-CITE-
26 USC Subchapter H - Banking Institutions 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
-HEAD-
SUBCHAPTER H - BANKING INSTITUTIONS
-MISC1-
Part
I. Rules of general application to banking institutions.
II. Mutual savings banks, etc.
AMENDMENTS
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(20)(C), Oct. 4,
1976, 90 Stat. 1797, struck out item for part III "Bank
affiliates".
-End-
-CITE-
26 USC PART I - RULES OF GENERAL APPLICA 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART I - RULES OF GENERAL APPLICA
-HEAD-
PART I - RULES OF GENERAL APPLICATION TO BANKING INSTITUTIONS
-MISC1-
Sec.
581. Definition of bank.
582. Bad debts, losses, and gains with respect to
securities held by financial institutions.
[583. Repealed.]
584. Common trust funds.
585. Reserves for losses on loans of banks.
[586. Repealed.]
AMENDMENTS
1986 - Pub. L. 99-514, title IX, Sec. 901(d)(4)(H), Oct. 22,
1986, 100 Stat. 2380, struck out item 586 "Reserves for losses on
loans of small business investment companies, etc."
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(18), Oct. 4, 1976,
90 Stat. 1796, struck out item 583 "Deductions of dividends paid on
certain preferred stock".
1969 - Pub. L. 91-172, title IV, Sec. 431(c)(2), Dec. 30, 1969,
83 Stat. 620, substituted "Bad debts, losses, and gains with
respect to securities held by financial institutions", for "Bad
debt and loss deduction with respect to securities held by banks"
in item 582, and added items 585 and 586.
-End-
-CITE-
26 USC Sec. 581 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART I - RULES OF GENERAL APPLICA
-HEAD-
Sec. 581. Definition of bank
-STATUTE-
For purposes of sections 582 and 584, the term "bank" means a
bank or trust company incorporated and doing business under the
laws of the United States (including laws relating to the District
of Columbia) or of any State, a substantial part of the business of
which consists of receiving deposits and making loans and
discounts, or of exercising fiduciary powers similar to those
permitted to national banks under authority of the Comptroller of
the Currency, and which is subject by law to supervision and
examination by State, Territorial, or Federal authority having
supervision over banking institutions. Such term also means a
domestic building and loan association.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 202; Pub. L. 87-722, Sec. 5,
Sept. 28, 1962, 76 Stat. 670; Pub. L. 94-455, title XIX, Sec.
1901(c)(5), Oct. 4, 1976, 90 Stat. 1803.)
-MISC1-
AMENDMENTS
1976 - Pub. L. 94-455 substituted "or of any State" for "of any
State, or of any Territory" after "District of Columbia)" and
struck out "Territorial" after "examination by State".
1962 - Pub. L. 87-722 substituted "authority of the Comptroller
of the Currency" for "section 11(k) of the Federal Reserve Act (38
Stat. 262; 12 U.S.C. 248(k))".
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 165, 246A, 271, 279, 368,
408, 409, 465, 501, 512, 514, 542, 585, 593, 864, 992, 1042, 1281,
1397E, 6032, 6050P, 6323, 6695, 7512, 7603 of this title.
-End-
-CITE-
26 USC Sec. 582 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART I - RULES OF GENERAL APPLICA
-HEAD-
Sec. 582. Bad debts, losses, and gains with respect to securities
held by financial institutions
-STATUTE-
(a) Securities
Notwithstanding sections 165(g)(1) and 166(e), subsections (a)
and (b) of section 166 (relating to allowance of deduction for bad
debts) shall apply in the case of a bank to a debt which is
evidenced by a security as defined in section 165(g)(2)(C).
(b) Worthless stock in affiliated bank
For purposes of section 165(g)(1), where the taxpayer is a bank
and owns directly at least 80 percent of each class of stock of
another bank, stock in such other bank shall not be treated as a
capital asset.
(c) Bond, etc., losses and gains of financial institutions
(1) General rule
For purposes of this subtitle, in the case of a financial
institution referred to in paragraph (2), the sale or exchange of
a bond, debenture, note, or certificate or other evidence of
indebtedness shall not be considered a sale or exchange of a
capital asset. For purposes of the preceding sentence, any
regular or residual interest in a REMIC, and any regular interest
in a FASIT, shall be treated as an evidence of indebtedness.
(2) Financial institutions to which paragraph (1) applies
(A) In general
For purposes of paragraph (1), the financial institutions
referred to in this paragraph are -
(i) any bank (and any corporation which would be a bank
except for the fact it is a foreign corporation),
(ii) any financial institution referred to in section 591,
(iii) any small business investment company operating under
the Small Business Investment Act of 1958, and
(iv) any business development corporation.
(B) Business development corporation
For purposes of subparagraph (A), the term "business
development corporation" means a corporation which was created
by or pursuant to an act of a State legislature for purposes of
promoting, maintaining, and assisting the economy and industry
within such State on a regional or statewide basis by making
loans to be used in trades and businesses which would generally
not be made by banks within such region or State in the
ordinary course of their business (except on the basis of a
partial participation), and which is operated primarily for
such purposes.
(C) Limitations on foreign banks
In the case of a foreign corporation referred to in
subparagraph (A)(i), paragraph (1) shall only apply to gains
and losses which are effectively connected with the conduct of
a banking business in the United States.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 202; Pub. L. 85-866, title I,
Sec. 34, Sept. 2, 1958, 72 Stat. 1632; Pub. L. 91-172, title IV,
Sec. 433(a), (c), Dec. 30, 1969, 83 Stat. 623, 624; Pub. L. 94-455,
title X, Sec. 1044(a), title XIV, Sec. 1402(b)(1)(G), (2), Oct. 4,
1976, 90 Stat. 1642, 1732; Pub. L. 98-369, div. A, title X, Sec.
1001(b)(6), (e), July 18, 1984, 98 Stat. 1011, 1012; Pub. L.
99-514, title VI, Sec. 671(b)(4), title IX, Sec. 901(d)(3), Oct.
22, 1986, 100 Stat. 2318, 2379; Pub. L. 100-647, title I, Sec.
1008(d)(3), Nov. 10, 1988, 102 Stat. 3439; Pub. L. 101-508, title
XI, Sec. 11801(a)(25), (c)(11), Nov. 5, 1990, 104 Stat. 1388-521,
1388-527; Pub. L. 104-188, title I, Sec. 1621(b)(4), Aug. 20, 1996,
110 Stat. 1867.)
-REFTEXT-
REFERENCES IN TEXT
The Small Business Investment Act of 1958, referred to in subsec.
(c)(2)(A)(iii), is Pub. L. 85-699, Aug. 21, 1958, 72 Stat. 689, as
amended, which is classified principally to chapter 14B (Sec. 661
et seq.) of Title 15, Commerce and Trade. For complete
classification of this Act to the Code, see Short Title note set
out under section 661 of Title 15 and Tables.
-MISC1-
AMENDMENTS
1996 - Subsec. (c)(1). Pub. L. 104-188 inserted ", and any
regular interest in a FASIT," after "REMIC".
1990 - Subsec. (c)(1). Pub. L. 101-508, Sec. 11801(c)(11)(A),
substituted "paragraph (2)" for "paragraph (5)".
Subsec. (c)(2). Pub. L. 101-508, Sec. 11801(a)(25), (c)(11)(B),
redesignated par. (5) as (2) and struck out former par. (2)
"Transitional rule for banks" which read as follows: "In the case
of a bank, if the net long-term capital gains of the taxable year
from sales or exchanges of qualifying securities exceed the net
short-term capital losses of the taxable year from such sales or
exchanges, such excess shall be considered as gain from the sale of
a capital asset held for more than 6 months to the extent it does
not exceed the net gain on sales and exchanges described in
paragraph (1)."
Subsec. (c)(3). Pub. L. 101-508, Sec. 11801(a)(25), struck out
par. (3) "Special rules" which read as follows: "For purposes of
this subsection -
"(A) The term 'qualifying security' means a bond, debenture,
note, or certificate or other evidence of indebtedness held by a
bank on July 11, 1969.
"(B) The amount treated as capital gain or loss from the sale
or exchange of a qualifying security shall be determined by
multiplying the amount of capital gain or loss from the sale or
exchange of such security (determined without regard to this
subsection) by a fraction, the numerator of which is the number
of days before July 12, 1969, that such security was held by the
bank, and the denominator of which is the number of days the
security was held by the bank."
Subsec. (c)(4). Pub. L. 101-508, Sec. 11801(a)(25), struck out
par. (4) "Transitional rule for banks" which read as follows: "In
the case of a corporation which would be a bank except for the fact
that it is a foreign corporation, the net gain, if any, for the
taxable year on sales and exchanges described in paragraph (1)
shall be considered as gain from the sale or exchange of a capital
asset to the extent such net gain does not exceed the portion of
any capital loss carryover to such taxable year which is
attributable to capital losses on sales or exchanges described in
paragraph (1) for a taxable year beginning before July 12, 1969.
For purposes of the preceding sentence, the portion of a net
capital loss for a taxable year which is attributable to capital
losses on sales or exchanges described in paragraph (1) is the
amount of the net capital loss on such sales or exchanges for such
taxable year (but not in excess of the net capital loss for such
taxable year)."
Subsec. (c)(5). Pub. L. 101-508, Sec. 11801(c)(11)(B),
redesignated par. (5) as (2).
1988 - Subsec. (a). Pub. L. 100-647 substituted "subsections (a)
and (b) of section 166" for "subsections (a), (b), and (c) of
section 166".
1986 - Subsec. (c)(1). Pub. L. 99-514, Sec. 901(d)(3)(A),
substituted "referred to in paragraph (5)" for "to which section
585, 586, or 593 applies".
Pub. L. 99-514, Sec. 671(b)(4), inserted "For purposes of the
preceding sentence, any regular or residual interest in a REMIC
shall be treated as an evidence of indebtedness."
Subsec. (c)(5). Pub. L. 99-514, Sec. 901(d)(3)(B), added par.
(5).
1984 - Subsec. (c)(2). Pub. L. 98-369 substituted "6 months" for
"1 year", applicable to property acquired after June 22, 1984, and
before Jan. 1, 1988. See Effective Date of 1984 Amendment note
below.
1976 - Subsec. (c)(2). Pub. L. 94-455, Sec. 1402(b)(2), provided
that "9 months" would be changed to "1 year".
Pub. L. 94-455, Sec. 1402(b)(1)(G), (2), provided that "6 months"
would be changed to "9 months" for taxable years beginning in 1977.
Subsec. (c)(4). Pub. L. 94-455, Sec. 1044(a), added par. (4).
1969 - Pub. L. 91-172, Sec. 433(c), substituted "Bad debts,
losses, and gains with respect to securities held by financial
institutions" for "Bad debt and loss deduction with respect to
securities held by banks" in section catchline.
Subsec. (c). Pub. L. 91-172, Sec. 433(a), redesignated existing
provisions as par. (1), inserted reference to sections 585, 586 and
593, and added pars. (2) and (3).
1958 - Subsec. (c). Pub. L. 85-866 struck out "with interest
coupons or in registered form," before "exceed the gains".
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective Sept. 1, 1997, see section
1621(d) of Pub. L. 104-188, set out as a note under section 26 of
this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 671(b)(4) of Pub. L. 99-514 effective Jan.
1, 1987, see section 675(a) of Pub. L. 99-514, as amended, set out
as an Effective Date note under section 860A of this title.
Amendment by section 901(d)(3) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 901(e) of
Pub. L. 99-514, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to property acquired after
June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub.
L. 98-369, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1044(b) of Pub. L. 94-455, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) The amendment made by subsection (a) [amending this section]
shall apply with respect to taxable years beginning after July 11,
1969.
"(2) If the refund or credit of any overpayment attributable to
the application of the amendment made by subsection (a) to any
taxable year is otherwise prevented by the operation of any law or
rule of law (other than section 7122 of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954], relating to compromises) on the day
which is one year after the date of the enactment of this Act [Oct.
4, 1976], such credit or refund shall be nevertheless allowed or
made if claim therefor is filed on or before such day."
Section 1402(b)(1) of Pub. L. 94-455 provided that amendment made
by that section is effective with respect to taxable years
beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning after Dec. 31, 1977.
