Data correspondence between automatically reported pressure altitude data and the pilot's altitude reference

This rule keeps the altitude your transponder reports to ATC honest. ATC's Mode C/S altitude readout and your own altimeter must agree, because controllers separate traffic vertically using what your transponder sends.

§ 91.217 prohibits operating automatic pressure-altitude reporting equipment:

• when ATC directs you to turn it off (deactivation);
• unless, as installed, it was tested and calibrated to transmit altitude within 125 feet (on a 95% probability basis) of the indicated/calibrated altitude shown by the altimeter you normally use — referenced to 29.92 inHg — across the aircraft's operating altitudes; or
• unless its altimeters and digitizers meet the applicable TSO standards.

It also requires, for aircraft equipped with both a transponder and ADS-B Out, that the pressure altitude reported for ADS-B Out and for Mode C/S come from the same source — so the two surveillance systems can't disagree about your altitude.

Summary: Automatic altitude-reporting equipment must be off when ATC directs, must report pressure altitude within 125 ft of your altimeter (referenced to 29.92) per TSO standards, and on aircraft with both a transponder and ADS-B Out the reported altitude must come from the same source.