§ 593. Reserves for losses on loans

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. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 205 · 68A Stat. 205

   Enacted · 26 U.S.C. § 593

   Aug. 16, 1954, ch. 736, 68A Stat. 205

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 205

2. 1962

   Revenue Act of 1962

   Pub. L. 87–834 § 6(a) · 76 Stat. 960

   Amended · 26 U.S.C. § 593

   Pub. L. 87–834 amended section generally. Prior to such amendment, section read as follows:

   Source evidence

   Code amendment note
   Pub. L. 87–834 amended section generally. Prior to such amendment, section read as follows:

   “§ 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.”

   Enacted provision · exact public law section
   (a) Reserves for losses on loans.— Section 593 is amended to read as follows: “SEC. 593. RESERVES FOR LOSSES ON LOANS. “(a) Organizations to Which Section Applies.— This section shall apply to any mutual savings bank not having capital stock represented by shares, domestic building and loan association, or cooperative bank without capital stock organized and operated for mutual purposes and without profit. “(b) Addition to Reserves for Bad Debts.— “(1) In general.— For purposes of section 166(c), 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 under section 166(c) to be a reasonable addition to the reserve for losses on nonqualifying loans, 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), (3), or (4), whichever amount is the largest, but the amount determined under this subparagraph shall in no case be greater than the larger of— “(i) the amount determined under paragraph (4), 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 or 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.— The amount determined under this paragraph for the taxable year shall be the excess of— “(A) an amount equal to 60 percent of the taxable income for such year, over “(B) the amount referred to in paragraph (1)(A) for such year, but the amount determined under this paragraph shall not exceed the amount necessary to increase the balance (as of 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. For purposes of this paragraph, taxable income shall be computed (i) or excluding from gross income any amount included therein by reason of subsection (f), and (ii) without regard to any deduction allowable for any addition to the reserve for bad debts. “(3) Percentage of real property loans method.— The amount determined under this paragraph for the taxable year shall be an amount equal to the amount necessary to increase the balance (as of the close of the taxable year) or the reserve for losses on qualifying real property loans to an amount equal to— “(A) 3 percent of such loans outstanding at such time, plus “(B) in the case of a taxpayer which is a new company and which does not have capital stock with respect to which 26 USC 317. 26 USC 591; Post, p. 984. distributions of property (as defined in section 317(a)) are not allowable as a deduction under section 591, an amount equal to— “(i) 2 percent of so much of the amount of such loans outstanding at such time as does not exceed $4,000,000, reduced (but not below zero) by “(ii) the amount, if any, of the balance (as of the close of such taxable year) of the taxpayer’s supplemental reserve for losses on loans. For purposes of subparagraph (B), a taxpayer is a new company for any taxable year only if such taxable year begins not more than 10 years after the first day on which it (or any predecessor) was authorized to do business as an organization described in subsection (a). “(4) Experience method.— The amount determined under this paragraph for the taxable year shall be an amount equal to the amount determined under section 166(c) (without regard to this 26 USC 166. subsection) to be a reasonable addition to the reserve for losses on qualifying real property loans. “(5) Limitation in cask of certain domestic building and loan associations.— If the percentage of the assets of a domestic building and loan association which are not assets described in section 7701(a)(19)(D)(ii) exceeds 36 percent for the taxable Post, p. 983. Post, p. 982. year (as determined for purposes of section 7701(a)(19) for such year), the amount determined under paragraph (2), and the amount determined under paragraph (3), shall in each case be the amount (determined without regard to this paragraph but with regard to the limits contained in paragraphs (2), (3), and (1)(B)) reduced by the amount determined under the following table: If the percentage exceeds— but does not exceeds— the reduction shall be the following proportion of the amount so determined without regard to this paragraph—       36 percent  37 percent 1/12  37 percent  38 percent 1/6   38 percent  89 percent 1/4   30 percent  40 percent 1/3   40 percent  41 percent 5/12        “(c) Treatment of Reserves 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 nonqualiying 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) Allocation of pre-1963 reserves.— For purposes of this section, the pre-1963 reserves shall, as of the close of December 31, 1962, be allocated to, and constitute the opening balance of— “(A) the reserve for losses on nonqualifying loans, “(B) the reserve for losses on qualifying real property loans, and “(C) the supplemental reserve for losses on loans. “(3) Method of allocation.— The allocation provided by paragraph (2) shall be made— “(A) first, to the reserve described in paragraph (2)(A), to the extent such reserve is not increased above the amount which would be a reasonable addition under section 166(c) for a period in which the nonqualifying loans increased from zero to the amount thereof outstanding at the close of December 31, 1962; “(B) second, to the reserve described in paragraph (2)(14), to the extent such reserve is not increased above the amount which would be determined under paragraph (3)(A) or (4) of subsection (b) (whichever such amount is the larger) for a period in which the qualifying real property loans increased from zero to the amount thereof outstanding at the close of December 31, 1962; and “(C) then to the supplemental reserve for losses on loans. “(4) Pre–1963 reserves defined.— For purposes of this Subsection, the term ‘pre-1963 reserves’ means the net amount, determined as of the close of December 31, 1962 (after applying subsection (d)(1)), accumulated in the reserve for bad debts 26 USC 166. pursuant to section 166(c) (or the corresponding provisions of prior revenue laws) for taxable years beginning after December 31, 1951. “(5) Certain pre-1952 surplus.— If after the application of paragraph 13), the opening balance of the reserve aescribed in paragraph (2)(B) is less than the amount described in paragraph (3)(B), then, for purposes of this subsection, the term ‘pre-1963 reserves’ includes so much 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 as does not exceed the amount by which such opening balance is less than the amount described in paragraph (3)(B). For purposes of the preceding sentence, the surplus, undivided profits, and bad debt reserves attributable to the period before the first taxable year beginning after December 31, 1951, shall be reduced by the amount thereof which is attributable to interest which would have been excludable from gross income under section 22(b)(4) of the Internal Revenue 53 Stat. 10. Code of 1939 (relating to interest on governmental obligations) or the corresponding provisions of prior laws. Notwithstanding the second sentence of paragraph (1), any amount which, by reason of the application of the first sentence of this paragraph, is allocated to the reserve described in paragraph (2)(B) 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. “(6) 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) Taxable Years Beginning in 1962 and Ending in 1963.— In the case of a taxable year beginning before January 1, 1963, and ending after December 31, 1962, of a taxpayer described in subsection (a) which uses the reserve method of Recounting for bad debts, the taxable income shall be the sum of— “(1) that portion of the taxable income allocable to the part of the taxable year occurring before January 1, 1963, reduced by the amount of the deduction for an addition to a reserve for bad debts which would be allowable under section 166(c) (without regard to the amendments made by section 6 of the Revenue Act of 1962) if such part year constituted a taxable year, plus “(2) that portion of the taxable income allocable to the part of the taxable year occurring after December 31, 1962, reduced by the amount of the deduction for an addition to a reserve for bad debts which would be allowed under section 166(c) (taking into account the amendments made by section 6 of the Revenue Act of 1962) if such part year constituted a taxable year. For purposes of the preceding sentence, the taxable income shall be determined without regard to any deduction under section 166(c), 26 USC 166. and the portion thereof allocable to each part year shall be determined on the basis of the ratio which the number or days in such part year bears to the number of days in the entire taxable year. “(e) 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 which term does not include— “(A) any loan evidenced by a security (as defined in section 165(g)(2)(C)); 26 USC 165. “(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 snare 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 26 USC 1504. 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. “(f) Distributions to Shareholders.— “(1) In general.— For purposes of this chapter, any distribution of property (as defined in section 317(a)) by a domestic 26 USC 317. building and loan association 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, to the extent thereof, • “(B) 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)(4), “(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 the association, 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. “(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.”

3. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 432(a)(1) · 83 Stat. 487

   Inserted · 26 U.S.C. § 593(b)(1)(A)

   Pub. L. 91–172, § 432(a)(1), inserted provisions for the method of computing the amount of the reasonable addition to the reserve for losses on nonqualifying loans

   Source evidence

   Code amendment note
   Subsec. (b)(1)(A). Pub. L. 91–172, § 432(a)(1), inserted provisions for the method of computing the amount of the reasonable addition to the reserve for losses on nonqualifying loans.

   Enacted provision · exact public law section
   (1) by striking out subparagraph (A) of paragraph (1) and inserting in lieu thereof the following: “(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)(3), plus”.

4. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 432(a)(2) · 83 Stat. 487

   1. Substituted · 26 U.S.C. § 593(b)(2)

      Pub. L. 91–172, § 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)

   2. Added · 26 U.S.C. § 593(b)(2)

      Pub. L. 91–172, § 432(a)(2), added subpars. (B) to (E)

   Source evidence

   Code amendment note
   Subsec. (b)(2). Pub. L. 91–172, § 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).

   Enacted provision · exact public law section
   (2) by striking out paragraphs (2), (3), (4), and (5) and inserting in lieu thereof the following: “(2) Percentage of taxable income method.— “(A) In general.— Subject to subparagraphs (B), (C), and (D), the amount determined under this paragraph for the taxable year shall be an amount equal to the applicable percentage of the taxable income for such year (determined under the following table): “For a taxable year beginning in—  The applicable percentage under this paragraph shall be—  1969 60 percent. 1970 57 percent. 1971 54 percent. 1972 51 percent. 1973 49 percent. 1974 47 percent. 1975 45 percent. 1976 43 percent. 1977 42 percent. 1978 41 percent. 1979 or thereafter 40 percent. “(B) Reduction of applicable percentage in certain cases.— If, for the taxable year, the percentage of the assets of a taxpayer described in subsection (a), which are assets described Post, p. 622. in section 7701(a)(19)(C), is less than— “(i) 82 percent of the total assets in the case of a taxpayer other than a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by ¾ of 1 percentage point for each 1 percentage point of such difference, or “(ii) 72 percent of the total assets in the case of a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by 1½ percentage points for each 1 percentage point of such difference. If, for the taxable year, the percentage of the assets of such taxpayer which are assets described in section 7701(a)(19)(C) is less than 60 percent (50 percent for a taxable year Post, p. 622. beginning before 1973 in the case of a mutual savings bank), this paragraph shall not apply. “(C) Reduction for amounts referred to in paragraph (1)(a).— The amount determined under subparagraph (A) shall be reduced by that portion of the amount referred to in paragraph (1)(A) for the taxable year (not in excess of 100 percent) which bears the same ratio to such amount as (i) 18 percent (28 percent in the case of mutual savings banks) bears to (ii) the percentage of the assets of the taxpayer for such year which are not assets described in section 7701(a)(19)(C). “(D) 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. “(E) 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 (f), “(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, Post, p. 656. “(iv) by excluding from gross income an amount equal to the lesser of ⅜ of the net long-term capital gain for the taxable year or ⅜ 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 “(v) 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 the applicable percentage (determined under subparagraphs (A) and (B)) of the dividends received deduction (determined without regard to section 596) for the taxable Post, p. 624. year. “(3) Percentage method.— 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 Ante, p. 616. amount referred to in paragraph (1)(A) for the taxable year. “(4) 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)(3). “(5) Determination of reserve for percentage method.— 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.”

5. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 432(a)(2) · 83 Stat. 487

   Changed · 26 U.S.C. § 593(b)(3)

   Pub. L. 91–172, § 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)

   Source evidence

   Code amendment note
   Subsec. (b)(3). Pub. L. 91–172, § 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).

   Enacted provision · exact public law section
   (2) by striking out paragraphs (2), (3), (4), and (5) and inserting in lieu thereof the following: “(2) Percentage of taxable income method.— “(A) In general.— Subject to subparagraphs (B), (C), and (D), the amount determined under this paragraph for the taxable year shall be an amount equal to the applicable percentage of the taxable income for such year (determined under the following table): “For a taxable year beginning in—  The applicable percentage under this paragraph shall be—  1969 60 percent. 1970 57 percent. 1971 54 percent. 1972 51 percent. 1973 49 percent. 1974 47 percent. 1975 45 percent. 1976 43 percent. 1977 42 percent. 1978 41 percent. 1979 or thereafter 40 percent. “(B) Reduction of applicable percentage in certain cases.— If, for the taxable year, the percentage of the assets of a taxpayer described in subsection (a), which are assets described Post, p. 622. in section 7701(a)(19)(C), is less than— “(i) 82 percent of the total assets in the case of a taxpayer other than a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by ¾ of 1 percentage point for each 1 percentage point of such difference, or “(ii) 72 percent of the total assets in the case of a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by 1½ percentage points for each 1 percentage point of such difference. If, for the taxable year, the percentage of the assets of such taxpayer which are assets described in section 7701(a)(19)(C) is less than 60 percent (50 percent for a taxable year Post, p. 622. beginning before 1973 in the case of a mutual savings bank), this paragraph shall not apply. “(C) Reduction for amounts referred to in paragraph (1)(a).— The amount determined under subparagraph (A) shall be reduced by that portion of the amount referred to in paragraph (1)(A) for the taxable year (not in excess of 100 percent) which bears the same ratio to such amount as (i) 18 percent (28 percent in the case of mutual savings banks) bears to (ii) the percentage of the assets of the taxpayer for such year which are not assets described in section 7701(a)(19)(C). “(D) 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. “(E) 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 (f), “(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, Post, p. 656. “(iv) by excluding from gross income an amount equal to the lesser of ⅜ of the net long-term capital gain for the taxable year or ⅜ 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 “(v) 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 the applicable percentage (determined under subparagraphs (A) and (B)) of the dividends received deduction (determined without regard to section 596) for the taxable Post, p. 624. year. “(3) Percentage method.— 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 Ante, p. 616. amount referred to in paragraph (1)(A) for the taxable year. “(4) 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)(3). “(5) Determination of reserve for percentage method.— 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.”

6. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 432(a)(2) · 83 Stat. 487

   Changed · 26 U.S.C. § 593(b)(4)

   Pub. L. 91–172, § 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)

   Source evidence

   Code amendment note
   Subsec. (b)(4). Pub. L. 91–172, § 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).

   Enacted provision · exact public law section
   (2) by striking out paragraphs (2), (3), (4), and (5) and inserting in lieu thereof the following: “(2) Percentage of taxable income method.— “(A) In general.— Subject to subparagraphs (B), (C), and (D), the amount determined under this paragraph for the taxable year shall be an amount equal to the applicable percentage of the taxable income for such year (determined under the following table): “For a taxable year beginning in—  The applicable percentage under this paragraph shall be—  1969 60 percent. 1970 57 percent. 1971 54 percent. 1972 51 percent. 1973 49 percent. 1974 47 percent. 1975 45 percent. 1976 43 percent. 1977 42 percent. 1978 41 percent. 1979 or thereafter 40 percent. “(B) Reduction of applicable percentage in certain cases.— If, for the taxable year, the percentage of the assets of a taxpayer described in subsection (a), which are assets described Post, p. 622. in section 7701(a)(19)(C), is less than— “(i) 82 percent of the total assets in the case of a taxpayer other than a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by ¾ of 1 percentage point for each 1 percentage point of such difference, or “(ii) 72 percent of the total assets in the case of a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by 1½ percentage points for each 1 percentage point of such difference. If, for the taxable year, the percentage of the assets of such taxpayer which are assets described in section 7701(a)(19)(C) is less than 60 percent (50 percent for a taxable year Post, p. 622. beginning before 1973 in the case of a mutual savings bank), this paragraph shall not apply. “(C) Reduction for amounts referred to in paragraph (1)(a).— The amount determined under subparagraph (A) shall be reduced by that portion of the amount referred to in paragraph (1)(A) for the taxable year (not in excess of 100 percent) which bears the same ratio to such amount as (i) 18 percent (28 percent in the case of mutual savings banks) bears to (ii) the percentage of the assets of the taxpayer for such year which are not assets described in section 7701(a)(19)(C). “(D) 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. “(E) 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 (f), “(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, Post, p. 656. “(iv) by excluding from gross income an amount equal to the lesser of ⅜ of the net long-term capital gain for the taxable year or ⅜ 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 “(v) 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 the applicable percentage (determined under subparagraphs (A) and (B)) of the dividends received deduction (determined without regard to section 596) for the taxable Post, p. 624. year. “(3) Percentage method.— 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 Ante, p. 616. amount referred to in paragraph (1)(A) for the taxable year. “(4) 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)(3). “(5) Determination of reserve for percentage method.— 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.”

7. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 432(a)(2) · 83 Stat. 487

   Substituted · 26 U.S.C. § 593(b)(5)

   Pub. L. 91–172, § 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

   Source evidence

   Code amendment note
   Subsec. (b)(5). Pub. L. 91–172, § 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.

   Enacted provision · exact public law section
   (2) by striking out paragraphs (2), (3), (4), and (5) and inserting in lieu thereof the following: “(2) Percentage of taxable income method.— “(A) In general.— Subject to subparagraphs (B), (C), and (D), the amount determined under this paragraph for the taxable year shall be an amount equal to the applicable percentage of the taxable income for such year (determined under the following table): “For a taxable year beginning in—  The applicable percentage under this paragraph shall be—  1969 60 percent. 1970 57 percent. 1971 54 percent. 1972 51 percent. 1973 49 percent. 1974 47 percent. 1975 45 percent. 1976 43 percent. 1977 42 percent. 1978 41 percent. 1979 or thereafter 40 percent. “(B) Reduction of applicable percentage in certain cases.— If, for the taxable year, the percentage of the assets of a taxpayer described in subsection (a), which are assets described Post, p. 622. in section 7701(a)(19)(C), is less than— “(i) 82 percent of the total assets in the case of a taxpayer other than a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by ¾ of 1 percentage point for each 1 percentage point of such difference, or “(ii) 72 percent of the total assets in the case of a mutual savings bank, the applicable percentage for such year provided by subparagraph (A) shall be reduced by 1½ percentage points for each 1 percentage point of such difference. If, for the taxable year, the percentage of the assets of such taxpayer which are assets described in section 7701(a)(19)(C) is less than 60 percent (50 percent for a taxable year Post, p. 622. beginning before 1973 in the case of a mutual savings bank), this paragraph shall not apply. “(C) Reduction for amounts referred to in paragraph (1)(a).— The amount determined under subparagraph (A) shall be reduced by that portion of the amount referred to in paragraph (1)(A) for the taxable year (not in excess of 100 percent) which bears the same ratio to such amount as (i) 18 percent (28 percent in the case of mutual savings banks) bears to (ii) the percentage of the assets of the taxpayer for such year which are not assets described in section 7701(a)(19)(C). “(D) 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. “(E) 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 (f), “(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, Post, p. 656. “(iv) by excluding from gross income an amount equal to the lesser of ⅜ of the net long-term capital gain for the taxable year or ⅜ 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 “(v) 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 the applicable percentage (determined under subparagraphs (A) and (B)) of the dividends received deduction (determined without regard to section 596) for the taxable Post, p. 624. year. “(3) Percentage method.— 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 Ante, p. 616. amount referred to in paragraph (1)(A) for the taxable year. “(4) 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)(3). “(5) Determination of reserve for percentage method.— 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.”

8. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 § 432(b) · 83 Stat. 487

   Changed · 26 U.S.C. § 593(f)

   Pub. L. 91–172, § 432(b), excepted the application of par. (1) to any transaction to which section 381 of this title applied

   Source evidence

   Code amendment note
   Subsec. (f). Pub. L. 91–172, § 432(b), excepted the application of par. (1) to any transaction to which section 381 of this title applied.

   Enacted provision · exact public law section
   (b) Certain Corporate Acquisitions.— Section 593(f)(1) (relating to distributions to shareholders) is amended by adding at the end thereof the following new sentence: “This paragraph shall not apply 26 USC 381. to any transaction to which section 381 (relating to carryovers in certain corporate acquisitions) applies.”

9. 1976

   Pub. L. 94–455 § 1901(a)(84)(A) · 90 Stat. 1520

   Changed · 26 U.S.C. § 593(b)(2)(A)

   Pub. L. 94–455, § 1901(a)(84)(A), struck from the percentage table the years 1969 to 1975, inclusive

   Source evidence

   Code amendment note
   Subsec. (b)(2)(A). Pub. L. 94–455, § 1901(a)(84)(A), struck from the percentage table the years 1969 to 1975, inclusive.

   Enacted provision · exact public law section
   (A) Section 593(b)(2) (relating to additions to bad debt reserves for mutual savings banks, etc.) is amended by striking out, in the table in subparagraph (A), the following: “1969 60 percent 1970 57 percent 1971 54 percent 1972 51 percent 1973 49 percent 1974 47 percent 1975 45 percent”

10. 1976

    Pub. L. 94–455 § 1901(a)(84)(D) · 90 Stat. 1520

    Substituted · 26 U.S.C. § 593(b)(2)(E)(i)

    Pub. L. 94–455, § 1901(a)(84)(D), substituted “subsection (e)” for “subsection (f)” after “by reason of”

    Source evidence

    Code amendment note
    Subsec. (b)(2)(E)(i). Pub. L. 94–455, § 1901(a)(84)(D), substituted “subsection (e)” for “subsection (f)” after “by reason of”.