EFFECTIVE DATE OF 1969 AMENDMENT
Section 433(d) of Pub. L. 91-172, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - The amendments made by this section [amending
this section and section 1243 of this title] shall apply to taxable
years beginning after July 11, 1969.
"(2) Election for small business investment companies and
business development corporations. - Notwithstanding paragraph (1),
in the case of a financial institution described in section 586(a)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the
amendments made by this section [amending this section and section
1243 of this title] shall not apply for its taxable years beginning
after July 11, 1969, and before July 11, 1974, unless the taxpayer
so elects at such time and in such manner as shall be prescribed by
the Secretary of the Treasury or his delegate. Such election shall
be irrevocable and shall apply to all such taxable years."
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 166, 172, 581, 856, 1236
of this title.
-End-
-CITE-
26 USC Sec. 583 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART I - RULES OF GENERAL APPLICA
-HEAD-
[Sec. 583. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(82),
Oct. 4, 1976, 90 Stat. 1778]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 202, related to
deductions by certain taxpayers of dividends paid to the United
States or any instrumentality thereof exempt from Federal income
taxes on the preferred stock of the corporation owned by the United
States or such instrumentality.
EFFECTIVE DATE OF REPEAL
Repeal effective with respect to taxable years beginning after
Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an
Effective Date of 1976 Amendment note under section 2 of this
title.
-End-
-CITE-
26 USC Sec. 584 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART I - RULES OF GENERAL APPLICA
-HEAD-
Sec. 584. Common trust funds
-STATUTE-
(a) Definitions
For purposes of this subtitle, the term "common trust fund" means
a fund maintained by a bank -
(1) exclusively for the collective investment and reinvestment
of moneys contributed thereto by the bank in its capacity -
(A) as a trustee, executor, administrator, or guardian, or
(B) as a custodian of accounts -
(i) which the Secretary determines are established pursuant
to a State law which is substantially similar to the Uniform
Gifts to Minors Act as published by the American Law
Institute, and
(ii) with respect to which the bank establishes, to the
satisfaction of the Secretary, that it has duties and
responsibilities similar to duties and responsibilities of a
trustee or guardian; and
(2) in conformity with the rules and regulations, prevailing
from time to time, of the Board of Governors of the Federal
Reserve System or the Comptroller of the Currency pertaining to
the collective investment of trust funds by national banks.
For purposes of this subsection, two or more banks which are
members of the same affiliated group (within the meaning of section
1504) shall be treated as one bank for the period of affiliation
with respect to any fund of which any of the member banks is
trustee or two or more of the member banks are cotrustees.
(b) Taxation of common trust funds
A common trust fund shall not be subject to taxation under this
chapter and for purposes of this chapter shall not be considered a
corporation.
(c) Income of participants in fund
Each participant in the common trust fund in computing its
taxable income shall include, whether or not distributed and
whether or not distributable -
(1) as part of its gains and losses from sales or exchanges of
capital assets held for not more than 1 year, its proportionate
share of the gains and losses of the common trust fund from sales
or exchanges of capital assets held for not more than 1 year,
(2) as part of its gains and losses from sales or exchanges of
capital assets held for more than 1 year, its proportionate share
of the gains and losses of the common trust fund from sales or
exchanges of capital assets held for more than 1 year, and
(3) its proportionate share of the ordinary taxable income or
the ordinary net loss of the common trust fund, computed as
provided in subsection (d).
The proportionate share of each participant in the amount of
dividends received by the common trust fund and to which section
1(h)(11) applies shall be considered for purposes of such paragraph
as having been received by such participant.
(d) Computation of common trust fund income
The taxable income of a common trust fund shall be computed in
the same manner and on the same basis as in the case of an
individual, except that -
(1) there shall be segregated the gains and losses from sales
or exchanges of capital assets;
(2) after excluding all items of gain and loss from sales or
exchanges of capital assets, there shall be computed -
(A) an ordinary taxable income which shall consist of the
excess of the gross income over deductions; or
(B) an ordinary net loss which shall consist of the excess of
the deductions over the gross income; and
(3) the deduction provided by section 170 (relating to
charitable, etc., contributions and gifts) shall not be allowed.
(e) Admission and withdrawal
No gain or loss shall be realized by the common trust fund by the
admission or withdrawal of a participant. The admission of a
participant shall be treated with respect to the participant as the
purchase of, or an exchange for, the participating interest. The
withdrawal of any participating interest by a participant shall be
treated as a sale or exchange of such interest by the participant.
(f) Different taxable years of common trust fund and participant
If the taxable year of the common trust fund is different from
that of a participant, the inclusions with respect to the taxable
income of the common trust fund, in computing the taxable income of
the participant for its taxable year, shall be based upon the
taxable income of the common trust fund for any taxable year of the
common trust fund ending within or with the taxable year of the
participant.
(g) Net operating loss deduction
The benefit of the deduction for net operating losses provided by
section 172 shall not be allowed to a common trust fund, but shall
be allowed to the participants in the common trust fund under
regulations prescribed by the Secretary.
(h) Nonrecognition treatment for certain transfers to regulated
investment companies
(1) In general
If -
(A) a common trust fund transfers substantially all of its
assets to one or more regulated investment companies in
exchange solely for stock in the company or companies to which
such assets are so transferred, and
(B) such stock is distributed by such common trust fund to
participants in such common trust fund in exchange solely for
their interests in such common trust fund,
no gain or loss shall be recognized by such common trust fund by
reason of such transfer or distribution, and no gain or loss
shall be recognized by any participant in such common trust fund
by reason of such exchange.
(2) Basis rules
(A) Regulated investment company
The basis of any asset received by a regulated investment
company in a transfer referred to in paragraph (1)(A) shall be
the same as it would be in the hands of the common trust fund.
(B) Participants
The basis of the stock which is received in an exchange
referred to in paragraph (1)(B) shall be the same as that of
the property exchanged. If stock in more than one regulated
investment company is received in such exchange, the basis
determined under the preceding sentence shall be allocated
among the stock in each such company on the basis of respective
fair market values.
(3) Treatment of assumptions of liability
(A) In general
In determining whether the transfer referred to in paragraph
(1)(A) is in exchange solely for stock in one or more regulated
investment companies, the assumption by any such company of a
liability of the common trust fund shall be disregarded.
(B) Special rule where assumed liabilities exceed basis
(i) In general
If, in any transfer referred to in paragraph (1)(A), the
assumed liabilities exceed the aggregate adjusted bases (in
the hands of the common trust fund) of the assets transferred
to the regulated investment company or companies -
(I) notwithstanding paragraph (1), gain shall be
recognized to the common trust fund on such transfer in an
amount equal to such excess,
(II) the basis of the assets received by the regulated
investment company or companies in such transfer shall be
increased by the amount so recognized, and
(III) any adjustment to the basis of a participant's
interest in the common trust fund as a result of the gain
so recognized shall be treated as occurring immediately
before the exchange referred to in paragraph (1)(B).
If the transfer referred to in paragraph (1)(A) is to two or
more regulated investment companies, the basis increase under
subclause (II) shall be allocated among such companies on the
basis of the respective fair market values of the assets
received by each of such companies.
(ii) Assumed liabilities
For purposes of clause (i), the term "assumed liabilities"
means any liability of the common trust fund assumed by any
regulated investment company in connection with the transfer
referred to in paragraph (1)(A).
(C) Assumption
For purposes of this paragraph, in determining the amount of
any liability assumed, the rules of section 357(d) shall apply.
(4) Common trust fund must meet diversification rules
This subsection shall not apply to any common trust fund which
would not meet the requirements of section 368(a)(2)(F)(ii) if it
were a corporation. For purposes of the preceding sentence,
Government securities shall not be treated as securities of an
issuer in applying the 25-percent and 50-percent test and such
securities shall not be excluded for purposes of determining
total assets under clause (iv) of section 368(a)(2)(F).
(i) Taxable year of common trust fund
For purposes of this subtitle, the taxable year of any common
trust fund shall be the calendar year.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 203; Pub. L. 87-722, Sec. 4,
Sept. 28, 1962, 76 Stat. 670; Pub. L. 88-272, title II, Sec.
201(d)(5), Feb. 26, 1964, 78 Stat. 32; Pub. L. 94-414, Sec. 1,
Sept. 17, 1976, 90 Stat. 1273; Pub. L. 94-455, title XIV, Sec.
1402(b)(1)(H), (2), title XIX, Secs. 1901(b)(1)(G), 1906(b)(13)(A),
title XXI, Secs. 2131(d), 2138, Oct. 4, 1976, 90 Stat. 1732, 1790,
1834, 1924, 1932; Pub. L. 95-30, title I, Sec. 101(d)(7), May 23,
1977, 91 Stat. 133; Pub. L. 96-223, title IV, Sec. 404(b)(3), Apr.
2, 1980, 94 Stat. 306; Pub. L. 97-34, title III, Sec. 301(b)(3),
(6)(A), Aug. 13, 1981, 95 Stat. 270; Pub. L. 97-448, title I, Sec.
103(a)(2), Jan. 12, 1983, 96 Stat. 2375; Pub. L. 98-369, div. A,
title X, Sec. 1001(b)(7), (e), July 18, 1984, 98 Stat. 1011, 1012;
Pub. L. 99-514, title VI, Sec. 612(b)(2), Oct. 22, 1986, 100 Stat.
2250; Pub. L. 100-647, title I, Sec. 1008(e)(5)(A), Nov. 10, 1988,
102 Stat. 3440; Pub. L. 104-188, title I, Sec. 1805(a), Aug. 20,
1996, 110 Stat. 1894; Pub. L. 106-36, title III, Sec. 3001(c)(1),
June 25, 1999, 113 Stat. 183; Pub. L. 108-27, title III, Sec.
302(e)(7), May 28, 2003, 117 Stat. 76.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 303 of Pub. L. 108-27,
see Effective and Termination Dates of 2003 Amendment note below.
-MISC1-
AMENDMENTS
2003 - Subsec. (c). Pub. L. 108-27, Secs. 302(e)(7), 303,
temporarily inserted concluding provisions. See Effective and
Termination Dates of 2003 Amendment note below.
1999 - Subsec. (h)(3)(A). Pub. L. 106-36, Sec. 3001(c)(1)(A),
struck out ", and the fact that any property transferred by the
common trust fund is subject to a liability," before "shall be
disregarded".
Subsec. (h)(3)(B)(ii). Pub. L. 106-36, Sec. 3001(c)(1)(B), added
cl. (ii) and struck out heading and text of former cl. (ii). Text
read as follows: "For purposes of clause (i), the term 'assumed
liabilities' means the aggregate of -
"(I) any liability of the common trust fund assumed by any
regulated investment company in connection with the transfer
referred to in paragraph (1)(A), and
"(II) any liability to which property so transferred is
subject."
Subsec. (h)(3)(C). Pub. L. 106-36, Sec. 3001(c)(1)(B), added
subpar. (C).
1996 - Subsecs. (h), (i). Pub. L. 104-188 added subsec. (h) and
redesignated former subsec. (h) as (i).
1988 - Subsec. (h). Pub. L. 100-647 added subsec. (h).
1986 - Subsec. (c). Pub. L. 99-514, Sec. 612(b)(2)(B),
substituted "1 year" for "6 months" wherever appearing in pars. (1)
and (2).
Pub. L. 99-514, Sec. 612(b)(2)(A), amended subsec. (c) generally,
restating subpars. (A) to (C) of former par. (1) as pars. (1) to
(3) and striking out former par. (2) which read as follows: "The
proportionate share of each participant in the amount of dividends
or interest received by the common trust fund and to which section
116 or 128 applies shall be considered for purposes of such section
as having been received by such participant."
1984 - Subsec. (c)(1)(A), (B). Pub. L. 98-369 substituted "6
months" for "1 year", wherever appearing, applicable to property
acquired after June 22, 1984, and before Jan. 1, 1988. See
Effective Date of 1984 Amendment note below.
1983 - Subsec. (c)(2). Pub. L. 97-448 reenacted par. (2) without
change.
1981 - Subsec. (c)(2). Pub. L. 97-34, Sec. 301(b)(6)(A), inserted
reference to "interest" in heading and text, which continued the
amendment made by Pub. L. 96-223.
Pub. L. 97-34, Sec. 301(b)(3), inserted "or 128" after "section
116".
