- 17 -
vest, during the year or within 2-1/2 months after the
end of the year. [H. Rept. 100-391 at 1061-1062
(1987); S. Print 100-63 at 143-144 (1987); emphasis
added.11]
Respondent argues that a proper reading of the foregoing
language indicates that the committees intended to draw a
distinction between situations where the vacation pay was vested
and funded and where it is paid. We disagree. Given a reading
of the entire expression of the committees' viewpoint, we think
they intended to equate, rather than separate, funding and
vesting and payment. In this connection, we also are of the view
that the broad language of the reports, particularly the
reference to "deferred benefits" with vacation pay, is simply an
example which indicates that the committees intended the 2-1/2
month rule to apply to deferred benefits such as severance pay,
which is involved herein along with vacation pay.
Respondent further seeks to buttress her position by
pointing to the second sentence of section 404(a)(5) (see supra
note 7) which was added by the conference committee with the
following explanation:
The conference agreement follows the Senate amendment
with modifications. The conference agreement provides
that vacation pay earned during any taxable year, but
not paid to employees on or before the date that is 2-
1/2 months after the end of the taxable year, is
deductible for the taxable year of the employer in
which it is paid to employees. This provision is an
11 Almost identical language was contained in the committee
reports when changes in the then existing reserve provision were
made in 1986. H. Rept. 99-426 (1985), 1986-3 C.B. (Vol. 2) 641;
S. Rept. 99-313 (1985), 1986-3 C.B. (Vol. 3) 674.
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