Internal Revenue Code · 26 U.S.C.
§ 197. Amortization of goodwill and certain other intangibles
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 197
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- August 10, 1993 by Pub. L. 103–66
- Last amended
- October 22, 2004 by Pub. L. 108–357
- Amendments
- 1 dated changes in the source credit
- Length
- 7 subsections · 2,332 words · about 10 min to read
- Defines
- 5 terms
- Cross-references
- cites 11; cited by 12 Code sections and 22 other regulations
- Regulations
- 3 issued under this section
A taxpayer shall be entitled to an amortization deduction with respect to any amortizable section 197 intangible. The amount of such deduction shall be determined by amortizing the adjusted basis (for purposes of determining gain) of such intangible ratably over the 15-year period beginning with the month in which such intangible was acquired.
Except as provided in subsection (a), no depreciation or amortization deduction shall be allowable with respect to any amortizable section 197 intangible.
In the case of a financial institution, the term “customer-based intangible” includes deposit base and similar items.
The term “supplier-based intangible” means any value resulting from future acquisitions of goods or services pursuant to relationships (contractual or otherwise) in the ordinary course of business with suppliers of goods or services to be used or sold by the taxpayer.
For purposes of subparagraph (A), the term “computer software” means any program designed to cause a computer to perform a desired function. Such term shall not include any data base or similar item unless the data base or item is in the public domain and is incidental to the operation of otherwise qualifying computer software.
Any right to service indebtedness which is secured by residential real property unless such right is acquired in a transaction (or series of related transactions) involving the acquisition of assets (other than rights described in this paragraph) constituting a trade or business or substantial portion thereof.
Any fees for professional services, and any transaction costs, incurred by parties to a transaction with respect to which any portion of the gain or loss is not recognized under part III of subchapter C.
In the case of any section 197 intangible which is a covenant not to compete (or other arrangement) described in subsection (d)(1)(E), in no event shall such covenant or other arrangement be treated as disposed of (or becoming worthless) before the disposition of the entire interest described in such subsection in connection with which such covenant (or other arrangement) was entered into.
All persons treated as a single taxpayer under section 41(f)(1) shall be so treated for purposes of this paragraph.
In the case of any section 197 intangible transferred in a transaction described in subparagraph (B), the transferee shall be treated as the transferor for purposes of applying this section with respect to so much of the adjusted basis in the hands of the transferee as does not exceed the adjusted basis in the hands of the transferor.
Any amount to which section 1253(d)(1) applies shall not be taken into account under this section.
For purposes of this section, a sublease shall be treated in the same manner as a lease of the underlying property involved.
For purposes of this chapter, any amortizable section 197 intangible shall be treated as property which is of a character subject to the allowance for depreciation provided in section 167.
This section shall not apply to any increment in value if, without regard to this section, such increment is properly taken into account in determining the cost of property which is not a section 197 intangible.
A person shall be treated as related to another person if such relationship exists immediately before or immediately after the acquisition of the intangible involved.
Subparagraph (A) shall not apply to the acquisition of any property by the taxpayer if the basis of the property in the hands of the taxpayer is determined under section 1014(a).
With respect to any increase in the basis of partnership property under section 732, 734, or 743, determinations under this paragraph shall be made at the partner level and each partner shall be treated as having owned and used such partner’s proportionate share of the partnership assets.
The term “amortizable section 197 intangible” does not include any section 197 intangible acquired in a transaction, one of the principal purposes of which is to avoid the requirement of subsection (c)(1) that the intangible be acquired after the date of the enactment of this section or to avoid the provisions of subparagraph (A).
In the case of any section 197 intangible which would be tax-exempt use property as defined in subsection (h) of section 168 if such section applied to such intangible, the amortization period under this section shall not be less than 125 percent of the lease term (within the meaning of section 168(i)(3)).
The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section, including such regulations as may be appropriate to prevent avoidance of the purposes of this section through related persons or otherwise.
(Added Pub. L. 103–66, title XIII, § 13261(a), Aug. 10, 1993, 107 Stat. 532; amended Pub. L. 108–357, title VIII, §§ 847(b)(3), 886(a), Oct. 22, 2004, 118 Stat. 1602, 1641.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 197
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 11 other sections
- § 212 Expenses for production of income
- § 41(f)(1) Credit for increasing research activities
- § 332 Complete liquidations of subsidiaries
- § 1253(b)(1) Transfers of franchises, trademarks, and trade names
- § 848 Capitalization of certain policy acquisition expenses
- § 167 Depreciation
- § 267(b) Losses, expenses, and interest with respect to transactions between related taxpayers
- § 707(b)(1) Transactions between partner and partnership
- § 1014(a) Basis of property acquired from a decedent
- § 732 Basis of distributed property other than money
- § 168 Accelerated cost recovery system
Cited by 12 Code sections
- § 56A(c)(14)(A)(i) Adjusted financial statement income
- § 144(a)(12)(C)(iii)(I) Qualified small issue bond; qualified student loan bond; qualified redevelopment bond
- § 167(f) Depreciation
- § 170(e)(1)(B)(iii) Charitable, etc., contributions and gifts
- § 179(d)(1)(A)(ii) Election to expense certain depreciable business assets
- § 470(c)(2)(A)(ii) Limitation on deductions allocable to property used by governments or other tax-exempt entities
- § 529(e)(3)(A)(iii) Qualified tuition programs
- § 530(b)(3)(C) Coverdell education savings accounts
- § 642(f) Special rules for credits and deductions
- § 848(g) Capitalization of certain policy acquisition expenses
- § 1060(b)(1) Special allocation rules for certain asset acquisitions
- § 1245(b)(8) Gain from dispositions of certain depreciable property
Cited in 22 regulations not issued under it
- § 1.162-11 Rentals.