1980 - Subsec. (c)(2). Pub. L. 96-223 inserted "or interest"
after "dividends" in heading and text.
1977 - Subsec. (d)(4). Pub. L. 95-30 struck out par. (4) relating
to standard deduction.
1976 - Subsec. (a). Pub. L. 94-414 inserted provision relating to
treatment of two or more bank members of same affiliated group.
Subsec. (a)(1). Pub. L. 94-455, Sec. 2138, designated existing
provisions relating to trustee, executor, administrator and
guardian as subpar. (A) and added subpar. (B).
Subsec. (c)(1)(A), (B). Pub. L. 94-455, Sec. 1402(b)(2), provided
that "9 months" would be changed to "1 year" wherever appearing.
Pub. L. 94-455, Sec. 1402(b)(1)(H), provided that "6 months"
would be changed to "9 months" for taxable years beginning in 1977.
Subsec. (c)(2). Pub. L. 94-455, Sec. 1901(b)(1)(G), struck out
provisions relating to partially tax exempt interest and election
of a common trust fund to amortize premiums on bonds and other
obligations.
Subsec. (e). Pub. L. 94-455, Sec. 2131(d), inserted "The
admission of a participant shall be treated with respect to the
participant as the purchase of, or exchange for, the participating
interest".
Subsec. (g). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out "or
his delegate" after "Secretary".
1964 - Subsec. (c)(2). Pub. L. 88-272 struck out "section 34 or"
before "section 116 applies".
1962 - Subsec. (a)(2). Pub. L. 87-722 inserted "or the
Comptroller of the Currency" after "the Board of Governors of the
Federal Reserve System".
EFFECTIVE AND TERMINATION DATES OF 2003 AMENDMENT
Amendment by Pub. L. 108-27 applicable, except as otherwise
provided, to taxable years beginning after Dec. 31, 2002, see
section 302(f) of Pub. L. 108-27, set out as a note under section 1
of this title.
Amendment by Pub. L. 108-27 inapplicable to taxable years
beginning after Dec. 31, 2008, and the Internal Revenue Code of
1986 to be applied and administered to such years as if such
amendment had never been enacted, see section 303 of Pub. L.
108-27, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-36 applicable to transfers after Oct.
18, 1998, see section 3001(e) of Pub. L. 106-36, set out as a note
under section 351 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1805(b) of Pub. L. 104-188 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
transfers after December 31, 1995."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1008(e)(5)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
take effect as if included in the amendments made by section 806 of
the Reform Act [Pub. L. 99-514], except that section 806(e)(1) [set
out as a note under section 1378 of this title] shall be applied by
substituting 'December 31, 1987' for 'December 31, 1986'. For
purposes of section 806(e)(2) of the Reform Act [set out as a note
under section 1378 of this title] -
"(i) a participant in a common trust fund shall be treated in
the same manner as a partner, and
"(ii) subparagraph (C) thereof shall be applied by substituting
'December 31, 1987' for 'December 31, 1986' and as if it did not
contain the election to include all income in the short taxable
year."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 612(b)(2)(B) of Pub. L. 99-514 provided that: "If the
amendments made by section 1001 of the Tax Reform Act of 1984 [Pub.
L. 98-369, amending this section and sections 166, 341, 402, 403,
423, 582, 631, 642, 702, 818, 852, 856, 857, 1222, 1223, 1231,
1232, 1233, 1234, 1235, 1246, 1247, and 1248 of this title] cease
to apply [see Effective Date of 1984 Amendment note below],
effective with respect to property to which such amendments do not
apply, subsection (c) of section 584 is amended by striking out '6
months' each place it appears and inserting in lieu thereof '1
year'."
Amendment by section 612(b)(2) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 612(c) of
Pub. L. 99-514, set out as a note under section 301 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to property acquired after
June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub.
L. 98-369, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 301(b)(3) of Pub. L. 97-34 applicable to
taxable years ending after Sept. 30, 1981, and amendment by section
301(b)(6)(A) of Pub. L. 97-34 applicable to taxable years beginning
after Dec. 31, 1981, see section 301(d) of Pub. L. 97-34, set out
as a note under section 265 of this title.
EFFECTIVE AND TERMINATION DATES OF 1980 AMENDMENT
Amendment by Pub. L. 96-223 applicable with respect to taxable
years beginning after Dec. 31, 1980, and before Jan. 1, 1982, see
section 404(c) of Pub. L. 96-223, set out as a note under section
265 of this title.
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95-30 applicable to taxable years beginning
after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Section 2131(f)(6) of Pub. L. 94-455 provided that: "The
amendments made by subsections (d) and (e) [amending this section
and section 683 of this title] shall take effect on April 8, 1976,
in taxable years ending on or after such date."
Section 1402(b)(1) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning after Dec. 31, 1977.
Amendment by section 1901(b)(1)(G) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as an Effective Date of
1976 Amendment note under section 2 of this title.
Section 2 of Pub. L. 94-414 provided that: "The amendment made by
the first section of this Act [amending this section] shall apply
to taxable years beginning after December 31, 1975."
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by Pub. L. 88-272 applicable with respect to dividends
received after Dec. 31, 1964, in taxable years ending after such
date, see section 201(e) of Pub. L. 88-272, set out as a note under
section 22 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 59, 170, 171, 581, 706,
851, 894, 6049 of this title.
-End-
-CITE-
26 USC Sec. 585 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART I - RULES OF GENERAL APPLICA
-HEAD-
Sec. 585. Reserves for losses on loans of banks
-STATUTE-
(a) Reserve for bad debts
(1) In general
Except as provided in subsection (c), a bank shall be allowed a
deduction for a reasonable addition to a reserve for bad debts.
Such deduction shall be in lieu of any deduction under section
166(a).
(2) Bank
For purposes of this section -
(A) In general
The term "bank" means any bank (as defined in section 581).
(B) Banking business of United States branch of foreign
corporation
The term "bank" also includes any corporation to which
subparagraph (A) would apply except for the fact that it is a
foreign corporation. In the case of any such foreign
corporation, this section shall apply only with respect to
loans outstanding the interest on which is effectively
connected with the conduct of a banking business within the
United States.
(b) Addition to reserves for bad debts
(1) General rule
For purposes of subsection (a), the reasonable addition to the
reserve for bad debts of any financial institution to which this
section applies shall be an amount determined by the taxpayer
which shall not exceed the addition to the reserve for losses on
loans determined under the experience method as provided in
paragraph (2).
(2) Experience method
The amount determined under this paragraph for a taxable year
shall be the amount necessary to increase the balance of the
reserve for losses on loans (at the close of the taxable year) to
the greater of -
(A) the amount which bears the same ratio to loans
outstanding at the close of the taxable year as (i) the total
bad debts sustained during the taxable year and the 5 preceding
taxable years (or, with the approval of the Secretary, a
shorter period), adjusted for recoveries of bad debts during
such period, bears to (ii) the sum of the loans outstanding at
the close of such 6 or fewer taxable years, or
(B) the lower of -
(i) the balance of the reserve at the close of the base
year, or
(ii) if the amount of loans outstanding at the close of the
taxable year is less than the amount of loans outstanding at
the close of the base year, the amount which bears the same
ratio to loans outstanding at the close of the taxable year
as the balance of the reserve at the close of the base year
bears to the amount of loans outstanding at the close of the
base year.
For purposes of this paragraph, the base year shall be the last
taxable year before the most recent adoption of the experience
method, except that for taxable years beginning after 1987 the
base year shall be the last taxable year beginning before 1988.
(3) Regulations; definition of loan
The Secretary shall define the term loan and prescribe such
regulations as may be necessary to carry out the purposes of this
section.
(c) Section not to apply to large banks
(1) In general
In the case of a large bank, this section shall not apply (and
no deduction shall be allowed under any other provision of this
subtitle for any addition to a reserve for bad debts).
(2) Large banks
For purposes of this subsection, a bank is a large bank if, for
the taxable year (or for any preceding taxable year beginning
after December 31, 1986) -
(A) the average adjusted bases of all assets of such bank
exceeded $500,000,000, or
(B) such bank was a member of a parent-subsidiary controlled
group and the average adjusted bases of all assets of such
group exceeded $500,000,000.
(3) 4-year spread of adjustments
(A) In general
Except as provided in paragraph (4), in the case of any bank
which for its last taxable year before the disqualification
year maintained a reserve for bad debts -
(i) the provisions of this subsection shall be treated as a
change in the method of accounting of such bank for the
disqualification year,
(ii) such change shall be treated as having been made with
the consent of the Secretary, and
(iii) the net amount of adjustments required by section
481(a) to be taken into account by the taxpayer shall be
taken into account in each of the 4 taxable years beginning
with the disqualification year with -
(I) the amount taken into account for the 1st of such
taxable years being the greater of 10 percent of such net
amount or such higher percentage of such net amount as the
taxpayer may elect, and
(II) the amount taken into account in each of the 3
succeeding taxable years being equal to the applicable
fraction (determined in accordance with the following table
for the taxable year involved) of the portion of such net
amount not taken into account under subclause (I).
The applicable
If the case of the - fraction is -
1st succeeding year (!2/9)
2nd succeeding year (!1/3)
3rd succeeding year 4/9 .
--------------------------------------------------------------------
(B) Suspension of recapture for taxable year for which bank is
financially troubled
(i) In general
In the case of a bank which is a financially troubled bank
for any taxable year -
(I) no adjustment shall be taken into account under
subparagraph (A) for such taxable year, and
(II) such taxable year shall be disregarded in
determining whether any other taxable year is a taxable
year for which an adjustment is required to be taken into
account under subparagraph (A) or the amount of such
adjustment.
(ii) Exception for elective recapture for 1st year
Clause (i) shall not apply to the 1st taxable year referred
to in subparagraph (A)(iii)(I) if the taxpayer elects a
higher percentage in accordance with such subparagraph.
(iii) Financially troubled bank
For purposes of clause (i), the term "financially troubled
bank" means any bank if, for the taxable year, the
nonperforming loan percentage of such bank exceeds 75
percent.
(iv) Nonperforming loan percentage
For purposes of clause (iii), the term "nonperforming loan
percentage" means the percentage determined by dividing -
(I) the sum of the outstanding balances of nonperforming
loans of the bank as of the close of each quarter of the
taxable year, by
(II) the sum of the amounts of equity of the bank as of
the close of each such quarter.
In the case of a bank which is a member of a
parent-subsidiary controlled group for the taxable year, the
preceding sentence shall be applied with respect to such
group.
(v) Other definitions
For purposes of this subparagraph -
(I) Nonperforming loans
The term "nonperforming loan" means any loan which is
considered to be nonperforming by the primary Federal
regulatory agency with respect to the bank.
(II) Equity
The term "equity" means the equity of the bank as
determined for Federal regulatory purposes.
(C) Coordination with estimated tax payments
For purposes of applying section 6655(e)(2)(A)(i) with
respect to any installment, the determination under
subparagraph (B) of whether an adjustment is required to be
taken into account under subparagraph (A) shall be made as of
the last day prescribed for payment of such installment.
(4) Elective cut-off method
If a bank makes an election under this paragraph for the
disqualification year -
(A) the provisions of this subsection shall not be treated as
a change in the method of accounting of the taxpayer for
purposes of section 481,
(B) the taxpayer shall continue to maintain its reserve for
loans held by the bank as of the 1st day of the
disqualification year and charge against such reserve any
losses resulting from loans held by the bank as of such 1st
day, and
(C) no deduction shall be allowed under this section (or any
other provision of this subtitle) for any addition to such
reserve for the disqualification year or any subsequent taxable
year.
If the amount of the reserve referred to in subparagraph (B) as
of the close of any taxable year exceeds the outstanding balance
(as of such time) of the loans referred to in subparagraph (B),
such excess shall be included in gross income for such taxable
year.
(5) Definitions
For purposes of this subsection -
(A) Parent-subsidiary controlled group
The term "parent-subsidiary controlled group" means any
controlled group of corporations described in section
1563(a)(1). In determining the average adjusted bases of assets
held by such a group, interests held by one member of such
group in another member of such group shall be disregarded.
(B) Disqualification year
The term "disqualification year" means, with respect to any
bank, the 1st taxable year beginning after December 31, 1986,
for which such bank was a large bank if such bank maintained a
reserve for bad debts for the preceding taxable year.