    Enacted provision · exact public law section
    (D) Section 593(b)(2)(E)(1) is amended by striking out “subsection (f)” and inserting in lien thereof “subsection (e)”-

11. 1976

    Pub. L. 94–455 § 1901(a)(84)(B) · 90 Stat. 1520

    Struck · 26 U.S.C. § 593(c)(2)

    Pub. L. 94–455, § 1901(a)(84)(B), added par. (2). Former par. (2), relating to allocation of pre-1963 reserves for bad debts, was struck out

    Source evidence

    Code amendment note
    Subsec. (c)(2). Pub. L. 94–455, § 1901(a)(84)(B), added par. (2). Former par. (2), relating to allocation of pre-1963 reserves for bad debts, was struck out.

    Enacted provision · exact public law section
    (B) Section 593(c) (relating to reserves for mutual savings banks) is amended by striking out paragraphs (2), (3), (4), and (5), by redesignating paragraph (6) as paragraph (3), and by inserting immediately after paragraph (1) the following: “(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.”

12. 1976

    Pub. L. 94–455 § 1901(a)(84)(B) · 90 Stat. 1520

    Redesignated · 26 U.S.C. § 593(c)(3)

    Pub. L. 94–455, § 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

    Source evidence

    Code amendment note
    Subsec. (c)(3). Pub. L. 94–455, § 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.

    Enacted provision · exact public law section
    (B) Section 593(c) (relating to reserves for mutual savings banks) is amended by striking out paragraphs (2), (3), (4), and (5), by redesignating paragraph (6) as paragraph (3), and by inserting immediately after paragraph (1) the following: “(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.”

13. 1976

    Pub. L. 94–455 § 1901(a)(84)(B) · 90 Stat. 1520

    1. Struck · 26 U.S.C. § 593(c)(4); 26 U.S.C. § 593(c)(5)

       Pub. L. 94–455, § 1901(a)(84)(B), struck out par. (4) which defined “pre-1963 reserves”

    2. Struck · 26 U.S.C. § 593(c)(4); 26 U.S.C. § 593(c)(5)

       Pub. L. 94–455, § 1901(a)(84)(B), struck out par. (5) which related to certain pre-1952 surplus

    Source evidence

    Code amendment note
    Subsec. (c)(4), (5). Pub. L. 94–455, § 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.

    Enacted provision · exact public law section
    (B) Section 593(c) (relating to reserves for mutual savings banks) is amended by striking out paragraphs (2), (3), (4), and (5), by redesignating paragraph (6) as paragraph (3), and by inserting immediately after paragraph (1) the following: “(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.”

14. 1976

    Pub. L. 94–455 § 1901(a)(84)(B) · 90 Stat. 1520

    Redesignated · 26 U.S.C. § 593(c)(6)

    Pub. L. 94–455, § 1901(a)(84)(B), redesignated par. (6) as (3)

    Source evidence

    Code amendment note
    Subsec. (c)(6). Pub. L. 94–455, § 1901(a)(84)(B), redesignated par. (6) as (3).

    Enacted provision · exact public law section
    (B) Section 593(c) (relating to reserves for mutual savings banks) is amended by striking out paragraphs (2), (3), (4), and (5), by redesignating paragraph (6) as paragraph (3), and by inserting immediately after paragraph (1) the following: “(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.”

15. 1976

    Pub. L. 94–455 § 1901(a)(84)(C) · 90 Stat. 1520

    1. Struck · 26 U.S.C. § 593(d)(f)

       Pub. L. 94–455, § 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

    2. Redesignated · 26 U.S.C. § 593(d)(f)

       Pub. L. 94–455, § 1901(a)(84)(C), redesignated subsecs. (e) and (f) as (d) and (e), respectively

    Source evidence

    Code amendment note
    Subsecs. (d) to (f). Pub. L. 94–455, § 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.

    Enacted provision · exact public law section
    (C) Section 593 is amended by striking out subsection (d) (relating to taxable years beginning in 1962 and ending in 1963), and by redesignating subsections (e) and (f) as subsections (d) and (e),respectively.

16. 1976

    Pub. L. 94–455 § 1901(a)(84)(C) · 90 Stat. 1520

    Redesignated · 26 U.S.C. § 593(e); 26 U.S.C. § 593(f)

    Pub. L. 94–455, § 1901(a)(84)(C), redesignated subsec. (f) as (e). Former subsec. (e) redesignated (d)

    Source evidence

    Code amendment note
    Subsecs. (e), (f). Pub. L. 94–455, § 1901(a)(84)(C), redesignated subsec. (f) as (e). Former subsec. (e) redesignated (d).

    Enacted provision · exact public law section
    (C) Section 593 is amended by striking out subsection (d) (relating to taxable years beginning in 1962 and ending in 1963), and by redesignating subsections (e) and (f) as subsections (d) and (e),respectively.

17. 1980

    Technical Corrections Act of 1979

    Pub. L. 96–222 title I § 104(a)(3)(C) · 94 Stat. 194

    Substituted · 26 U.S.C. § 593(b)(2)(E)(iv)

    Pub. L. 96–222 substituted “18⁄46” for “⅜” in two places

    Source evidence

    Code amendment note
    Subsec. (b)(2)(E)(iv). Pub. L. 96–222 substituted “18⁄46” for “⅜” in two places.

    Enacted provision · exact public law section
    (C) Addition to reserves for bad debts.— Clause (iv) of section 593(b)(2)(E) is amended by striking out “⅜” each 26 USC 593. place it appears and inserting in lieu thereof “18/46”.

18. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 245(c)(1) · 95 Stat. 175

    Struck · 26 U.S.C. § 593(a)

    Pub. L. 97–34, § 245(c)(1), struck out “not having capital stock represented by shares” after “mutual savings bank”

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 97–34, § 245(c)(1), struck out “not having capital stock represented by shares” after “mutual savings bank”.

    Enacted provision · exact public law section
    (1) Sections 593(a) (relating to reserves for losses on loans) is amended by striking out “not having capital stock represented by shares”.

19. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 245(b)(1) · 95 Stat. 175

    Inserted · 26 U.S.C. § 593(b)(2)(B)

    Pub. L. 97–34, § 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

    Source evidence

    Code amendment note
    Subsec. (b)(2)(B). Pub. L. 97–34, § 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.

    Enacted provision · exact public law section
    (1) Subparagraph (B) of section 593(b)(2) (relating to reduction of applicable percentage in certain cases) is amended by inserting “which is not described in section 591(b)” after “mutual savings bank” each place it appears.

20. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 245(b)(2) · 95 Stat. 175

    Inserted · 26 U.S.C. § 593(b)(2)(C)

    Pub. L. 97–34, § 245(b)(2), inserted “which are not described in section 591(b)” after “mutual savings banks” in cl. (i)

    Source evidence

    Code amendment note
    Subsec. (b)(2)(C). Pub. L. 97–34, § 245(b)(2), inserted “which are not described in section 591(b)” after “mutual savings banks” in cl. (i).

    Enacted provision · exact public law section
    (2) Subparagraph (C) of section 593(b)(2) is amended by inserting “which are not described in section 591(b)” after mutual savings banks”.

21. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 245(c)(2) · 95 Stat. 175

    Inserted · 26 U.S.C. § 593(e)(1)

    Pub. L. 97–34, § 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”

    Source evidence

    Code amendment note
    Subsec. (e)(1). Pub. L. 97–34, § 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”.

    Enacted provision · exact public law section
    (2) Paragraph (1) of section 593(e) (relating to distributions to shareholders) is amended by inserting “or an institution that is treated as a mutual savings bank under section 591(b)” after “association” each place it appears.

22. 1981

    Economic Recovery Tax Act of 1981

    Pub. L. 97–34 § 243 · 95 Stat. 175

    Inserted · 26 U.S.C. § 593(e)(1)

    Pub. L. 97–34, § 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

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 97–34, § 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.

    Enacted provision · exact public law section
    SEC. 243. RESERVES FOR LOSSES ON LOANS. Paragraph (1) of section 593(e) (relating to distributions to shareholders 26 USC 593. of a domestic building and loan association) is amended by striking out “applies.” in the last sentence thereof and substituting therefor the following: “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)).”

23. 1986

    Tax Reform Act of 1986

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

    Amended · 26 U.S.C. § 593(a)

    Pub. L. 99–514, § 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.”

    Source evidence

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

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

24. 1986

    Tax Reform Act of 1986

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

    1. Substituted · 26 U.S.C. § 593(b)(1)

       Pub. L. 99–514, § 901(d)(2)(A), (B), in introductory provisions, substituted “subsection (a)” for “section 166(c)” and in subpar. (B)

    2. Substituted · 26 U.S.C. § 593(b)(1)

       Pub. L. 99–514, § 901(d)(2)(A), (B), in introductory provisions, substituted “paragraph (2) or (3), whichever is the larger” for “paragraph (2), (3), or (4), whichever amount is the largest” in cl. (i)

    3. Substituted · 26 U.S.C. § 593(b)(1)

       Pub. L. 99–514, § 901(d)(2)(A), (B), in introductory provisions, substituted “paragraph (3)” for “paragraph (4)” in cl. (i)

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 99–514, § 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).

    Enacted provision · exact public law section
    (A) Paragraph (1) of section 593(b) is amended by striking out “section 166(c)” and inserting in lieu thereof “subsection (a)”.

25. 1986

    Tax Reform Act of 1986

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

    1. Added · 26 U.S.C. § 593(b)(2)(A)

       Pub. L. 99–514, § 901(b)(2)(A), added subpar. (A)

    2. Struck · 26 U.S.C. § 593(b)(2)(A)

       Pub. L. 99–514, § 901(b)(2)(A), 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

    Source evidence

    Code amendment note
    Subsec. (b)(2)(A). Pub. L. 99–514, § 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.

    Enacted provision · exact public law section
    (A) by striking out subparagraphs (A), (B), and (C) and inserting in lieu thereof the following: “(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).”, and

26. 1986

    Tax Reform Act of 1986

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

    1. Added · 26 U.S.C. § 593(b)(2)(A)

       Pub. L. 99–514, § 901(b)(2)(A), added subpar. (B), which incorporated provisions of former subpar. (C), relating to reducing amounts referred to in par. (1)(A)

    2. Struck · 26 U.S.C. § 593(b)(2)(A)

       Pub. L. 99–514, § 901(b)(2)(A), struck out former subpar. (B) which provided for reduction of applicable percentage in certain cases

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Subpar. (b)(2)(B). Pub. L. 99–514, § 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.

    Enacted provision · exact public law section
    (A) by striking out subparagraphs (A), (B), and (C) and inserting in lieu thereof the following: “(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).”, and

27. 1986

    Tax Reform Act of 1986

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

    1. Redesignated · 26 U.S.C. § 593(b)(2)(C)

       Pub. L. 99–514, § 901(b)(2)(A), (B), redesignated former subpar. (D) as (C)

    2. Struck · 26 U.S.C. § 593(b)(2)(C)

       Pub. L. 99–514, § 901(b)(2)(A), (B), struck out former subpar. (C) which related to reduction for amounts referred to in par. (1)(A). See par. (1)(B)

    Source evidence

    Code amendment note
    Subsec. (b)(2)(C). Pub. L. 99–514, § 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).

