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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2494 Reported in House (RH)]

                                                 Union Calendar No. 175

104th CONGRESS

  1st Session

                               H. R. 2494

                          [Report No. 104-324]

_______________________________________________________________________

                                 A BILL

To amend the Internal Revenue Code of 1986 to provide for the treatment 
  of bad debt reserves of savings associations which are required to 
              convert into banks, and for other purposes.

_______________________________________________________________________

                            November 7, 1995

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed

                                                 Union Calendar No. 175
104th CONGRESS
  1st Session
                                H. R. 2494

                          [Report No. 104-324]

To amend the Internal Revenue Code of 1986 to provide for the treatment 
  of bad debt reserves of savings associations which are required to 
              convert into banks, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            October 18, 1995

 Mr. Archer (for himself, Mr. Leach, and Mrs. Roukema) introduced the 
 following bill; which was referred to the Committee on Ways and Means

                            November 7, 1995

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
[For text of introduced bill, see copy of bill as introduced on October 
                               18, 1995]

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to provide for the treatment 
  of bad debt reserves of savings associations which are required to 
              convert into banks, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Thrift Charter Conversion Tax Act of 
1995''.

SEC. 2. TREATMENT OF RESERVES FOR BAD DEBTS OF SAVINGS ASSOCIATIONS 
              WHICH ARE REQUIRED TO CONVERT INTO BANKS.