(C) Election made by each member
In the case of a parent-subsidiary controlled group, any
election under this section shall be made separately by each
member of such group.
-SOURCE-
(Added Pub. L. 91-172, title IV, Sec. 431(a), Dec. 30, 1969, 83
Stat. 616; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97-34, title II, Sec. 267(a),
Aug. 13, 1981, 95 Stat. 266; Pub. L. 99-514, title IX, Sec. 901(a),
(d)(1), Oct. 22, 1986, 100 Stat. 2375, 2378; Pub. L. 100-203, title
X, Sec. 10301(b)(2), Dec. 22, 1987, 101 Stat. 1330-429; Pub. L.
100-647, title I, Sec. 1009(a)(2), (3), Nov. 10, 1988, 102 Stat.
3445; Pub. L. 101-508, title XI, Sec. 11801(a)(26), (c)(12)(C)-(E),
Nov. 5, 1990, 104 Stat. 1388-521, 1388-527; Pub. L. 104-188, title
I, Sec. 1616(b)(6), Aug. 20, 1996, 110 Stat. 1856.)
-MISC1-
AMENDMENTS
1996 - Subsec. (a)(2)(A). Pub. L. 104-188 struck out "other than
an organization to which section 593 applies" after "section 581)".
1990 - Subsec. (b)(1). Pub. L. 101-508, Sec. 11801(c)(12)(C),
substituted "shall not exceed the addition to the reserve for
losses on loans determined under the experience method as provided
in paragraph (2)." for "shall not exceed the greater of -
"(A) for taxable years beginning before 1988 the addition to
the reserve for losses on loans determined under the percentage
method as provided in paragraph (2), or
"(B) the addition to the reserve for losses on loans determined
under the experience method as provided in paragraph (3)."
Subsec. (b)(2). Pub. L. 101-508, Sec. 11801(a)(26), (c)(12)(D),
redesignated par. (3) as (2) and struck out former par. (2) which
related to use of percentage method for determining amount to add
to reserve for bad debts.
Subsec. (b)(3). Pub. L. 101-508, Sec. 11801(c)(12)(D), (E),
redesignated par. (4) as (3), substituted heading for one which
read: "Regulations; definition of eligible loan, etc.", and amended
text generally. Prior to amendment, text read as follows: "The
Secretary shall define the terms 'loan' and 'eligible loan' and
prescribe such regulations as may be necessary to carry out the
purposes of this section; except that the term 'eligible loan'
shall not include -
"(A) a loan to a bank (as defined in section 581),
"(B) a loan to a domestic branch of a foreign corporation to
which subsection (a)(2) applies,
"(C) a loan secured by a deposit (i) in the lending bank, or
(ii) in an institution described in subparagraph (A) or (B) if
the lending bank has control over withdrawal of such deposit,
"(D) a loan to or guaranteed by the United States, a possession
or instrumentality thereof, or a State or a political subdivision
thereof,
"(E) a loan evidenced by a security as defined in section
165(g)(2)(C),
"(F) a loan of Federal funds, and
"(G) commercial paper, including short-term promissory notes
which may be purchased on the open market." Former par. (3)
redesignated (2).
Subsec. (b)(4). Pub. L. 101-508, Sec. 11801(c)(12)(D),
redesignated par. (4) as (3).
1988 - Subsec. (c)(3)(A)(iii)(I). Pub. L. 100-647, Sec.
1009(a)(2)(B), substituted "such higher percentage of such net
amount as the taxpayer may elect" for "such greater amount as the
taxpayer may designate".
Subsec. (c)(3)(B)(ii). Pub. L. 100-647, Sec. 1009(a)(2)(C),
substituted "elects a higher percentage" for "designates an
amount".
Subsec. (c)(4). Pub. L. 100-647, Sec. 1009(a)(3), inserted at end
"If the amount of the reserve referred to in subparagraph (B) as of
the close of any taxable year exceeds the outstanding balance (as
of such time) of the loans referred to in subparagraph (B), such
excess shall be included in gross income for such taxable year."
Subsec. (c)(5)(C). Pub. L. 100-647, Sec. 1009(a)(2)(A), added
subpar. (C).
1987 - Subsec. (c)(3)(C). Pub. L. 100-203 substituted "section
6655(e)(2)(A)(i)" for "section 6655(d)(3)".
1986 - Subsec. (a). Pub. L. 99-514, Sec. 901(a)(1), amended
subsec. (a) generally. Prior to amendment, subsec. (a) read as
follows: "This section shall apply to the following financial
institutions:
"(1) any bank (as defined in section 581) other than an
organization to which section 593 applies, and
"(2) any corporation to which paragraph (1) would apply except
for the fact that it is a foreign corporation, and in the case of
any such foreign corporation this section shall apply only with
respect to loans outstanding the interest on which is effectively
connected with the conduct of a banking business within the
United States."
Subsec. (b)(1). Pub. L. 99-514, Sec. 901(d)(1), substituted
"subsection (a)" for "section 166(c)".
Subsec. (c). Pub. L. 99-514, Sec. 901(a)(2), added subsec. (c).
1981 - Subsec. (b)(2). Pub. L. 97-34 defined "allowable
percentage" to mean 1.0 percent for taxable years beginning in 1982
and 0.6 percent for taxable years beginning after 1982, previously
so applicable for taxable years beginning after 1981 and redefined
"base year" by substituting the last taxable year beginning before
1976 for taxable years beginning after 1975 but before 1983, for
the last taxable year beginning before 1976 for taxable years after
1975 but before 1982; and the last taxable year beginning before
1983 for taxable years beginning after 1982, for the last taxable
year beginning before 1982 for taxable years beginning after 1981.
1976 - Subsec. (b)(3), (4). Pub. L. 94-455 struck out "or his
delegate" after "Secretary".
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 applicable to taxable years
beginning after Dec. 31, 1995, see section 1616(c) of Pub. L.
104-188, set out as a note under section 593 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10301(c) of Pub. L. 100-203 provided that: "The
amendments made by this section [amending this section and sections
6201, 6425, 6601, 6651, and 6655 of this title and repealing
section 6154 of this title] shall apply to taxable years beginning
after December 31, 1987."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, see section 901(e) of Pub. L. 99-514, set out
as a note under section 166 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 267(b) of Pub. L. 97-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after 1981."
EFFECTIVE DATE
Section 431(d) of Pub. L. 91-172 provided that: "The amendments
made by subsections (a) [enacting this section and section 586 of
this title] and (c) [amending section 166 of this title] shall
apply to taxable years beginning after July 11, 1969."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 172, 265, 291, 593, 1277,
1361 of this title.
-End-
-CITE-
26 USC Sec. 586 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART I - RULES OF GENERAL APPLICA
-HEAD-
[Sec. 586. Repealed. Pub. L. 99-514, title IX, Sec. 901(c), Oct.
22, 1986, 100 Stat. 2378]
-MISC1-
Section, added Pub. L. 91-172, title IV, Sec. 431(a), Dec. 30,
1969, 83 Stat. 618; amended Pub. L. 94-455, title XIX, Sec.
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, related to reserves
for losses on loans of small business investment companies, etc.
EFFECTIVE DATE OF REPEAL
Repeal applicable to taxable years beginning after Dec. 31, 1986,
see section 901(e) of Pub. L. 99-514, set out as an Effective Date
of 1986 Amendment note under section 166 of this title.
-End-
-CITE-
26 USC PART II - MUTUAL SAVINGS BANKS, ETC. 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
PART II - MUTUAL SAVINGS BANKS, ETC.
-MISC1-
Sec.
591. Deduction for dividends paid on deposits.
[592. Repealed.]
593. Reserves for losses on loans.
594. Alternative tax for mutual savings banks conducting
life insurance business.
[595, 596. Repealed.]
597. Treatment of transactions in which Federal financial
assistance provided.
AMENDMENTS
1996 - Pub. L. 104-188, title I, Sec. 1616(b)(16), Aug. 20, 1996,
110 Stat. 1857, struck out items 595 "Foreclosure on property
securing loans" and 596 "Limitation on dividends received
deduction".
1989 - Pub. L. 101-73, title XIV, Sec. 1401(b)(1), Aug. 9, 1989,
103 Stat. 549, repealed amendment made by Pub. L. 99-514, Sec.
904(b)(2), see 1986 Amendment note below.
Pub. L. 101-73, title XIV, Sec. 1401(a)(3)(C), Aug. 9, 1989, 103
Stat. 549, substituted "Treatment of transactions in which Federal
financial assistance provided" for "FSLIC or FDIC financial
assistance" in item 597.
1988 - Pub. L. 100-647, title IV, Sec. 4012(b)(2)(D)(ii), Nov.
10, 1988, 102 Stat. 3658, substituted "FSLIC or FDIC" for "FSLIC"
in item 597.
1986 - Pub. L. 99-514, title IX, Sec. 904(b)(2), (c)(2)(A), Oct.
22, 1986, 100 Stat. 2385, as amended by Pub. L. 100-647, title IV,
Sec. 4012(a)(2), Nov. 10, 1988, 102 Stat. 3656, which, applicable
to transfers after Dec. 31, 1989, in taxable years ending after
that date, directed amendment of analysis by striking out item 597,
was repealed by Pub. L. 101-73, title XIV, Sec. 1401(b)(1), (c)(4),
Aug. 9, 1989, 103 Stat. 549, 550, eff. Oct. 22, 1986, and
applicable as if the amendments made by such section had not been
enacted.
1981 - Pub. L. 97-34, title II, Sec. 244(b), Aug. 13, 1981, 95
Stat. 255, added item 597.
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(19), Oct. 4, 1976,
90 Stat. 1796, struck out item 592 "Deduction for repayment of
certain loans".
1969 - Pub. L. 91-172, title IV, Sec. 434(b)(2), Dec. 30, 1969,
83 Stat. 625, added item 596.
1962 - Pub. L. 87-834, Sec. 6(d), Oct. 16, 1962, 76 Stat. 984,
substituted "Reserves for losses on loans" for "Additions to
reserve for bad debts" in item 593, and added item 595.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 1381 of this title.
-End-
-CITE-
26 USC Sec. 591 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
Sec. 591. Deduction for dividends paid on deposits
-STATUTE-
(a) In general
In the case of mutual savings banks, cooperative banks, and
domestic building and loan associations and other savings
institutions chartered and supervised as savings and loan or
similar associations under Federal or State law, there shall be
allowed as deductions in computing taxable income amounts paid to,
or credited to the accounts of, depositors or holders of accounts
as dividends or interest on their deposits or withdrawable
accounts, if such amounts paid or credited are withdrawable on
demand subject only to customary notice of intention to withdraw.
(b) Mutual savings bank to include certain banks with capital stock
For purposes of this part, the term "mutual savings bank"
includes any bank -
(1) which has capital stock represented by shares, and
(2) which is subject to, and operates under, Federal or State
laws relating to mutual savings bank.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 204; Pub. L. 87-834, Sec. 6(f),
Oct. 16, 1962, 76 Stat. 984; Pub. L. 97-34, title II, Sec. 245(a),
Aug. 13, 1981, 95 Stat. 255.)
-MISC1-
AMENDMENTS
1981 - Pub. L. 97-34 designated existing provisions as subsec.
(a), inserted heading "In general", and added subsec. (b).
1962 - Pub. L. 87-834 included other savings institutions
chartered and supervised as savings and loan or similar
associations under Federal or State law, and authorized amounts
paid as interest as a deduction.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 246(d) of Pub. L. 97-34 provided that: "The amendments
made by section 245 [amending this section and section 593 of this
title] shall apply with respect to taxable years ending after the
date of the enactment of this Act [Aug. 13, 1981]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 165, 243, 368, 465,
501, 512, 514, 582, 593, 864, 871, 6050P, 6323 of this title.
-End-
-CITE-
26 USC Sec. 592 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
[Sec. 592. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(83),
Oct. 4, 1976, 90 Stat. 1778]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 205, authorized a
deduction by mutual savings banks for repayment of loans made
before Sept. 1, 1951, by the United States or any agency or
instrumentality thereof, or any mutual fund established under the
authority of the laws of any State.
EFFECTIVE DATE OF REPEAL
Repeal effective with respect to taxable years beginning after
Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an
Effective Date of 1976 Amendment note under section 2 of this
title.
