I 

114TH CONGRESS 

1ST SESSION H. R. 3287 

To amend the Internal Revenue Code of 1986 to clarify the treatment of 

banks organized as limited liability companies. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 29, 2015 

Mr. MARCHANT (for himself and Mrs. BLACK) introduced the following bill; 

which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to clarify 

the treatment of banks organized as limited liability companies. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Community Bank 

5 Flexibility Act’’. 

6 SEC. 2. TREATMENT OF BANKS ORGANIZED AS LIMITED LI7 ABILITY COMPANIES. 

8 (a) IN GENERAL.—Section 581 of the Internal Rev9 enue Code of 1986 is amended— 


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1 (1) by striking ‘‘For purposes of’’ and inserting 

2 the following: 

3 ‘‘(a) IN GENERAL.—For purposes of’’, and 

4 (2) by adding at the end the following new sub5 section: 

6 ‘‘(b) TREATMENT OF LIMITED LIABILITY COMPA7 NIES, ETC.— 

8 ‘‘(1) IN GENERAL.—An entity shall not fail to 

9 be treated as a bank under subsection (a) merely be10 cause such entity is a specified entity (or because 

11 such entity elects to be treated either as a corpora12 tion or as a partnership for purposes of this title). 

13 ‘‘(2) SPECIFIED ENTITY.—For purposes of this 

14 subsection, the term ‘specified entity’ means any en15 tity which may elect to be treated either as a cor16 poration or as a partnership for purposes of this 

17 title. 

18 ‘‘(3) TRANSITIONAL RULES.— 

19 ‘‘(A) REORGANIZATIONS.—In the case of 

20 any acquisition or transfer during the 5-year 

21 period beginning on the date of the enactment 

22 of this subsection, any specified entity which 

23 (after such acquisition or transfer) qualifies as 

24 a bank under paragraph (1) shall be treated as 


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1 a corporation for purposes of applying section 

2 368(a)(1). 

3 ‘‘(B) TAX IMPOSED ON CERTAIN BUILT-IN

4 GAINS.— 

5 ‘‘(i) IN GENERAL.—In the case of any 

6 specified entity with respect to which any 

7 transfer or acquisition is treated as a reor8 ganization under section 368(a)(1) by rea9 son of this paragraph, rules similar to the 

10 rules of section 1374 shall apply with re11 spect to such specified entity by treating 

12 such reorganization in the same manner as 

13 an election under section 1362(a) (and by 

14 treating the specified entity as an S cor15 poration and the other corporation with re16 spect to such reorganization as the small 

17 business corporation making such election). 

18 ‘‘(ii) SPECIAL RULE FOR REORGA19 NIZATIONS DURING RECOGNITION PERIOD

20 OF AN S CORPORATION BANK.—In the case 

21 of a transfer or acquisition to which clause 

22 (i) applies, if— 

23 ‘‘(I) the other corporation re24 ferred to in clause (i) is an S corpora25 tion, and 


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1 ‘‘(II) such transfer or acquisition 

2 occurs during the recognition period 

3 (as defined in section 1374(d)(7)) of 

4 such S corporation, 

5 the recognition period of the specified enti6 ty determined by reason of the application 

7 of clause (i) shall not include any taxable 

8 year of the specified entity which begins 

9 after the recognition period of such S cor10 poration. 

11 ‘‘(C) ELECTION TO HAVE TRANSITION

12 RULES NOT APPLY.—Subparagraphs (A) and 

13 (B) shall not apply if the specified entity re14 ferred to in such subparagraphs elects under 

15 this subparagraph to have such subparagraphs 

16 not apply. Any such election shall, except as 

17 otherwise provided by the Secretary, be made 

18 contemporaneously with the acquisition or 

19 transfer referred to in subparagraph (A).’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 

Æ 


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