§ 585. Reserves for losses on loans of banks

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 title IV § 431(a) · 83 Stat. 487

   Enacted · 26 U.S.C. § 585

   Added Pub. L. 91–172, title IV, § 431(a), Dec. 30, 1969, 83 Stat. 616

   Source evidence

   Code source credit
   Added Pub. L. 91–172, title IV, § 431(a), Dec. 30, 1969, 83 Stat. 616

   Enacted provision · exact public law section
   (a) Bad Debt Deductions of Financial Institutions.— Part I of 68A Stat. 202. 26 USC 581–584. subchapter H of chapter 1 (relating to rules of general application to banking institutions) is amended by adding at the end thereof the following new sections: “SEC. 585. RESERVES FOR LOSSES ON LOANS OF BANKS. “(a) Institutions to Which Section Applies.— 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. “(b) Addition to Reserves for Bad Debts.— “(1) General rule.— For purposes of section 166(c), 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 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). “(2) Percentage 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 allowable percentage of eligible loans outstanding at such time, except that— “(A) If the reserve for losses on loans at the close of the base year is less than the allowable percentage of eligible loans outstanding at such time, the amount determined under this paragraph with respect to the difference shall not exceed one-fifth of such difference. “(B) If the reserve for losses on loans at the close of the base year is not less than the allowable percentage of eligible loans outstanding at such time, the amount determined under this paragraph shall be the amount necessary to increase the balance of the reserve at the close of the taxable year to (i) the allowable percentage of eligible loans outstanding at such time, or (ii) the balance of the reserve at the close of the base year, whichever is greater, but if the amount of eligible loans outstanding at the close of the taxable year is less than the amount of such loans outstanding at the close of the base year, the amount determined under clause (ii) shall be the amount necessary to increase the balance of the reserve at the close of the taxable year to the amount which bears the same ratio to eligible 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 eligible loans outstanding at the close of the base year. For purposes of this paragraph, the term ‘allowable percentage’ means 1.8 percent for taxable years beginning before 1976; 1.2 percent for taxable years beginning after 1975 but before 1982; and 0.6 percent for taxable years beginning after 1981. The amount determined under this paragraph shall not exceed 0.6 percent of eligible loans outstanding at the close of the taxable year or an amount sufficient to increase the reserve for losses on loans to 0.6 percent of eligible loans outstanding at the close of the taxable year, whichever is greater. For purposes of this paragraph, the term ‘base year’ means: for taxable years beginning before 1976, the last taxable year beginning on or before July 11, 1969, for taxable years beginning after 1975 but before 1982, the last taxable year beginning before 1976, and for taxable years beginning after 1981, the last taxable year beginning before 1982; except that for purposes of subparagraph (A) such term means the last taxable year before the most recent adoption of the percentage method, if later. “(3) 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 or his delegate, 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. “(4) Regulations; definition of eligible loan, etc.— The Secretary or his delegate 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 26 USC 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. “SEC. 586. RESERVES FOR LOSSES ON LOANS OF SMALL BUSINESS INVESTMENT COMPANIES, ETC. “(a) Institutions to Which Section Applies.— This section shall apply to the following financial institutions: “(1) any small business investment company operating under 72 Stat. 689. 15 USC 661 note. the Small Business Investment Act of 1958, and “(2) any business development corporation. For purposes of this section, 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 (as defined in section 581) 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. “(b) Addition to Reserves for Bad Debts.— “(1) General rule.— For purposes of section 166(c), except as provided in paragraph (2) 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 amount necessary to increase the balance of the reserve for bad debts (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 or his delegate, 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 subparagraph, the term ‘base year’ means the last taxable year beginning on or before July 11, 1969. “(2) New financial institutions.— In the case of any taxable year beginning not more than 10 years after the day before the first day on which a financial institution (or any predecessor) was authorized to do business as a financial institution described in subsection (a), the reasonable addition to the reserve for bad debts of such financial institution shall not exceed the larger of the amount determined under paragraph (1) or the amount necessary to increase the balance of the reserve for bad debts at the close of the taxable year to the amount which bears the same ratio (as determined by the Secretary or his delegate) to loans outstanding at the close of the taxable year as (i) the total bad debts sustained by all institutions described in the applicable paragraph of subsection (a) during the 6 preceding taxable years (adjusted for recoveries of bad debts during such period), bears to (ii) the sum of the loans by all such institutions outstanding at the close of such taxable years.”

2. 1976

   Pub. L. 94–455 title XIX § 1906(b)(13)(A) · 90 Stat. 1520

   Struck · 26 U.S.C. § 585(b)(3); 26 U.S.C. § 585(b)(4)

   Pub. L. 94–455 struck out “or his delegate” after “Secretary”

   Source evidence

   Code amendment note
   Subsec. (b)(3), (4). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

   Enacted provision · exact public law section
   (A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.

3. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 title II § 267(a) · 95 Stat. 175

   Substituted · 26 U.S.C. § 585(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

   Source evidence

   Code amendment note
   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.

   Enacted provision · exact public law section
   (a) General Rule.— (1) The first sentence after subparagraph (B) of paragraph (2) of 26 USC 585. section 585(b) is amended by striking out “but before 1982; and 0.6 percent for taxable years beginning after 1981” and inserting in lieu thereof “but before 1982; 1.0 percent for taxable years beginning in 1982; and 0.6 percent for taxable years beginning after 1982”. (2) The last sentence of paragraph (2) of section 585(b) is 26 USC 585. amended by striking out “but before 1982, the last taxable year beginning before 1976, and for taxable years beginning after 1981, the last taxable year beginning before 1982” and inserting in lieu thereof “but before 1983, the last taxable year beginning before 1976, and for taxable years beginning after 1982, the last taxable year beginning before 1983”.

4. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 § 901(a)(1) · 100 Stat. 2085

   Amended · 26 U.S.C. § 585(a)

   Pub. L. 99–514, § 901(a)(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “This section shall apply to the following financial institutions:

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 99–514, § 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.”

   Enacted provision · exact public law section
   (1) In general.— Subsection (a) of section 585 (relating to reserves for losses on loans of banks) is amended to read as follows: “(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) other than an organization to which section 593 applies. “(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.”

5. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 § 901(d)(1) · 100 Stat. 2085

   Substituted · 26 U.S.C. § 585(b)(1)

   Pub. L. 99–514, § 901(d)(1), substituted “subsection (a)” for “section 166(c)”

   Source evidence

   Code amendment note
   Subsec. (b)(1). Pub. L. 99–514, § 901(d)(1), substituted “subsection (a)” for “section 166(c)”.

   Enacted provision · exact public law section
   (1) Amendment to section 585.— Paragraph (1) of section 585(b) is amended by striking out “section 166(c)” and inserting in lieu thereof “subsection (a)”.

6. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 § 901(a)(2) · 100 Stat. 2085

   Added · 26 U.S.C. § 585(c)

   Pub. L. 99–514, § 901(a)(2), added subsec. (c)

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 99–514, § 901(a)(2), added subsec. (c).

   Enacted provision · exact public law section
   (2) Reserve deduction not available for large banks.— Section 585 is amended by adding at the end thereof the following new subsection: “(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 greater amount as the taxpayer may designate, 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 ⅓  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)(1) if the taxpayer designates an amount 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(d)(3) 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. “(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.”

7. 1987

   Pub. L. 100–203 title X § 10301(b)(2) · 101 Stat. 1330

   Substituted · 26 U.S.C. § 585(c)(3)(C)

   Pub. L. 100–203 substituted “section 6655(e)(2)(A)(i)” for “section 6655(d)(3)”

   Source evidence

   Code amendment note
   Subsec. (c)(3)(C). Pub. L. 100–203 substituted “section 6655(e)(2)(A)(i)” for “section 6655(d)(3)”.

   Enacted provision · exact public law section
   (2) Subparagraph (C) of section 585(c)(3) of such Code is amended by striking out “section 6655(d)(3)” and inserting in lieu thereof “section 6655(e)(2)(A)(i)”.

8. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1009(a)(2)(B) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 585(c)(3)(A)(iii)(I)

   Pub. L. 100–647, § 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”

   Source evidence

   Code amendment note
   Subsec. (c)(3)(A)(iii)(I). Pub. L. 100–647, § 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”.

   Enacted provision · exact public law section
   (B) Subclause (I) of section 585(c)(3)(A)(iii) of the 1986 Code is amended by striking out “or such greater amount as the tax-payer may designate” and inserting in lieu thereof “or such higher percentage of such net amount as the taxpayer may elect.”

9. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 § 1009(a)(2)(C) · 102 Stat. 3342

   Substituted · 26 U.S.C. § 585(c)(3)(B)(ii)

   Pub. L. 100–647, § 1009(a)(2)(C), substituted “elects a higher percentage” for “designates an amount”

   Source evidence

   Code amendment note
   Subsec. (c)(3)(B)(ii). Pub. L. 100–647, § 1009(a)(2)(C), substituted “elects a higher percentage” for “designates an amount”.

   Enacted provision · exact public law section
   (C) Clause (ii) of section 585(c)(3)(B) of the 1986 Code is amended by striking out “designates an amount” and inserting in lieu thereof “elects a higher percentage”.

10. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1009(a)(3) · 102 Stat. 3342

    Inserted · 26 U.S.C. § 585(c)(4)

    Pub. L. 100–647, § 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.”

    Source evidence

    Code amendment note
    Subsec. (c)(4). Pub. L. 100–647, § 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.”