-End-
-CITE-
26 USC Sec. 593 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
Sec. 593. Reserves for losses on loans
-STATUTE-
(a) Reserve for bad debts
(1) In general
Except as provided in paragraph (2), in the case of -
(A) any domestic building and loan association,
(B) any mutual savings bank, or
(C) any cooperative bank without capital stock organized and
operated for mutual purposes and without profit,
there shall be allowed a deduction for a reasonable addition to a
reserve for bad debts. Such deduction shall be in lieu of any
deduction under section 166(a).
(2) Organization must meet 60-percent asset test of section
7701(a)(19)
This section shall apply to an association or bank referred to
in paragraph (1) only if it meets the requirements of section
7701(a)(19)(C).
(b) Addition to reserves for bad debts
(1) In general
For purposes of subsection (a), the reasonable addition for the
taxable year to the reserve for bad debts of any taxpayer
described in subsection (a) shall be an amount equal to the sum
of -
(A) the amount determined to be a reasonable addition to the
reserve for losses on nonqualifying loans, computed in the same
manner as is provided with respect to additions to the reserves
for losses on loans of banks under section 585(b)(2), plus
(B) the amount determined by the taxpayer to be a reasonable
addition to the reserve for losses on qualifying real property
loans, but such amount shall not exceed the amount determined
under paragraph (2) or (3), whichever is the larger, but the
amount determined under this subparagraph shall in no case be
greater than the larger of -
(i) the amount determined under paragraph (3), or
(ii) the amount which, when added to the amount determined
under subparagraph (A), equals the amount by which 12 percent
of the total deposits or withdrawable accounts of depositors
of the taxpayer at the close of such year exceeds the sum of
its surplus, undivided profits, and reserves at the beginning
of such year (taking into account any portion thereof
attributable to the period before the first taxable year
beginning after December 31, 1951).
(2) Percentage of taxable income method
(A) In general
Subject to subparagraphs (B) and (C), the amount determined
under this paragraph for the taxable year shall be an amount
equal to 8 percent of the taxable income for such year.
(B) Reduction for amounts referred to in paragraph (1)(A)
The amount determined under subparagraph (A) shall be reduced
(but not below 0) by the amount determined under paragraph
(1)(A).
(C) Overall limitation on paragraph
The amount determined under this paragraph shall not exceed
the amount necessary to increase the balance at the close of
the taxable year of the reserve for losses on qualifying real
property loans to 6 percent of such loans outstanding at such
time.
(D) Computation of taxable income
For purposes of this paragraph, taxable income shall be
computed -
(i) by excluding from gross income any amount included
therein by reason of subsection (e),
(ii) without regard to any deduction allowable for any
addition to the reserve for bad debts,
(iii) by excluding from gross income an amount equal to the
net gain for the taxable year arising from the sale or
exchange of stock of a corporation or of obligations the
interest on which is excludable from gross income under
section 103,
(iv) by excluding from gross income dividends with respect
to which a deduction is allowable by part VIII of subchapter
B, reduced by an amount equal to 8 percent of the dividends
received deduction (determined without regard to section 596)
(!1) for the taxable year, and
(v) if there is a capital gain rate differential (as
defined in section 904(b)(3)(D)) for the taxable year, by
excluding from gross income the rate differential portion
(within the meaning of section 904(b)(3)(E)) of the lesser of
-
(I) the net long-term capital gain for the taxable year,
or
(II) the net long-term capital gain for the taxable year
from the sale or exchange of property other than property
described in clause (iii).
(3) Experience method
The amount determined under this paragraph for the taxable year
shall be computed in the same manner as is provided with respect
to additions to the reserves for losses on loans of banks under
section 585(b)(2).
(c) Treatment of reserve for bad debts
(1) Establishment of reserves
Each taxpayer described in subsection (a) which uses the
reserve method of accounting for bad debts shall establish and
maintain a reserve for losses on qualifying real property loans,
a reserve for losses on nonqualifying loans, and a supplemental
reserve for losses on loans. For purposes of this title, such
reserves shall be treated as reserves for bad debts, but no
deduction shall be allowed for any addition to the supplemental
reserve for losses on loans.
(2) Certain pre-1963 reserves
Notwithstanding the second sentence of paragraph (1), any
amount allocated pursuant to paragraph (5) (as in effect
immediately before the enactment of the Tax Reform Act of 1976)
during a taxable year beginning before January 1, 1977, to the
reserve for losses on qualifying real property loans out of the
surplus, undivided profits, and bad debt reserves (determined as
of December 31, 1962) attributable to the period before the first
taxable year beginning after December 31, 1951, shall not be
treated as a reserve for bad debts for any purpose other than
determining the amount referred to in subsection (b)(1)(B), and
for such purpose such amount shall be treated as remaining in
such reserve.
(3) Charging of bad debts to reserves
Any debt becoming worthless or partially worthless in respect
of a qualifying real property loan shall be charged to the
reserve for losses on such loans, and any debt becoming worthless
or partially worthless in respect of a nonqualifying loan shall
be charged to the reserve for losses on nonqualifying loans;
except that any such debt may, at the election of the taxpayer,
be charged in whole or in part to the supplemental reserve for
losses on loans.
(d) Loans defined
For purposes of this section -
(1) Qualifying real property loans
The term "qualifying real property loan" means any loan secured
by an interest in improved real property or secured by an
interest in real property which is to be improved out of the
proceeds of the loan, but such term does not include -
(A) any loan evidenced by a security (as defined in section
165(g)(2)(C));
(B) any loan, whether or not evidenced by a security (as
defined in section 165(g)(2)(C)), the primary obligor on which
is -
(i) a government or political subdivision or
instrumentality thereof;
(ii) a bank (as defined in section 581); or
(iii) another member of the same affiliated group;
(C) any loan, to the extent secured by a deposit in or share
of the taxpayer; or
(D) any loan which, within a 60-day period beginning in one
taxable year of the creditor and ending in its next taxable
year, is made or acquired and then repaid or disposed of,
unless the transactions by which such loan was made or acquired
and then repaid or disposed of are established to be for bona
fide business purposes. For purposes of subparagraph (B)(iii),
the term "affiliated group" has the meaning assigned to such
term by section 1504(a); except that (i) the phrase "more than
50 percent" shall be substituted for the phrase "at least 80
percent" each place it appears in section 1504(a), and (ii) all
corporations shall be treated as includible corporations
(without any exclusion under section 1504(b)).
(2) Nonqualifying loans
The term "nonqualifying loan" means any loan which is not a
qualifying real property loan.
(3) Loan
The term "loan" means debt, as the term "debt" is used in
section 166.
(4) Treatment of interests in REMIC's
A regular or residual interest in a REMIC shall be treated as a
qualifying real property loan; except that, if less than 95
percent of the assets of such REMIC are qualifying real property
loans (determined as if the taxpayer held the assets of the
REMIC), such interest shall be so treated only in the proportion
which the assets of such REMIC consist of such loans. For
purposes of determining whether any interest in a REMIC qualifies
under the preceding sentence, any interest in another REMIC held
by such REMIC shall be treated as a qualifying real property loan
under principles similar to the principles of the preceding
sentence, except that if such REMIC's are part of a tiered
structure, they shall be treated as 1 REMIC for purposes of this
paragraph.
(e) Distributions to shareholders
(1) In general
For purposes of this chapter, any distribution of property (as
defined in section 317(a)) by a taxpayer having a balance
described in subsection (g)(2)(A)(ii) to a shareholder with
respect to its stock, if such distribution is not allowable as a
deduction under section 591, shall be treated as made -
(A) first out of its earnings and profits accumulated in
taxable years beginning after December 31, 1951, (and, in the
case of an S corporation, the accumulated adjustments account,
as defined in section 1368(e)(1)) to the extent thereof,
(B) then out of the balance taken into account under
subsection (g)(2)(A)(ii) (properly adjusted for amounts charged
against such reserves for taxable years beginning after
December 31, 1987),
(C) then out of the supplemental reserve for losses on loans,
to the extent thereof,
(D) then out of such other accounts as may be proper.
This paragraph shall apply in the case of any distribution in
redemption of stock or in partial or complete liquidation of a
taxpayer having a balance described in subsection (g)(2)(A)(ii),
except that any such distribution shall be treated as made first
out of the amount referred to in subparagraph (B), second out of
the amount referred to in subparagraph (C), third out of the
amount referred to in subparagraph (A), and then out of such
other accounts as may be proper. This paragraph shall not apply
to any transaction to which section 381 applies, or to any
distribution to the Federal Savings and Loan Insurance
Corporation (or any successor thereof) or the Federal Deposit
Insurance Corporation in redemption of an interest in a taxpayer
having a balance described in subsection (g)(2)(A)(ii), if such
interest was originally received by any such entity in exchange
for assistance provided under a provision of law referred to in
section 597(c). This paragraph shall not apply to any
distribution of all of the stock of a bank (as defined in section
581) to another corporation if, immediately after the
distribution, such bank and such other corporation are members of
the same affiliated group (as defined in section 1504) and the
provisions of section 5(e) of the Federal Deposit Insurance Act
(as in effect on December 31, 1995) or similar provisions are in
effect.
(2) Amounts charged to reserve accounts and included in gross
income
If any distribution is treated under paragraph (1) as having
been made out of the reserves described in subparagraphs (B) and
(C) of such paragraph, the amount charged against such reserve
shall be the amount which, when reduced by the amount of tax
imposed under this chapter and attributable to the inclusion of
such amount in gross income, is equal to the amount of such
distribution; and the amount so charged against such reserve
shall be included in gross income of the taxpayer.
(3) Special rules
(A) For purposes of paragraph (1)(B), additions to the reserve
for losses on qualifying real property loans for the taxable year
in which the distribution occurs shall be taken into account.
(B) For purposes of computing under this section the amount of
a reasonable addition to the reserve for losses on qualifying
real property loans for any taxable year, any amount charged
during any year to such reserve pursuant to the provisions of
paragraph (2) shall not be taken into account.
(f) Termination of reserve method
Subsections (a), (b), (c), and (d) shall not apply to any taxable
year beginning after December 31, 1995.
(g) 6-year spread of adjustments
(1) In general
In the case of any taxpayer who is required by reason of
subsection (f) to change its method of computing reserves for bad
debts -
(A) such change shall be treated as a change in a method of
accounting,
(B) such change shall be treated as initiated by the taxpayer
and as having been made with the consent of the Secretary, and
(C) the net amount of the adjustments required to be taken
into account by the taxpayer under section 481(a) -
(i) shall be determined by taking into account only
applicable excess reserves, and
(ii) as so determined, shall be taken into account ratably
over the 6-taxable year period beginning with the first
taxable year beginning after December 31, 1995.
(2) Applicable excess reserves
(A) In general
For purposes of paragraph (1), the term "applicable excess
reserves" means the excess (if any) of -
(i) the balance of the reserves described in subsection
(c)(1) (other than the supplemental reserve) as of the close
of the taxpayer's last taxable year beginning before January
1, 1996, over
(ii) the lesser of -
(I) the balance of such reserves as of the close of the
taxpayer's last taxable year beginning before January 1,
1988, or
(II) the balance of the reserves described in subclause
(I), reduced in the same manner as under section
585(b)(2)(B)(ii) on the basis of the taxable years
described in clause (i) and this clause.
(B) Special rule for thrifts which become small banks
In the case of a bank (as defined in section 581) which was
not a large bank (as defined in section 585(c)(2)) for its
first taxable year beginning after December 31, 1995 -
(i) the balance taken into account under subparagraph
(A)(ii) shall not be less than the amount which would be the
balance of such reserves as of the close of its last taxable
year beginning before such date if the additions to such
reserves for all taxable years had been determined under
section 585(b)(2)(A), and
(ii) the opening balance of the reserve for bad debts as of
the beginning of such first taxable year shall be the balance
taken into account under subparagraph (A)(ii) (determined
after the application of clause (i) of this subparagraph).
The preceding sentence shall not apply for purposes of
paragraphs (5) and (6) or subsection (e)(1).
(3) Recapture of pre-1988 reserves where taxpayer ceases to be
bank
If, during any taxable year beginning after December 31, 1995,
a taxpayer to which paragraph (1) applied is not a bank (as
defined in section 581), paragraph (1) shall apply to the
reserves described in paragraph (2)(A)(ii) and the supplemental
reserve; except that such reserves shall be taken into account
ratably over the 6-taxable year period beginning with such
taxable year.