    Enacted provision · exact public law section
    (A) by striking out subparagraphs (A), (B), and (C) and inserting in lieu thereof the following: “(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).”, and

28. 1986

    Tax Reform Act of 1986

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

    1. Redesignated · 26 U.S.C. § 593(b)(2)(D)

       Pub. L. 99–514, § 901(b)(2)(B), (d)(2)(B), redesignated subpar. (E) as (D)

    2. Redesignated · 26 U.S.C. § 593(b)(2)(D)

       Pub. L. 99–514, § 901(b)(2)(B), (d)(2)(B), substituted in cl. (iv) “8 percent” for “the applicable percentage (determined under subparagraphs (A) and (B))”. Former subpar. (D) redesignated (C)

    Source evidence

    Code amendment note
    Subsec. (b)(2)(D). Pub. L. 99–514, § 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).

    Enacted provision · exact public law section
    (B) by redesignating subparagraphs (D) and (E) as subparagraphs (C) and (D), respectively.

29. 1986

    Tax Reform Act of 1986

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

    Redesignated · 26 U.S.C. § 593(b)(2)(E)

    Pub. L. 99–514, § 901(b)(2)(B), redesignated subpar. (E) as (D)

    Source evidence

    Code amendment note
    Subsec. (b)(2)(E). Pub. L. 99–514, § 901(b)(2)(B), redesignated subpar. (E) as (D).

    Enacted provision · exact public law section
    (B) by redesignating subparagraphs (D) and (E) as subparagraphs (C) and (D), respectively.

30. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 311(b)(2) · 100 Stat. 2085

    1. Redesignated · 26 U.S.C. § 593(b)(2)(E)

       Pub. L. 99–514, § 311(b)(2), redesignated former cl. (v) as (iv)

    2. Struck · 26 U.S.C. § 593(b)(2)(E)

       Pub. L. 99–514, § 311(b)(2), 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”

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 99–514, § 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”.

    Enacted provision · exact public law section
    (2) Subparagraph (E) of section 593(b)(2), as in effect before the amendments made by title IX, is amended by adding “and” at the end of clause (iii), by striking out clause (iv), and by redesignating clause (v) as clause (iv).

31. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 901(b)(3) · 100 Stat. 2085

    1. Redesignated · 26 U.S.C. § 593(b)(3); 26 U.S.C. § 593(b)(4)

       Pub. L. 99–514, § 901(b)(3), redesignated par. (4) as (3)

    2. Struck · 26 U.S.C. § 593(b)(3); 26 U.S.C. § 593(b)(4)

       Pub. L. 99–514, § 901(b)(3), 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.”

    Source evidence

    Code amendment note
    Subsec. (b)(3), (4). Pub. L. 99–514, § 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.”

    Enacted provision · exact public law section
    (3) Repeal of percentage method of computing reserves for bad debts.— Subsection (b) of section 593 (relating to addition to reserves for bad debts) is amended by striking out paragraphs (3) and (5) and by redesignating paragraph (4) as paragraph (3).

32. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 901(b)(3) · 100 Stat. 2085

    Struck · 26 U.S.C. § 593(b)(5)

    Pub. L. 99–514, § 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.”

    Source evidence

    Code amendment note
    Subsec. (b)(5). Pub. L. 99–514, § 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.”

    Enacted provision · exact public law section
    (3) Repeal of percentage method of computing reserves for bad debts.— Subsection (b) of section 593 (relating to addition to reserves for bad debts) is amended by striking out paragraphs (3) and (5) and by redesignating paragraph (4) as paragraph (3).

33. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 § 671(b)(2) · 100 Stat. 2085

    Added · 26 U.S.C. § 593(d)(4)

    Pub. L. 99–514, § 671(b)(2), added par. (4)

    Source evidence

    Code amendment note
    Subsec. (d)(4). Pub. L. 99–514, § 671(b)(2), added par. (4).

    Enacted provision · exact public law section
    (2) Treatment for purposes of section 593.— Subsect ion (d) of section 593 (defining loans) is amended by adding at the end thereof the following new paragraph: “(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.”

34. 1986

    Tax Reform Act of 1986

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

    Substituted · 26 U.S.C. § 593(e)(1)(B)

    Pub. L. 99–514, § 901(d)(2)(C), substituted “subsection (b)(3)” for “subsection (B)(4)”

    Source evidence

    Code amendment note
    Subsec. (e)(1)(B). Pub. L. 99–514, § 901(d)(2)(C), substituted “subsection (b)(3)” for “subsection (B)(4)”.

    Enacted provision · exact public law section
    (C) Subparagraph (B) of section 593(e)(1) is amended by striking out “subsection (b)(4)” and inserting in lieu thereof “subsection (b)(3)”.

35. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1003(c)(3) · 102 Stat. 3342

    Added · 26 U.S.C. § 593(b)(2)(D)(v)

    Pub. L. 100–647, § 1003(c)(3), added cl. (v)

    Source evidence

    Code amendment note
    Subsec. (b)(2)(D)(v). Pub. L. 100–647, § 1003(c)(3), added cl. (v).

