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 com-
panies. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Community Bank 
Flexibility Act’’. 
SEC. 2. TREATMENT OF BANKS ORGANIZED AS LIMITED LI-
ABILITY COMPANIES. 
(a) IN GENERAL.—Section 581 of the Internal Rev-
enue Code of 1986 is amended— 
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(1) by striking ‘‘For purposes of’’ and inserting 
the following: 
‘‘(a) IN GENERAL.—For purposes of’’, and 
(2) by adding at the end the following new sub-
section: 
‘‘(b) TREATMENT OF LIMITED LIABILITY COMPA-
NIES, ETC.— 
‘‘(1) IN GENERAL.—An entity shall not fail to 
be treated as a bank under subsection (a) merely be-
cause such entity is a specified entity (or because 
such entity elects to be treated either as a corpora-
tion or as a partnership for purposes of this title). 
‘‘(2) SPECIFIED ENTITY.—For purposes of this 
subsection, the term ‘specified entity’ means any en-
tity which may elect to be treated either as a cor-
poration or as a partnership for purposes of this 
title. 
‘‘(3) TRANSITIONAL RULES.— 
‘‘(A) REORGANIZATIONS.—In the case of 
any acquisition or transfer during the 5-year 
period beginning on the date of the enactment 
of this subsection, any specified entity which 
(after such acquisition or transfer) qualifies as 
a bank under paragraph (1) shall be treated as 
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a corporation for purposes of applying section 
368(a)(1). 
‘‘(B) TAX IMPOSED ON CERTAIN BUILT-IN 
GAINS.— 
‘‘(i) IN GENERAL.—In the case of any 
specified entity with respect to which any 
transfer or acquisition is treated as a reor-
ganization under section 368(a)(1) by rea-
son of this paragraph, rules similar to the 
rules of section 1374 shall apply with re-
spect to such specified entity by treating 
such reorganization in the same manner as 
an election under section 1362(a) (and by 
treating the specified entity as an S cor-
poration and the other corporation with re-
spect to such reorganization as the small 
business corporation making such election). 
‘‘(ii) SPECIAL
RULE
FOR
REORGA-
NIZATIONS DURING RECOGNITION PERIOD 
OF AN S CORPORATION BANK.—In the case 
of a transfer or acquisition to which clause 
(i) applies, if— 
‘‘(I) the other corporation re-
ferred to in clause (i) is an S corpora-
tion, and 
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‘‘(II) such transfer or acquisition 
occurs during the recognition period 
(as defined in section 1374(d)(7)) of 
such S corporation, 
the recognition period of the specified enti-
ty determined by reason of the application 
of clause (i) shall not include any taxable 
year of the specified entity which begins 
after the recognition period of such S cor-
poration. 
‘‘(C) ELECTION
TO
HAVE
TRANSITION 
RULES
NOT
APPLY.—Subparagraphs (A) and 
(B) shall not apply if the specified entity re-
ferred to in such subparagraphs elects under 
this subparagraph to have such subparagraphs 
not apply. Any such election shall, except as 
otherwise provided by the Secretary, be made 
contemporaneously with the acquisition or 
transfer referred to in subparagraph (A).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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