- § 1.163(j)-10 Allocation of interest expense, interest income, and other items of expense and gross income to an excepted trade or business.
- § 1.167(a)-3 Intangibles.
- § 1.167(a)-4 Leased property.
- § 1.167(a)-6 Depreciation in special cases.
- § 1.167(a)-14 Treatment of certain intangible property excluded from section 197.
- § 1.263(a)-0 Outline of regulations under section 263(a).
- § 1.263(a)-4 Amounts paid to acquire or create intangibles.
- § 1.336-0 Table of contents.
- § 1.336-2 Availability, mechanics, and consequences of section 336(e) election.
- § 1.338-6 Allocation of ADSP and AGUB among target assets.
- § 1.338-11 Effect of section 338 election on insurance company targets.
- § 1.381(c)(22)-1 Successor life insurance company.
- § 1.446-1 General rule for methods of accounting.
- § 1.704-3 Contributed property.
- § 1.707-4 Disguised sales of property to partnership; special rules applicable to guaranteed payments, preferred returns, operating cash flow distributions, and reimbursements of preformation expenditures.
- § 1.721(c)-6 Procedural and reporting requirements.
- § 1.721(c)-7 Examples.
- § 1.755-1 Rules for allocation of basis.
- § 1.1016-3 Exhaustion, wear and tear, obsolescence, amortization, and depletion for periods since February 28, 1913.
- § 1.1060-1 Special allocation rules for certain asset acquisitions.
- § 1.1502-13 Intercompany transactions.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter B Computation of Taxable Income
- Part VI ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
Nearby sections
- § 194 Treatment of reforestation expenditures
- § 194A Contributions to employer liability trusts
- § 195 Start-up expenditures
- § 196 Deduction for certain unused business credits
- § 197 Amortization of goodwill and certain other intangibles
- § 198 Expensing of environmental remediation costs
- § 198A Repealed
- § 199 Repealed
- § 199A Qualified business income
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsecs. (c)(1)(A) and (f)(9)(A), (F), is the date of enactment of Pub. L. 103–66, which was approved Aug. 10, 1993.
Amendments
2004—Subsec. (e)(6) to (8). Pub. L. 108–357, § 886(a), redesignated pars. (7) and (8) as (6) and (7), respectively, and struck out heading and text of former par. (6). Text read as follows: “A franchise to engage in professional football, basketball, baseball, or other professional sport, and any item acquired in connection with such a franchise.”
Subsec. (f)(10). Pub. L. 108–357, § 847(b)(3), added par. (10).
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Amendment by section 847(b)(3) of Pub. L. 108–357 applicable to leases entered into after Oct. 3, 2004, see section 849(b)(4) of Pub. L. 108–357, set out as an Effective Date note under section 470 of this title.
Pub. L. 108–357, title VIII, § 886(c), Oct. 22, 2004, 118 Stat. 1641, provided that:
“(1) In general.— Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 1245 and 1253 of this title and repealing section 1056 of this title] shall apply to property acquired after the date of the enactment of this Act [Oct. 22, 2004].“(2) Section 1245.— The amendment made by subsection (b)(2) [amending section 1245 of this title] shall apply to franchises acquired after the date of the enactment of this Act [Oct. 22, 2004].”
Effective Date
Pub. L. 103–66, title XIII, § 13261(g), Aug. 10, 1993, 107 Stat. 540, as amended by Pub. L. 104–188, title I, § 1703(l), Aug. 20, 1996, 110 Stat. 1877, provided that:
“(1) In general.— Except as otherwise provided in this subsection, the amendments made by this section [enacting this section and amending sections 167, 642, 848, 1016, 1060, 1245, and 1253 of this title] shall apply with respect to property acquired after the date of the enactment of this Act [Aug. 10, 1993].“(2) Election to have amendments apply to property acquired after july 25, 1991.—“(A) In general.— If an election under this paragraph applies to the taxpayer—“(i) the amendments made by this section shall apply to property acquired by the taxpayer after July 25, 1991,“(ii) subsection (c)(1)(A) of section 197 of the Internal Revenue Code of 1986 (as added by this section) (and so much of subsection (f)(9)(A) of such section 197 as precedes clause (i) thereof) shall be applied with respect to the taxpayer by treating July 25, 1991, as the date of the enactment of such section, and“(iii) in applying subsection (f)(9) of such section, with respect to any property acquired by the taxpayer or a related person on or before the date of the enactment of this Act, only holding or use on July 25, 1991, shall be taken into account.“(B) Election.— An election under this paragraph shall be made at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe. Such an election by any taxpayer, once made—“(i) may be revoked only with the consent of the Secretary, and“(ii) shall apply to the taxpayer making such election and any other taxpayer under common control with the taxpayer (within the meaning of subparagraphs (A) and (B) of section 41(f)(1) of such Code) at any time after August 2, 1993, and on or before the date on which such election is made.“(3) Elective binding contract exception.—“(A) In general.— The amendments made by this section shall not apply to any acquisition of property by the taxpayer if—“(i) such acquisition is pursuant to a written binding contract in effect on the date of the enactment of this Act and at all times thereafter before such acquisition,“(ii) an election under paragraph (2) does not apply to the taxpayer, and“(iii) the taxpayer makes an election under this paragraph with respect to such contract.“(B) Election.— An election under this paragraph shall be made at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe. Such an election, once made—“(i) may be revoked only with the consent of the Secretary, and“(ii) shall apply to all property acquired pursuant to the contract with respect to which such election was made.”