I
104TH CONGRESS
1ST SESSION
H. R. 2494
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
A BILL
To amend the Internal Revenue Code of 1986 to provide
for the treatment of bad debt reserves of savings associa-
tions which are required to convert into banks, and for
other purposes.
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 ‘‘Thrift Charter Conver-
sion Tax Act of 1995’’.
SEC. 2. TREATMENT OF RESERVES FOR BAD DEBTS OF SAV-
INGS ASSOCIATIONS WHICH ARE REQUIRED
TO CONVERT INTO BANKS.
(a) IN GENERAL.—Section 593 of the Internal Reve-
nue Code of 1986 (relating to reserves for losses on loans)
is hereby repealed.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (e) of section 52 of such Code
is amended by striking paragraph (1) and by redes-
ignating paragraphs (2) and (3) as paragraphs (1)
and (2), respectively.
(2) Subsection (a) of section 57 of such Code
is amended by striking paragraph (4).
(3) Section 246 of such Code is amended by
striking subsection (f).
(4) Clause (i) of section 291(e)(1)(B) of such
Code is amended by striking ‘‘or to which section
593 applies’’.
(5) Subparagraph (A) of section 585(a)(2) of
such Code is amended by striking ‘‘other than an or-
ganization to which section 593 applies’’.
(6) Section 596 of such Code is hereby re-
pealed.
(7) Subsection (a) of section 860E of such Code
is amended—
(A) by striking ‘‘Except as provided in
paragraph (2), the’’ in paragraph (1) and in-
serting ‘‘The’’,
(B) by striking paragraphs (2) and (4) and
redesignating paragraphs (3) and (5) as para-
graphs (2) and (3), respectively, and
(C) by striking in paragraph (2) (as so re-
designated) all that follows ‘‘subsection’’ and
inserting a period.
(8) Paragraph (3) of section 992(d) of such
Code is amended by striking ‘‘or 593’’.
(9) Section 1038 of such Code is amended by
striking subsection (f).
(10) Clause (ii) of section 1042(c)(4)(B) of
such Code is amended by striking ‘‘or 593’’.
(11) Subsection (c) of section 1277 of such
Code is amended by striking ‘‘or to which section
593 applies’’.
(12) Subparagraph (B) of section 1361(b)(2) of
such Code is amended by striking ‘‘or to which sec-
tion 593 applies’’.
(13) The table of sections for part II of sub-
chapter H of chapter 1 of such Code is amended by
striking the items relating to sections 593 and 596.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to 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 initi-
ated by the taxpayer and as having been made
with the consent of the Secretary, and
(C) the net amount of the adjustments re-
quired to be taken into account by the taxpayer
under section 481(a) of the Internal Revenue
Code of 1986 (as modified by paragraph (2))
shall be taken into account ratably over the 6-
taxable year period beginning with the first tax-
able year beginning after December 31, 1995.
(2) NO INCLUSION OF PORTION OF RESERVE.—
In the case of a taxpayer to which paragraph (1) ap-
plies and which is a large bank (as defined in section
585(c)(2) of such Code) for its first taxable year be-
ginning after December 31, 1995—
(A) no amount shall be includible in gross
income by reason of the reduction of its reserve
for bad debts to the extent that the amount of
such reserve as of the close of its last taxable
year beginning before January 1, 1996, does
not exceed the amount applicable to such tax-
payer under section 585(b)(2)(B) of such Code
for such last taxable year, and
(B) the net amount of adjustments taken
into account under paragraph (1)(C) shall be
reduced by the amount not includible in gross
income by reason of subparagraph (A) of this
paragraph.
(3) SUSPENSION OF RECAPTURE IF RESIDEN-
TIAL LOAN REQUIREMENT MET.—
(A) IN GENERAL.—In the case of a tax-
payer which meets the residential loan require-
ment of subparagraph (B) for any taxable
year—
(i) no adjustment shall be taken into
account under paragraph (1) for such tax-
able year, and
(ii) such taxable year shall be dis-
regarded 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 adjust-
ment.
(B) RESIDENTIAL LOAN REQUIREMENT.—
A taxpayer meets the residential loan require-
ment 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 average of the principal amounts
of such loans made by the taxpayer during the
6 most recent testing years ending before such
taxable year.
(C) TESTING
YEARS.—For purposes of
subparagraph (B), the term ‘‘testing year’’
means—
(i) each taxable year ending on or
after December 31, 1990, and before Jan-
uary 1, 1996, and
(ii) each taxable year ending after De-
cember 31, 1995, for which the taxpayer
meets the residential loan requirement of
subparagraph (B).
(D) RESIDENTIAL LOAN.—For purposes of
this paragraph, the term ‘‘residential loan’’
means 
any 
loan 
described 
in 
section
7701(a)(19)(C)(v) of such Code.
(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) of such Code, subparagraph (B)
shall be applied with respect to such group.
(F) COORDINATION WITH ESTIMATED TAX
PAYMENTS.—For purposes of applying section
6655(e)(2)(A)(i) of such Code with respect to
any installment, the determination under sub-
paragraph (A) of whether an adjustment is re-
quired to be taken into account under para-
graph (1) shall be made as of the last day pre-
scribed for payment of such installment.
(4) CONTINUED APPLICATION OF PARAGRAPH
(2) UNDER SECTION 585 TRANSITIONAL RULES.—In
the case of a taxpayer to which paragraph (1) ap-
plied 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.—Rules similar to the
rules of paragraph (2) shall apply for purposes
of applying section 585(c)(3) of such Code with
respect to the amount of such taxpayer’s re-
serve for bad debts as of the close of the last
taxable year before the disqualification year.
(B) TREATMENT
UNDER
ELECTIVE
CUT-
OFF METHOD.—No amount shall be includible
in gross income under section 585(c)(4) of such
Code by reason of the reduction of such tax-
payer’s reserve for bad debts below the amount
applicable to such taxpayer under section
585(b)(2)(B) of such Code for the last taxable
year before the disqualification year.
(5) CONTINUED
APPLICATION
OF
SECTION
593(e).—Notwithstanding the amendments made by
this section, in the case of a taxpayer to which para-
graph (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 amount of such taxpayer’s reserve
for bad debts which is not includible in gross income
by reason of paragraph (2) or (4) of this subsection.
(6) REGULATIONS.—The Secretary of the
Treasury or his delegate shall prescribe such regula-
tions as may be necessary to carry out this sub-
section, including regulations providing for the appli-
cation 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 the taxable year shall include
the amount paid during 1996 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 proposed by H.R. 2491, as introduced in the
104th Congress.
Æ