(4) Suspension of recapture if residential loan requirement met
(A) In general
In the case of a bank which meets the residential loan
requirement of subparagraph (B) for the first taxable year
beginning after December 31, 1995, or for the following taxable
year -
(i) no adjustment shall be taken into account under
paragraph (1) for such taxable year, and
(ii) such taxable year shall be disregarded in determining
-
(I) whether any other taxable year is a taxable year for
which an adjustment is required to be taken into account
under paragraph (1), and
(II) the amount of such adjustment.
(B) Residential loan requirement
A taxpayer meets the residential loan requirement of this
subparagraph for any taxable year if the principal amount of
the residential loans made by the taxpayer during such year is
not less than the base amount for such year.
(C) Residential loan
For purposes of this paragraph, the term "residential loan"
means any loan described in clause (v) of section
7701(a)(19)(C) but only if such loan is incurred in acquiring,
constructing, or improving the property described in such
clause.
(D) Base amount
For purposes of subparagraph (B), the base amount is the
average of the principal amounts of the residential loans made
by the taxpayer during the 6 most recent taxable years
beginning on or before December 31, 1995. At the election of
the taxpayer who made such loans during each of such 6 taxable
years, the preceding sentence shall be applied without regard
to the taxable year in which such principal amount was the
highest and the taxable year in such principal amount was the
lowest. Such an election may be made only for the first taxable
year beginning after such date, and, if made for such taxable
year, shall apply to the succeeding taxable year unless revoked
with the consent of the Secretary.
(E) Controlled groups
In the case of a taxpayer which is a member of any controlled
group of corporations described in section 1563(a)(1),
subparagraph (B) shall be applied with respect to such group.
(5) Continued application of fresh start under section 585
transitional rules
In the case of a taxpayer to which paragraph (1) applied and
which was not a large bank (as defined in section 585(c)(2)) for
its first taxable year beginning after December 31, 1995:
(A) In general
For purposes of determining the net amount of adjustments
referred to in section 585(c)(3)(A)(iii), there shall be taken
into account only the excess (if any) of the reserve for bad
debts as of the close of the last taxable year before the
disqualification year over the balance taken into account by
such taxpayer under paragraph (2)(A)(ii) of this subsection.
(B) Treatment under elective cut-off method
For purposes of applying section 585(c)(4) -
(i) the balance of the reserve taken into account under
subparagraph (B) thereof shall be reduced by the balance
taken into account by such taxpayer under paragraph
(2)(A)(ii) of this subsection, and
(ii) no amount shall be includible in gross income by
reason of such reduction.
(6) Suspended reserve included as section 381(c) items
The balance taken into account by a taxpayer under paragraph
(2)(A)(ii) of this subsection and the supplemental reserve shall
be treated as items described in section 381(c).
(7) Conversions to credit unions
In the case of a taxpayer to which paragraph (1) applied which
becomes a credit union described in section 501(c) and exempt
from taxation under section 501(a) -
(A) any amount required to be included in the gross income of
the credit union by reason of this subsection shall be treated
as derived from an unrelated trade or business (as defined in
section 513), and
(B) for purposes of paragraph (3), the credit union shall not
be treated as if it were a bank.
(8) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out this subsection and subsection (e),
including regulations providing for the application of such
subsections in the case of acquisitions, mergers, spin-offs, and
other reorganizations.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 205; Pub. L. 87-834, Sec. 6(a),
Oct. 16, 1962, 76 Stat. 977; Pub. L. 91-172, title IV, Sec. 432(a),
(b), Dec. 30, 1969, 83 Stat. 620, 622; Pub. L. 94-455, title XIX,
Sec. 1901(a)(84), Oct. 4, 1976, 90 Stat. 1778; Pub. L. 96-222,
title I, Sec. 104(a)(3)(C), Apr. 1, 1980, 94 Stat. 215; Pub. L.
97-34, title II, Secs. 243, 245(b), (c), Aug. 13, 1981, 95 Stat.
255, 256; Pub. L. 99-514, title III, Sec. 311(b)(2), title VI, Sec.
671(b)(2), title IX, Sec. 901(b)(1)-(3), (d)(2), Oct. 22, 1986, 100
Stat. 2219, 2317, 2378; Pub. L. 100-647, title I, Secs. 1003(c)(3),
1006(t)(25)(B), Nov. 10, 1988, 102 Stat. 3384, 3426; Pub. L.
101-73, title XIV, Sec. 1401(b)(3), Aug. 9, 1989, 103 Stat. 550;
Pub. L. 101-508, title XI, Sec. 11801(c)(12)(F), Nov. 5, 1990, 104
Stat. 1388-527; Pub. L. 104-188, title I, Secs. 1616(a), (b)(7),
1704(t)(51), Aug. 20, 1996, 110 Stat. 1854, 1857, 1890; Pub. L.
105-34, title XVI, Sec. 1601(f)(5)(A), Aug. 5, 1997, 111 Stat.
1091.)
-REFTEXT-
REFERENCES IN TEXT
Section 596, referred to in subsec. (b)(2)(D)(iv), was repealed
by Pub. L. 104-188, title I, Sec. 1616(b)(9), Aug. 20, 1996, 110
Stat. 1857.
The Tax Reform Act of 1976, referred to in subsec. (c)(2), is
Pub. L. 94-455, Oct. 4, 1976, 90 Stat. 1520, as amended, which was
enacted Oct. 4, 1976. For complete classification of this Act to
the Code, see Tables.
Section 5(e) of the Federal Deposit Insurance Act, referred to in
subsec. (e)(1), is classified to section 1815(e) of Title 12, Banks
and Banking.
-MISC1-
AMENDMENTS
1997 - Subsec. (e)(1)(A). Pub. L. 105-34 inserted "(and, in the
case of an S corporation, the accumulated adjustments account, as
defined in section 1368(e)(1))" after "1951,".
1996 - Subsec. (b)(1)(A), (3). Pub. L. 104-188, Sec. 1704(t)(51),
provided that the amendment made by section 11801(c)(12)(F) of Pub.
L. 101-508 shall be applied as if "and (3)" appeared instead of
"and (E)". See 1990 Amendment note below.
Subsec. (e)(1). Pub. L. 104-188, Sec. 1616(b)(7)(A), substituted
"by a taxpayer having a balance described in subsection
(g)(2)(A)(ii)" for "by a domestic building and loan association or
an institution that is treated as a mutual savings bank under
section 591(b)" in introductory provisions.
Pub. L. 104-188, Sec. 1616(b)(7)(C)-(E), in closing provisions,
substituted "a taxpayer having a balance described in subsection
(g)(2)(A)(ii)" for "the association or an institution that is
treated as a mutual savings bank under section 591(b)" after
"complete liquidation of" and for "an association" after "an
interest in" and inserted at end "This paragraph shall not apply to
any distribution of all of the stock of a bank (as defined in
section 581) to another corporation if, immediately after the
distribution, such bank and such other corporation are members of
the same affiliated group (as defined in section 1504) and the
provisions of section 5(e) of the Federal Deposit Insurance Act (as
in effect on December 31, 1995) or similar provisions are in
effect."
Subsec. (e)(1)(B). Pub. L. 104-188, Sec. 1616(b)(7)(B), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "then out of the reserve for losses on qualifying real
property loans, to the extent additions to such reserve exceed the
additions which would have been allowed under subsection (b)(3),".
Subsecs. (f), (g). Pub. L. 104-188, Sec. 1616(a), added subsecs.
(f) and (g).
1990 - Subsec. (b). Pub. L. 101-508, Sec. 11801(c)(12)(F), which
directed the amendment of pars. (1)(A) and (E) by substituting
"section 585(b)(2)" for "section 585(b)(3)", was executed to pars.
(1)(A) and (3). See 1996 Amendment note above.
1989 - Subsec. (e)(1). Pub. L. 101-73 amended last sentence
generally. Prior to amendment, last sentence read as follows: "This
paragraph shall not apply to any transaction to which section 381
(relating to carryovers in certain corporate acquisitions) applies,
or to any distribution to the Federal Savings and Loan Insurance
Corporation in redemption of an interest in an association, if such
interest was originally received by the Federal Savings and Loan
Insurance Corporation in exchange for financial assistance pursuant
to section 406(f) of the National Housing Act (12 U.S.C. sec.
1729(f))."
1988 - Subsec. (b)(2)(D)(v). Pub. L. 100-647, Sec. 1003(c)(3),
added cl. (v).
Subsec. (d)(4). Pub. L. 100-647, Sec. 1006(t)(25)(B), inserted at
end "For purposes of determining whether any interest in a REMIC
qualifies under the preceding sentence, any interest in another
REMIC held by such REMIC shall be treated as a qualifying real
property loan under principles similar to the principles of the
preceding sentence, except that if such REMIC's are part of a
tiered structure, they shall be treated as 1 REMIC for purposes of
this paragraph."
1986 - Subsec. (a). Pub. L. 99-514, Sec. 901(b)(1), amended
subsec. (a) generally. Prior to amendment, subsec. (a) read as
follows: "This section shall apply to any mutual savings bank,
domestic building and loan association, or cooperative bank without
capital stock organized and operated for mutual purposes and
without profit."
Subsec. (b)(1). Pub. L. 99-514, Sec. 901(d)(2)(A), (B), in
introductory provisions, substituted "subsection (a)" for "section
166(c)" and in subpar. (B), substituted "paragraph (2) or (3),
whichever is the larger" for "paragraph (2), (3), or (4), whichever
amount is the largest" in introductory provisions and "paragraph
(3)" for "paragraph (4)" in cl. (i).
Subsec. (b)(2)(A). Pub. L. 99-514, Sec. 901(b)(2)(A), added
subpar. (A) and struck out former subpar. (A) which provided that
subject to subpars. (B), (C), and (D), the amount determined under
par. (2) was to be an amount equal to applicable percentage of
taxable income for such year determined under a table which fixed
specific percentages for taxable years 1976, 1977, 1978, and 1979
or thereafter.
Subpar. (b)(2)(B). Pub. L. 99-514, Sec. 901(b)(2)(A), added
subpar. (B), which incorporated provisions of former subpar. (C),
relating to reducing amounts referred to in par. (1)(A), and struck
out former subpar. (B) which provided for reduction of applicable
percentage in certain cases.
Subsec. (b)(2)(C). Pub. L. 99-514, Sec. 901(b)(2)(A), (B),
redesignated former subpar. (D) as (C) and struck out former
subpar. (C) which related to reduction for amounts referred to in
par. (1)(A). See par. (1)(B).
Subsec. (b)(2)(D). Pub. L. 99-514, Sec. 901(b)(2)(B), (d)(2)(B),
redesignated subpar. (E) as (D) and substituted in cl. (iv) "8
percent" for "the applicable percentage (determined under
subparagraphs (A) and (B))". Former subpar. (D) redesignated (C).
Subsec. (b)(2)(E). Pub. L. 99-514, Sec. 901(b)(2)(B),
redesignated subpar. (E) as (D).
Pub. L. 99-514, Sec. 311(b)(2), redesignated former cl. (v) as
(iv), and struck out former cl. (iv) which read as follows: "by
excluding from gross income an amount equal to the lesser of 18/46
of the net long-term capital gain for the taxable year or 18/46
of the net long-term capital gain for the taxable year from the
sale or exchange of property other than property described in
clause (iii), and".
Subsec. (b)(3), (4). Pub. L. 99-514, Sec. 901(b)(3), redesignated
par. (4) as (3) and struck out former par. (3) which read as
follows: "The amount determined under this paragraph to be a
reasonable addition to the reserve for losses on qualifying real
property loans shall be computed in the same manner as is provided
with respect to additions to the reserves for losses on loans of
banks under section 585(b)(2), reduced by the amount referred to in
paragraph (1)(A) for the taxable year."
Subsec. (b)(5). Pub. L. 99-514, Sec. 901(b)(3), struck out par.
(5) which read as follows: "For purposes of paragraph (3), the
amount deemed to be the balance of the reserve for losses on loans
at the beginning of the taxable year shall be the total of the
balances at such time of the reserve for losses on nonqualifying
loans, the reserve for losses on qualifying real property loans,
and the supplemental reserve for losses on loans."