    Enacted provision · exact public law section
    (a) Amendments Related to Section 901 of the Reform Act.— (1) Subparagraph (O of section 46(e)(4) of the 1986 Code is amended by adding at the end thereof the following new sentences: “Notwithstanding the preceding provisions of this subparagraph, any such election shall terminate effective with respect to the 1st taxable year of the organization making such election which begins after 1986 and during which such organization (or any successor organization) was not at any time the lessee under any lease of regular investment tax credit property. For purposes of the preceding sentence, the term regular investment tax credit property’ means any section 38 property if the regular percentage applied to such property and the amount of qualified investment with respect to such property would have been reduced under paragraph (1) but for an election under this subparagraph.” (2) (A) Paragraph (5) of section 585(c) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(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.” (B) Subclause (I) of section 585(c)(3)(A)(iii) of the 1986 Code is amended by striking out “or such greater amount as the tax-payer may designate” and inserting in lieu thereof “or such higher percentage of such net amount as the taxpayer may elect.” (C) Clause (ii) of section 585(c)(3)(B) of the 1986 Code is amended by striking out “designates an amount” and inserting in lieu thereof “elects a higher percentage”. (D) Paragraph (4) of section 585(c) of the 1986 Code is amended by adding at the end thereof the following new sentence: “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.”

11. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1009(a)(2)(A) · 102 Stat. 3342

    Added · 26 U.S.C. § 585(c)(5)(C)

    Pub. L. 100–647, § 1009(a)(2)(A), added subpar. (C)

    Source evidence

    Code amendment note
    Subsec. (c)(5)(C). Pub. L. 100–647, § 1009(a)(2)(A), added subpar. (C).

    Enacted provision · exact public law section
    (A) Paragraph (5) of section 585(c) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(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.”

12. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(12)(C) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 585(b)(1)

    Pub. L. 101–508, § 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—

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 101–508, § 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).”

    Enacted provision · exact public law section
    (C) Paragraph (1) of section 585(b) is amended by striking “shall not exceed” and all that follows down through the period at the end thereof and inserting “shall not exceed the addition to the reserve for losses on loans determined under the experience method as provided in paragraph (2).”

13. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(a)(26) · 104 Stat. 1388

    1. Redesignated · 26 U.S.C. § 585(b)(2)

       Pub. L. 101–508, § 11801(a)(26), (c)(12)(D), redesignated par. (3) as (2)

    2. Struck · 26 U.S.C. § 585(b)(2)

       Pub. L. 101–508, § 11801(a)(26), (c)(12)(D), struck out former par. (2) which related to use of percentage method for determining amount to add to reserve for bad debts

    Source evidence

    Code amendment note
    Subsec. (b)(2). Pub. L. 101–508, § 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.

    Enacted provision · exact public law section
    (26) Paragraph (2) of section 585(b) (relating to percentage method).

14. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(12)(D) · 104 Stat. 1388

    1. Redesignated · 26 U.S.C. § 585(b)(3)

       Pub. L. 101–508, § 11801(c)(12)(D), (E), redesignated par. (4) as (3)

    2. Substituted · 26 U.S.C. § 585(b)(3)

       Pub. L. 101–508, § 11801(c)(12)(D), (E), substituted heading for one which read: “Regulations; definition of eligible loan, etc.”

    3. Amended · 26 U.S.C. § 585(b)(3)

       Pub. L. 101–508, § 11801(c)(12)(D), (E), 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—

    Source evidence

    Code amendment note
    Subsec. (b)(3). Pub. L. 101–508, § 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).

    Enacted provision · exact public law section
    (D) Subsection (b) of section 585 is amended by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

15. 1990

    Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11801(c)(12)(D) · 104 Stat. 1388

    Redesignated · 26 U.S.C. § 585(b)(4)

    Pub. L. 101–508, § 11801(c)(12)(D), redesignated par. (4) as (3)

    Source evidence

    Code amendment note
    Subsec. (b)(4). Pub. L. 101–508, § 11801(c)(12)(D), redesignated par. (4) as (3).

    Enacted provision · exact public law section
    (D) Subsection (b) of section 585 is amended by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

16. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 title I § 1616(b)(6) · 110 Stat. 1755

    Struck · 26 U.S.C. § 585(a)(2)(A)

    Pub. L. 104–188 struck out “other than an organization to which section 593 applies” after “section 581)”

    Source evidence

    Code amendment note
    Subsec. (a)(2)(A). Pub. L. 104–188 struck out “other than an organization to which section 593 applies” after “section 581)”.

    Enacted provision · exact public law section
    (6) Subparagraph (A) of section 585(a)(2) is amended by striking “other than an organization to which section 593 applies”.

    Effective date note
    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.

19 of 19 references resolved to an enrolled provision