Northern Mariana Islands, and the Trust Territory of the Pacific Islands. (6) State law The term State law means any law, decision, rule, regulation, or other action having the effect of a law of any State or any political subdivision of a State, or any agency or instrumentality of a State or political subdivision of a State, except that a law of the United States applicable only to the District of Columbia shall be treated as a State law (rather than a law of the United States). I Tax Treatment of Income-Share Agreements 101. Tax treatment of proceeds and payments of future income For purposes of the Internal Revenue Code of 1986— (1) Funding excluded from gross income In the case of an individual, gross income shall not include the amount of any income-share funding which is paid to or on behalf of such individual under an income-share agreement. (2) Difference in repayment not included as gross income In the case of an income-share agreement under which the income-share funding exceeds the total income-share payments (in any period over the life of the contract), the individual’s gross income shall not include the amount of such excess. (3) Treatment of payments of future income The amount of any income-share payments under an income-share agreement shall be treated— (A) first, with respect to so much of such amount as does not exceed the income-share funding under such agreement, as a recovery of investment (with a corresponding reduction in basis) in the contract