Subsec. (d)(4). Pub. L. 99-514, Sec. 671(b)(2), added par. (4).
Subsec. (e)(1)(B). Pub. L. 99-514, Sec. 901(d)(2)(C), substituted
"subsection (b)(3)" for "subsection (B)(4)".
1981 - Subsec. (a). Pub. L. 97-34, Sec. 245(c)(1), struck out
"not having capital stock represented by shares" after "mutual
savings bank".
Subsec. (b)(2)(B). Pub. L. 97-34, Sec. 245(b)(1), inserted "which
is not described in section 591(b)" after "mutual savings bank" in
cls. (i) and (ii) and in last sentence.
Subsec. (b)(2)(C). Pub. L. 97-34, Sec. 245(b)(2), inserted "which
are not described in section 591(b)" after "mutual savings banks"
in cl. (i).
Subsec. (e)(1). Pub. L. 97-34, Sec. 245(c)(2), inserted "or an
institution that is treated as a mutual savings bank under section
591(b)" after "domestic building and loan association" and
"liquidation of the association".
Pub. L. 97-34, Sec. 243, inserted provisions making par. (1)
inapplicable to any distribution to the Federal Savings and Loan
Insurance Corporation in redemption of an interest in an
association, if such interest was originally received by the
Corporation in exchange for financial assistance pursuant to
section 1729(f) of title 12.
1980 - Subsec. (b)(2)(E)(iv). Pub. L. 96-222 substituted " 18/46
" for " 3/8 " in two places.
1976 - Subsec. (b)(2)(A). Pub. L. 94-455, Sec. 1901(a)(84)(A),
struck from the percentage table the years 1969 to 1975, inclusive.
Subsec. (b)(2)(E)(i). Pub. L. 94-455, Sec. 1901(a)(84)(D),
substituted "subsection (e)" for "subsection (f)" after "by reason
of".
Subsec. (c)(2). Pub. L. 94-455, Sec. 1901(a)(84)(B), added par.
(2). Former par. (2), relating to allocation of pre-1963 reserves
for bad debts, was struck out.
Subsec. (c)(3). Pub. L. 94-455, Sec. 1901(a)(84)(B), redesignated
par. (6) as par. (3). Former par. (3), relating to the method of
allocation to reserves for bad debts, was struck out.
Subsec. (c)(4), (5). Pub. L. 94-455, Sec. 1901(a)(84)(B), struck
out par. (4) which defined "pre-1963 reserves", and struck out par.
(5) which related to certain pre-1952 surplus.
Subsec. (c)(6). Pub. L. 94-455, Sec. 1901(a)(84)(B), redesignated
par. (6) as (3).
Subsecs. (d) to (f). Pub. L. 94-455, Sec. 1901(a)(84)(C), struck
out subsec. (d) relating to the determination of taxable income for
taxpayer which uses the reserve method of accounting for bad debts
for taxable years beginning in 1962 and ending in 1963, and
redesignated subsecs. (e) and (f) as (d) and (e), respectively.
Subsecs. (e), (f). Pub. L. 94-455, Sec. 1901(a)(84)(C),
redesignated subsec. (f) as (e). Former subsec. (e) redesignated
(d).
1969 - Subsec. (b)(1)(A). Pub. L. 91-172, Sec. 432(a)(1),
inserted provisions for the method of computing the amount of the
reasonable addition to the reserve for losses on nonqualifying
loans.
Subsec. (b)(2). Pub. L. 91-172, Sec. 432(a)(2), substituted a
table of applicable percentages of the taxable income for each year
up to 1979 and thereafter for the amount in excess of 60 percent
over the amount referred to in former subsec. (b)(1)(A),
transferred the remaining provisions of former subsec. (b)(2) to
subpart (D), and added subpars. (B) to (E).
Subsec. (b)(3). Pub. L. 91-172, Sec. 432(a)(2), substantially
changed method of computation of the amount by conforming it to the
method of determining the additions to the reserves for losses on
loans of banks under section 585(b)(2).
Subsec. (b)(4). Pub. L. 91-172, Sec. 432(a)(2), changed method of
computation of the amount by conforming it to the method of
determining the additions to the reserves for losses on loans of
banks under section 585(b)(3).
Subsec. (b)(5). Pub. L. 91-172, Sec. 432(a)(2), substituted
provisions relating to determination of reserve for percentage
method for provisions relating to limitation in case of certain
domestic building and loan associations.
Subsec. (f). Pub. L. 91-172, Sec. 432(b), excepted the
application of par. (1) to any transaction to which section 381 of
this title applied.
1962 - Pub. L. 87-834 amended section generally. Prior to such
amendment, section read as follows:
"Sec. 593. Additions to reserve for bad debts
"In the case of a mutual savings bank not having capital stock
represented by shares, a domestic building and loan association,
and a cooperative bank without capital stock organized and operated
for mutual purposes and without profit, the reasonable addition to
a reserve for bad debts under section 166(c) shall be determined
with due regard to the amount of the taxpayer's surplus or bad debt
reserves existing at the close of December 31, 1951. In the case of
a taxpayer described in the preceding sentence, the reasonable
addition to a reserve for bad debts for any taxable year shall in
no case be less than the amount determined by the taxpayer as the
reasonable addition for such year; except that the amount
determined by the taxpayer under this sentence shall not be greater
than the lesser of -
"(1) the amount of its taxable income for the taxable year,
computed without regard to this section, or
"(2) the amount by which 12 percent of the total deposits or
withdrawable accounts of its depositors at the close of such year
exceeds the sum of its surplus, undivided profits, and reserves
at the beginning of the taxable year."
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 effective as if included in the
provisions of the Small Business Job Protection Act of 1996, Pub.
L. 104-188, to which it relates, see section 1601(j) of Pub. L.
105-34, set out as a note under section 23 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1616(c) of Pub. L. 104-188 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 50, 52, 57, 246, 291, 585, 860E, 992, 1038,
1042, 1277, and 1361 of this title and repealing sections 595 and
596 of this title] shall apply to taxable years beginning after
December 31, 1995.
"(2) Subsection (b)(7)(B). - The amendments made by subsection
(b)(7)(B) [amending this section] shall not apply to any
distribution with respect to preferred stock if -
"(A) such stock is outstanding at all times after October 31,
1995, and before the distribution, and
"(B) such distribution is made before the date which is 1 year
after the date of the enactment of this Act [Aug. 20, 1996] (or,
in the case of stock which may be redeemed, if later, the date
which is 30 days after the earliest date that such stock may be
redeemed).
"(3) Subsection (b)(8). - The amendment made by subsection (b)(8)
[repealing section 595 of this title] shall apply to property
acquired in taxable years beginning after December 31, 1995.
"(4) Subsection (b)(10). - The amendments made by subsection
(b)(10) [amending section 860E of this title] shall not apply to
any residual interest held by a taxpayer if such interest has been
held by such taxpayer at all times after October 31, 1995."
EFFECTIVE DATE OF 1989 AMENDMENT
Section 1401(c)(6) of Pub. L. 101-73 provided that: "The
amendment made by subsection (b)(3) [amending this section] shall
take effect on the date of the enactment of this Act [Aug. 9,
1989]."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 311(b)(2) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 311(c) of
Pub. L. 99-514, set out as a note under section 1201 of this title.
Amendment by section 671(b)(2) of Pub. L. 99-514 effective Jan.
1, 1987, see section 675(a) of Pub. L. 99-514, as amended, set out
as an Effective Date note under section 860A of this title.
Amendment by section 901(b)(1)-(3), (d)(2) of Pub. L. 99-514
applicable to taxable years beginning after Dec. 31, 1986, see
section 901(e) of Pub. L. 99-514, set out as a note under section
166 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 246(b) of Pub. L. 97-34 provided that: "The amendment
made by section 243 [amending this section] shall apply to any
distribution made on or after January 1, 1981."
Amendment by section 245(b), (c) of Pub. L. 97-34 applicable with
respect to taxable years ending after Aug. 13, 1981, see section
246(d) of Pub. L. 97-34, set out as a note under section 591 of
this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Section 432(e) of Pub. L. 91-172 provided that: "The amendments
made by this section [amending this section and section 7701 of
this title] shall be effective for taxable years beginning after
July 11, 1969."
EFFECTIVE DATE OF 1962 AMENDMENT
Section 6(g)(1) of Pub. L. 87-834, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by subsection (a) [amending this section] shall
apply to taxable years ending after December 31, 1962, except that
section 593(f) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] shall apply to distributions after December 31, 1962,
in taxable years ending after such date."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-TRANS-
TRANSFER OF FUNCTIONS
Federal Savings and Loan Insurance Corporation abolished and its
functions transferred, see sections 401 to 406 of Pub. L. 101-73,
set out as a note under section 1437 of Title 12, Banks and
Banking.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1374 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 594 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
Sec. 594. Alternative tax for mutual savings banks conducting life
insurance business
-STATUTE-
(a) Alternative tax
In the case of a mutual savings bank not having capital stock
represented by shares, authorized under State law to engage in the
business of issuing life insurance contracts, and which conducts a
life insurance business in a separate department the accounts of
which are maintained separately from the other accounts of the
mutual savings bank, there shall be imposed in lieu of the taxes
imposed by section 11 or section 1201(a), a tax consisting of the
sum of the partial taxes determined under paragraphs (1) and (2):
(1) A partial tax computed on the taxable income determined
without regard to any items of gross income or deductions
properly allocable to the business of the life insurance
department, at the rates and in the manner as if this section had
not been enacted; and
(2) a partial tax computed on the income of the life insurance
department determined without regard to any items of gross income
or deductions not properly allocable to such department, at the
rates and in the manner provided in subchapter L (sec. 801 and
following) with respect to life insurance companies.
(b) Limitations of section
Subsection (a) shall apply only if the life insurance department
would, if it were treated as a separate corporation, qualify as a
life insurance company under section 816.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 205; Mar. 13, 1956, ch. 83, Sec.
5(3), 70 Stat. 49; Pub. L. 98-369, div. A, title II, Sec.
211(b)(8), July 18, 1984, 98 Stat. 755.)
-MISC1-
AMENDMENTS
1984 - Subsec. (b). Pub. L. 98-369 substituted "section 816" for
"section 801".
1956 - Subsec. (a)(2). Act Mar. 13, 1956, substituted "the
income" for "the taxable income (as defined in section 803)".
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, see section 215 of Pub. L. 98-369, set out as
an Effective Date note under section 801 of this title.
EFFECTIVE DATE OF 1956 AMENDMENT
Amendment by act Mar. 13, 1956, applicable only to taxable years
beginning after Dec. 31, 1954, see section 6 of act Mar. 13, 1956,
set out as a note under section 821 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 11 of this title.
-End-
-CITE-
26 USC Secs. 595, 596 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
[Secs. 595, 596. Repealed. Pub. L. 104-188, title I, Sec.
1616(b)(8), (9), Aug. 20, 1996, 110 Stat. 1857]
-MISC1-
Section 595, added Pub. L. 87-834, Sec. 6(b), Oct. 16, 1962, 76
Stat. 982; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1834, related to foreclosure on property
securing loans, including provisions relating to nonrecognition of
gain or loss as result of foreclosure, character of property,
basis, and regulatory authority.
Section 596, added Pub. L. 91-172, title IV, Sec. 434(a), Dec.
30, 1969, 83 Stat. 624; amended Pub. L. 99-514, title IX, Sec.
901(d)(4)(D), Oct. 22, 1986, 100 Stat. 2380, provided that in case
of organization to which section 593 of this title applied and
which computed additions to reserve for losses on loans for taxable
year under section 593(b)(2) of this title, total amount allowed
under sections 243, 244, and 245 of this title for taxable year as
deduction with respect to dividends received was to be reduced by
amount equal to 8 percent of such total amount.
EFFECTIVE DATE OF REPEAL
Repeal of section 595 applicable to property acquired in taxable
years beginning after Dec. 31, 1995, and repeal of section 596
applicable to taxable years beginning after Dec. 31, 1995, see
section 1616(c)(1), (3) of Pub. L. 104-188, set out as an Effective
Date of 1996 Amendment note under section 593 of this title.