    (a) In General.--Section 593 of the Internal Revenue Code of 1986 
(relating to reserves for losses on loans) is hereby repealed.
    (b) Conforming Amendments.--
            (1) Subsection (d) of section 50 of such Code is amended by 
        adding at the end the following new sentence:
``Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) referred to 
in paragraph (1) of this subsection shall not apply to any taxable year 
beginning after December 31, 1995.''
            (2) Subsection (e) of section 52 of such Code is amended by 
        striking paragraph (1) and by redesignating paragraphs (2) and 
        (3) as paragraphs (1) and (2), respectively.
            (3) Subsection (a) of section 57 of such Code is amended by 
        striking paragraph (4).
            (4) Section 246 of such Code is amended by striking 
        subsection (f).
            (5) Clause (i) of section 291(e)(1)(B) of such Code is 
        amended by striking ``or to which section 593 applies''.
            (6) Subparagraph (A) of section 585(a)(2) of such Code is 
        amended by striking ``other than an organization to which 
        section 593 applies''.
            (7) Section 595 of such Code is hereby repealed.
            (8) Section 596 of such Code is hereby repealed.
            (9) Subsection (a) of section 860E of such Code is 
        amended--
                    (A) by striking ``Except as provided in paragraph 
                (2), the'' in paragraph (1) and inserting ``The'',
                    (B) by striking paragraphs (2) and (4) and 
                redesignating paragraphs (3) and (5) as paragraphs (2) 
                and (3), respectively, and
                    (C) by striking in paragraph (2) (as so 
                redesignated) all that follows ``subsection'' and 
                inserting a period.
            (10) Paragraph (3) of section 992(d) of such Code is 
        amended by striking ``or 593''.
            (11) Section 1038 of such Code is amended by striking 
        subsection (f).
            (12) Clause (ii) of section 1042(c)(4)(B) of such Code is 
        amended by striking ``or 593''.
            (13) Subsection (c) of section 1277 of such Code is amended 
        by striking ``or to which section 593 applies''.
            (14) Subparagraph (B) of section 1361(b)(2) of such Code is 
        amended by striking ``or to which section 593 applies''.
            (15) The table of sections for part II of subchapter H of 
        chapter 1 of such Code is amended by striking the items 
        relating to sections 593, 595, and 596.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 1995.
            (2) Repeal of section 595.--The amendment made by 
        subsection (b)(7) shall apply to property acquired in taxable 
        years beginning after December 31, 1995.
    (d) 6-Year Spread of Adjustments.--
            (1) In general.--In the case of any taxpayer who is 
        required by reason of the amendments made by this section 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) of the Internal Revenue Code of 1986--
                            (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 section 593(c)(1) of such Code (as in effect 
                        on the day before the date of the enactment of 
                        this Act) as of the close of the taxpayer's 
                        last taxable year beginning before January 1, 
                        1996, over
                            (ii) the balance of such reserves as of the 
                        close of the taxpayer's last taxable year 
                        beginning before January 1, 1988.
                    (B) Special rule for thrifts which become small 
                banks.--In the case of a bank (as defined in section 
                581 of such Code) which was not a large bank (as 
                defined in section 585(c)(2) of such Code) 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 
                        reserve as of the close of its last taxable 
                        year beginning before January 1, 1996, if the 
                        additions to such reserve for all taxable years 
                        had been determined under section 585(b)(2)(A) 
                        of such Code, 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 (4), (5), and (6).
            (3) Suspension of recapture if residential loan requirement 
        met.--
                    (A) In general.--In the case of a taxpayer which 
                meets the residential loan requirement of subparagraph 
                (B) for any 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--
                            (i) the principal amount of the residential 
                        loans made by the taxpayer during such year is 
                        not less than the base amount for such year, or
                            (ii) the principal amount of the 
                        residential loans made by the taxpayer during 
                        each of the 2 preceding taxable years is not 
                        less than the base amount for such preceding 
                        years.
                Clause (ii) shall not apply for purposes of determining 
                whether a taxpayer meets the residential loan 
                requirement of this subparagraph for any taxable year 
                beginning before January 1, 1998.
                    (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) of 
                such Code 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 before 
                January 1, 1996. 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 
December 31, 1995, and, if made for such taxable year, shall apply to 
all succeeding taxable years unless revoked with the consent of the 
Secretary of the Treasury or his delegate.
                    (E) Inflation adjustment of base amount.--In the 
                case of a taxable year beginning in a calendar year 
                after 1996, the amount determined under subparagraph 
                (D) shall be increased by an amount equal to--
                            (i) the amount so determined, multiplied by
                            (ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) of such Code 
                        for such calendar year, by substituting 
                        ``calendar year 1995'' for ``calendar year 
                        1992'' in subparagraph (B) thereof.
                    (F) Controlled groups.--In the case of a taxpayer 
                which is a member of any controlled group of 
                corporations described in section 1563(a)(1) of such 
                Code, subparagraph (B) shall be applied with respect to 
                such group.
            (4) 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) of such Code) 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) of such Code, there shall be taken 
                into account only the excess 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) of such Code--
                            (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.
            (5) Continued application of section 593(e).--
        Notwithstanding the amendments made by this section, in the 
        case of a taxpayer to which paragraph (1) of this subsection 
        applies, section 593(e) of such Code (as in effect on the day 
        before the date of the enactment of this Act) shall continue to 
        apply to such taxpayer as if such taxpayer were a domestic 
        building and loan association but the amount of the reserve 
        taken into account under such section 593(e) shall be only the 
        balance taken into account by such taxpayer under paragraph 
        (2)(A)(ii) of this subsection.
            (6) Certain items included as section 381(c) items.--The 
        balance of the applicable excess reserves, and the balance 
        taken into account by a taxpayer under paragraph (2)(A)(ii) of 
        this subsection, shall be treated as items described in section 
        381(c) of such Code.
            (7) Regulations.--The Secretary of the Treasury or his 
        delegate shall prescribe such regulations as may be necessary 
        to carry out this subsection, including regulations providing 
        for the application of paragraph (3) in the case of mergers, 
        spin-offs, and other reorganizations.

SEC. 3. DEDUCTION FOR SPECIAL ASSESSMENTS.

    For purposes of subtitle A of the Internal Revenue Code of 1986, 
the amount allowed as a deduction under section 162 of such Code for a 
taxable year shall include the amount paid during such year as a 
special assessment under section 7(b)(6)(B) of the Federal Deposit 
Insurance Act, as amended by the Thrift Charter Conversion Act of 1995, 
as contained in subtitle B of title II of H.R. 2491 of the 104th 
Congress, as passed by the House of Representatives.
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