    Enacted provision · exact public law section
    (3) Subparagraph (D) of section 593(b)(2) of the 1986 Code is amended by striking out “and” at the end of clause (iii), by striking out the period at the end of clause (iv) and inserting in lieu thereof “, and”, and by adding at the end thereof the following new clause: “(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 tax-able year from the sale or exchange of property other than property described in clause (iii).”

36. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1006(t)(25)(B) · 102 Stat. 3342

    Inserted · 26 U.S.C. § 593(d)(4)

    Pub. L. 100–647, § 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.”

    Source evidence

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

    Enacted provision · exact public law section
    (B) Paragraph (4) of section 593(d) of the 1986 Code is amended by adding at the end thereof the following new sentence: “Forpurposes 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.”.

37. 1989

    Financial Institutions Reform, Recovery, and Enforcement Act of 1989

    Pub. L. 101–73 title XIV § 1401(b)(3) · 103 Stat. 183

    Amended · 26 U.S.C. § 593(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)).”

    Source evidence

    Code amendment note
    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)).”

    Enacted provision · exact public law section
    (3) The last sentence of section 593(e)(1) of such Code is amended to read as follows: “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 an association, 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).”.

38. 1990

    Revenue Reconciliation Act of 1990

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

    Substituted · 26 U.S.C. § 593(b)

    Pub. L. 101–508, § 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

    Source evidence

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

    Enacted provision · exact public law section
    (F) Paragraphs (1) (A) and (E) of section 593(b) are each amended by striking “section 585(b)(3)” and inserting “section 585(b)(2)”.

39. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1704(t)(51) · 110 Stat. 1755

    Changed · 26 U.S.C. § 593(b)(1)(A); 26 U.S.C. § 593(b)(1)(3)

    Pub. L. 104–188, § 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

    Source evidence

    Code amendment note
    Subsec. (b)(1)(A), (3). Pub. L. 104–188, § 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.

    Enacted provision · exact public law section
    (51) Subparagraph (F) of section 11801(c)(12) of the Revenue Reconciliation Act of 1990 shall be applied as if “and (3)” appeared instead of “and (E)”.

    Effective date note
    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.

40. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1616(b)(7)(A) · 110 Stat. 1755

    Substituted · 26 U.S.C. § 593(e)(1)

    Pub. L. 104–188, § 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

    Source evidence

    Code amendment note
    Subsec. (e)(1). Pub. L. 104–188, § 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.

    Enacted provision · exact public law section
    (A) The material preceding subparagraph (A) of section 593(e)(1) is amended by striking “by a domestic building and loan association or an institution that is treated as a mutual savings bank under section 591(b)” and inserting “by a taxpayer having a balance described in subsection (g)(2)(A)(ii)”.

    Effective date note
    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.

41. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1616(b)(7)(C) · 110 Stat. 1755

    1. Substituted · 26 U.S.C. § 593(e)(1)

       Pub. L. 104–188, § 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”

    2. Inserted · 26 U.S.C. § 593(e)(1)

       Pub. L. 104–188, § 1616(b)(7)(C)–(E), in closing provisions, 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.”

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 104–188, § 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.”

    Enacted provision · exact public law section
    (C) The second sentence of section 593(e)(1) is amended by striking “the association or an institution that is treated as a mutual savings bank under section 591(b)” and inserting “a taxpayer having a balance described in subsection (g)(2)(A)(ii)”.

    Effective date note
    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.

42. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1616(b)(7)(B) · 110 Stat. 1755

    Amended · 26 U.S.C. § 593(e)(1)(B)

    Pub. L. 104–188, § 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),”

    Source evidence

    Code amendment note
    Subsec. (e)(1)(B). Pub. L. 104–188, § 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),”.

    Enacted provision · exact public law section
    (B) Subparagraph (B) of section 593(e)(1) is amended to read as follows: “(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),”.

    Effective date note
    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.

43. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 § 1616(a) · 110 Stat. 1755

    Added · 26 U.S.C. § 593(f); 26 U.S.C. § 593(g)

    Pub. L. 104–188, § 1616(a), added subsecs. (f) and (g)

    Source evidence

    Code amendment note
    Subsecs. (f), (g). Pub. L. 104–188, § 1616(a), added subsecs. (f) and (g).

    Enacted provision · exact public law section
    (a) In General.— Section 593 (relating to reserves for losses on loans) is amended by adding at the end the following new subsections: “(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.”.

    Effective date note
    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.

44. 1997

    Pub. L. 105–34 title XVI § 1601(f)(5)(A) · 111 Stat. 788

    Inserted · 26 U.S.C. § 593(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,”

    Source evidence

    Code amendment note
    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,”.

    Enacted provision · exact public law section
    (A) Subparagraph (A) of section 593(e)(1) is amended by inserting “(and, in the case of an S corporation, the accumulated adjustments account, as defined in section 1368(e)(D)” after “1951,”.

    Effective date note
    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.

45. 2018

    Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 div. U title IV § 401(b)(24) · 132 Stat. 348

    Struck · 26 U.S.C. § 593(b)(2)(D)(iv)

    Pub. L. 115–141 struck out “(determined without regard to section 596)” after “received deduction”

    Source evidence

    Code amendment note
    Subsec. (b)(2)(D)(iv). Pub. L. 115–141 struck out “(determined without regard to section 596)” after “received deduction”.

    Enacted provision · exact public law section
    Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.

56 of 57 references resolved to an enrolled provision · 1 partial