-End-
-CITE-
26 USC Sec. 597 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
Sec. 597. Treatment of transactions in which Federal financial
assistance provided
-STATUTE-
(a) General rule
The treatment for purposes of this chapter of any transaction in
which Federal financial assistance is provided with respect to a
bank or domestic building and loan association shall be determined
under regulations prescribed by the Secretary.
(b) Principles used in prescribing regulations
(1) Treatment of taxable asset acquisitions
In the case of any acquisition of assets to which section
381(a) does not apply, the regulations prescribed under
subsection (a) shall -
(A) provide that Federal financial assistance shall be
properly taken into account by the institution from which the
assets were acquired, and
(B) provide the proper method of allocating basis among the
assets so acquired (including rights to receive Federal
financial assistance).
(2) Other transactions
In the case of any transaction not described in paragraph (1),
the regulations prescribed under subsection (a) shall provide for
the proper treatment of Federal financial assistance and
appropriate adjustments to basis or other tax attributes in
connection with such assistance.
(3) Denial of double benefit
No regulations prescribed under this section shall permit the
utilization of any deduction (or other tax benefit) if such
amount was in effect reimbursed by nontaxable Federal financial
assistance.
(c) Federal financial assistance
For purposes of this section, the term "Federal financial
assistance" means -
(1) any money or other property provided with respect to a
domestic building and loan association by the Federal Savings and
Loan Insurance Corporation or the Resolution Trust Corporation
pursuant to section 406(f) of the National Housing Act or section
21A of the Federal Home Loan Bank Act (or under any other similar
provision of law), and
(2) any money or other property provided with respect to a bank
or domestic building and loan association by the Federal Deposit
Insurance Corporation pursuant to section 11(f) or 13(c) of the
Federal Deposit Insurance Act (or under any other similar
provision of law),
regardless of whether any note or other instrument is issued in
exchange therefor.
(d) Domestic building and loan association
For purposes of this section, the term "domestic building and
loan association" has the meaning given such term by section
7701(a)(19) without regard to subparagraph (C) thereof.
-SOURCE-
(Added Pub. L. 97-34, title II, Sec. 244(a), Aug. 13, 1981, 95
Stat. 255; amended Pub. L. 99-514, title IX, Sec. 904(b)(1), Oct.
22, 1986, 100 Stat. 2385; Pub. L. 100-647, title IV, Sec.
4012(b)(2)(A)-(D)(i), (c)(1), Nov. 10, 1988, 102 Stat. 3657, 3658;
Pub. L. 101-73, title XIV, Sec. 1401(a)(3)(A), (b)(1), Aug. 9,
1989, 103 Stat. 548, 549; Pub. L. 101-239, title VII, Sec.
7841(e)(1), Dec. 19, 1989, 103 Stat. 2429; Pub. L. 101-508, title
XI, Sec. 11704(a)(7), Nov. 5, 1990, 104 Stat. 1388-518.)
-REFTEXT-
REFERENCES IN TEXT
Section 406 of the National Housing Act, referred to in subsec.
(c)(1), which was classified to section 1729 of Title 12, Banks and
Banking, was repealed by Pub. L. 101-73, title IV, Sec. 407, Aug.
9, 1989, 103 Stat. 363.
Section 21A of the Federal Home Loan Bank Act, referred to in
subsec. (c)(1), is classified to section 1441a of Title 12.
Sections 11(f) and 13(c) of the Federal Deposit Insurance Act,
referred to in subsec. (c)(2), are classified to sections 1821(f)
and 1823(c), respectively, of Title 12.
-MISC1-
AMENDMENTS
1990 - Subsec. (c). Pub. L. 101-508 substituted "For purposes of"
for "The purposes of".
1989 - Pub. L. 101-73, Sec. 1401(b)(1), repealed amendment made
by Pub. L. 99-514, Sec. 904(b)(1), see 1986 Amendment note below.
Pub. L. 101-73, Sec. 1401(a)(3)(A), amended section generally,
substituting present provisions for former provisions which
contained section catchline that read "FSLIC or FDIC financial
assistance" and which provided: in subsec. (a) for an exclusion
from gross income; in subsec. (b) for no reduction in basis of
assets; in subsec. (c) for a reduction of tax attributes by 50
percent of amounts excludable under subsection (a); and in subsec.
(d) for a definition of "domestic building and loan association".
Subsec. (b)(2). Pub. L. 101-239 substituted "in connection with
such assistance" for "to reflect such treatment".
1988 - Pub. L. 100-647, Sec. 4012(b)(2)(D)(i), substituted "FSLIC
or FDIC" for "FSLIC" in section catchline.
Subsec. (a). Pub. L. 100-647, Sec. 4012(b)(2)(A), inserted at end
"Gross income of a bank does not include any amount of money or
other property received from the Federal Deposit Insurance
Corporation pursuant to sections 13(c), 15(c)(1), and 15(c)(2) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(f) and 1823(c)(1)
and (c)(2)), regardless of whether any note or other instrument is
issued in exchange therefor."
Subsec. (b). Pub. L. 100-647, Sec. 4012(b)(2)(C), substituted
"association or bank" for "association".
Subsec. (c). Pub. L. 100-647, Sec. 4012(c)(1), added subsec. (c).
Subsec. (d). Pub. L. 100-647, Sec. 4012(b)(2)(B), which directed
amendment of section 597(b), as amended by section 4012(c)(1) of
Pub. L. 100-647, by adding at the end thereof subsec. (d), was
executed by adding subsec. (d) at the end of section 597, as
amended by section 4012(c)(1) of Pub. L. 100-647, as the probable
intent of Congress.
1986 - Pub. L. 99-514, Sec. 904(b)(1), (c)(2)(A), as amended by
Pub. L. 100-647, title IV, Sec. 4012(a)(2), which (applicable to
transfers after Dec. 31, 1989, in taxable years ending after such
date, with exceptions) directed repeal of this section, was
repealed by Pub. L. 101-73, Sec. 1401(b)(1), (c)(4), eff. Oct. 22,
1986, and I.R.C. of 1986 applicable as if the amendments made by
such section had not been enacted.
EFFECTIVE DATE OF 1989 AMENDMENTS
Section 7841(e)(2) of Pub. L. 101-239 provided that: "The
amendment made by this subsection [amending this section] shall
apply as if included in the amendments made by section 1401 of the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989 [Pub. L. 101-73]."
Section 1401(c)(3)-(5) of Pub. L. 101-73 provided that:
"(3) Subsection (a)(3). -
"(A) In general. - The amendments made by subsection (a)(3)
[amending this section and repealing provisions set out below]
shall apply to any amount received or accrued by the financial
institution on or after May 10, 1989, except that such amendments
shall not apply to transfers on or after such date pursuant to an
acquisition to which the amendment made by subsection (a)(1)
[amending section 368 of this title] does not apply.
"(B) Interim rule. - In the case of any payment pursuant to a
transaction on or after May 10, 1989, and before the date on
which the Secretary of the Treasury (or his delegate) takes
action in exercise of his regulatory authority under section 597
of the Internal Revenue Code of 1986 (as amended by subsection
(a)(3)), the taxpayer may rely on the legislative history for the
amendments made by subsection (a)(3) in determining the proper
treatment of such payment.
"(4) Subsection (b)(1). - The provisions of subsection (b)(1)
[set out below] shall take effect on the date of the enactment of
the Tax Reform Act of 1986 [Oct. 22, 1986].
"(5) Subsection (b)(2). - The amendment made by subsection (b)(2)
[amending provisions set out below] shall take effect on the date
of the enactment of the Technical and Miscellaneous Revenue Act of
1988 [Nov. 10, 1988]."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 4012(b)(2)(E) of Pub. L. 100-647 provided that: "The
amendments made by this paragraph [amending this section] shall
apply to any transfer -
"(i) after the date of the enactment of this Act [Nov. 10,
1988], and before January 1, 1990, unless such transfer is
pursuant to an acquisition occurring on or before such date of
enactment, and
"(ii) after December 31, 1989, if such transfer is pursuant to
an acquisition occurring after such date of enactment and before
January 1, 1990."
Section 4012(c)(3) of Pub. L. 100-647, as amended by Pub. L.
101-73, title XIV, Sec. 1401(b)(2), Aug. 9, 1989, 103 Stat. 549,
provided that: "The amendments made by this subsection [amending
this section and provisions set out below] shall apply to any
transfer -
"(A) after December 31, 1988, and before January 1, 1990,
unless such transfer is pursuant to an acquisition occurring
before January 1, 1989, and
"(B) after December 31, 1989, if such transfer is pursuant to
an acquisition occurring after December 31, 1988, and before
January 1, 1990.
In the case of any bank or any institution treated as a domestic
building and loan association for purposes of section 597 of the
1986 Code by reason of the amendment made by subsection (b)(2)(B),
the amendments made by this subsection shall also apply to any
transfer before January 1, 1989, to which the amendments made by
subsection (b)(2) [amending this section] apply."
EFFECTIVE DATE OF REPEAL
Pub. L. 99-514, title IX, Sec. 904(c)(2), Oct. 22, 1986, 100
Stat. 2385, as amended by Pub. L. 100-647, title IV, Sec.
4012(a)(2), (c)(2), Nov. 10, 1988, 102 Stat. 3656, 3660, which
provided that repeal of this section was to be applicable to
transfers after Dec. 31, 1989, in taxable years ending after such
date, with exceptions, and which related to clarification of
treatment of amounts excluded under this section, was repealed by
Pub. L. 101-73, title XIV, Sec. 1401(a)(3)(B), (b)(1), Aug. 9,
1989, 103 Stat. 549.
EFFECTIVE DATE
Section 246(c) of Pub. L. 97-34 provided that: "The amendment
made by section 244 [enacting this section] shall apply to any
payment made on or after January 1, 1981."
-TRANS-
TRANSFER OF FUNCTIONS
Federal Savings and Loan Insurance Corporation abolished and its
functions transferred, see sections 401 to 406 of Pub. L. 101-73,
set out as a note under section 1437 of Title 12, Banks and
Banking.
-MISC2-
REPEAL OF PROVISIONS RELATING TO REPEAL OF SPECIAL REORGANIZATION
RULES FOR FINANCIAL INSTITUTIONS
Section 1401(b)(1) of Pub. L. 101-73 provided that: "Section 904
of the Tax Reform Act of 1986 [Pub. L. 99-514, amending section 368
of this title, repealing this section and enacting provisions set
out as notes under sections 368 and 597 of this title] (other than
subsection (c)(2)(B) thereof [section 904(c)(2)(B) of Pub. L.
99-514, formerly set out as a note above]) is hereby repealed and
the Internal Revenue Code of 1986 shall be applied as if the
amendments made by such section had not been enacted."
REFERENCES TO FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION
Section 1401(c)(7) of Pub. L. 101-73 provided that: "Any
reference to the Federal Savings and Loan Insurance Corporation in
section 597 of the Internal Revenue Code of 1986 (as in effect on
the day before the date of the enactment of this Act [Aug. 9,
1989]) shall be treated as including a reference to the Resolution
Trust Corporation and the FSLIC Resolution Fund."
ANNUAL REPORTS ON TRANSACTIONS IN WHICH FEDERAL FINANCIAL
ASSISTANCE PROVIDED
Pub. L. 101-73, title XIV, Sec. 1403, Aug. 9, 1989, 103 Stat.
551, which required the Secretary of the Treasury to submit annual
reports to the Senate and to the Committee on Ways and Means of the
House of Representatives on transactions with respect to which
Federal financial assistance subject to this section was provided,
terminated, effective May 15, 2000, pursuant to section 3003 of
Pub. L. 104-66, as amended, set out as a note under section 1113 of
Title 31, Money and Finance. See, also, page 142 of House Document
No. 103-7.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 593 of this title.
-End-
-CITE-
26 USC Sec. 601 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter H - Banking Institutions
PART II - MUTUAL SAVINGS BANKS, ETC.
-HEAD-
[Sec. 601. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(85),
Oct. 4, 1976, 90 Stat. 1778]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 206, related to a
special deduction for bank affiliates.
EFFECTIVE DATE OF REPEAL
Repeal effective for taxable years beginning after Dec. 31, 1976,
see section 1901(d) of Pub. L. 94-455, set out as an Effective Date
of 1976 Amendment note under section 2 of this title.
-End-
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