trust not taxed on contributionsIn the case of an electing Settlement Trust, no amount shall be includible in the gross income of a beneficiary of such trust by reason of a contribution to such trust. (2) Earnings and profitsThe earnings and profits of the sponsoring Native Corporation shall not be reduced on account of any contribution to such Settlement Trust. (e) Tax treatment of distributions to beneficiariesAmounts distributed by an electing Settlement Trust during any taxable year shall be considered as having the following characteristics in the hands of the recipient beneficiary:(1) First, as amounts excludable from gross income for the taxable year to the extent of the taxable income of such trust for such taxable year (decreased by any income tax paid by the trust with respect to the income) plus any amount excluded from gross income of the trust under section 103.