‘‘provision— 
‘‘(1) is inconsistent with the safe and sound op-
eration of United States financial institutions; or 
‘‘(2) could adversely impact a subset of the 
banking industry disproportionately.’’. 
SEC. 108. FEDERAL RESERVE EXAMINATION AUTHORITY. 
Section 1012(c) of the Consumer Financial Protec-
tion Act of 2010 is amended— 
(1) by striking paragraph (1); and 
(2) by redesignating paragraphs (2), (3), (4), 
and (5) as paragraphs (1), (2), (3), and (4), respec-
tively. 
TITLE II—REGULATORY RELIEF 
FOR COMMUNITY BANKS AND 
THEIR CUSTOMERS 
SEC. 201. ESCROW REQUIREMENTS. 
(a) IN GENERAL.—Section 129D(c) of the Truth in 
Lending Act, as added by section 1461(a) of the Dodd- 
Frank Wall Street Reform and Consumer Protection Act, 
is amended— 
(1) by redesignating paragraphs (1), (2), (3), 
and (4) as subparagraph (A), (B), (C), and (D) and 
moving such subparagraphs 2ems to the right; 
(2) striking ‘‘The Board’’ and inserting the fol-
lowing: 
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‘‘(1) IN GENERAL.—The Board’’; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(2) TREATMENT OF LOANS HELD BY SMALLER 
CREDITORS.—The Board shall, by regulation, exempt 
from the requirements of subsection (a) any loan secured 
by a first lien on a consumer’s principle dwelling, if such 
loan is held by a creditor with assets of $10,000,000,000 
or less.’’. 
SEC. 202. EXCEPTION TO ANNUAL PRIVACY NOTICE RE-
QUIREMENT UNDER THE GRAMM-LEACH-BLI-
LEY ACT. 
Section 503 of the Gramm-Leach-Bliley Act (15 
U.S.C. 6803) is amended by adding the following new sub-
sections: 
‘‘(f) EXCEPTION
TO ANNUAL NOTICE REQUIRE-
MENT.—A financial institution that— 
‘‘(1) provides nonpublic personal information 
only in accordance with the provisions of subsection 
(b)(2) or (e) of section 502 or regulations prescribed 
under section 504(b), 
‘‘(2) does not share information with affiliates 
under section 603(d)(2)(A) of the Fair Credit Re-
porting Act, and 
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‘‘(3) has not changed its policies and practices 
with regard to disclosing nonpublic personal infor-
mation from the policies and practices that were dis-
closed in the most recent disclosure sent to con-
sumers in accordance with this subsection, 
shall not be required to provide an annual disclosure under 
this subsection until such time as the financial institution 
fails to comply with any criteria described in paragraph 
(1), (2), or (3). 
‘‘(g) EXCEPTION TO NOTICE REQUIREMENT.—A fi-
nancial institution shall not be required to provide any dis-
closure under this section if— 
‘‘(1) the financial institution is licensed by a 
State and is subject to existing regulation of con-
sumer confidentiality that prohibits disclosure of 
nonpublic personal information without knowing and 
expressed consent of the consumer in the form of 
laws, rules, or regulation of professional conduct or 
ethics promulgated either by the court of highest ap-
pellate authority or by the principal legislative body 
or regulatory agency or body of any State of the 
United States, the District of Columbia, or any ter-
ritory of the United States; or 
‘‘(2) the financial institution is licensed by a 
State and becomes subject to future regulation of 
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consumer confidentiality that prohibits disclosure of 
nonpublic personal information without knowing and 
expressed consent of the consumer in the form of 
laws, rules, or regulation of professional conduct or 
ethics promulgated either by the court of highest ap-
pellate authority or by the principal legislative body 
or regulatory agency or body of any State of the 
United States, the District of Columbia, any terri-
tory of the United States.’’. 
SEC. 203. AGRICULTURE LOAN GUARANTEES. 
(a) FEES.—Section 310B(g)(5) of the Consolidated 
Farm and Rural Development Act (7 U.S.C. 1932(g)(5)) 
is amended by inserting before the period the following: 
‘‘, except that for loans under $5,000,000, the Secretary 
may assess a 1-time fee of 1 percent or less of the guaran-
teed principal portion of the loan’’. 
(b) GUARANTEE AMOUNTS.—Section 364 of the Con-
solidated Farm and Rural Development Act (7 U.S.C. 
2006f) is amended— 
(1) in subsection (a)— 
(A) in paragraph (3)— 
(i) by striking ‘‘may’’ and inserting 
‘‘shall’’; and 
(ii) by striking ‘‘standards that are 
not less stringent than’’; 
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(B) in paragraph (4), by inserting before 
the period the following: ‘‘except that the Sec-
retary may guarantee not more than 90 percent 
of a loan made by a certified lender if such loan 
is in an amount of less than $5,000,000’’; and 
(C) in paragraph (6); and 
(2) in subsection (b)— 
(A) by amending paragraph (1) to read as 
follows: 
‘‘(1) IN GENERAL.—The Secretary may estab-
lish a preferred certified lender’s program for lend-
ers who— 
‘‘(A) establish their— 
‘‘(i) knowledge of, and experience 
under, the program established under sub-
section (a); 
‘‘(ii) knowledge of the regulations con-
cerning the particular guaranteed loan pro-
gram; and 
‘‘(iii) proficiency related to the cer-
tified lender program requirement; or 
‘‘(B) in the absence of a demand for or ex-
perience with guaranteed loans having been 
made under a rural development program, es-
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tablish their proven experience in having made 
small business loans.’’; and 
(B) in paragraph (5)(A), by inserting be-
fore the semicolon the following: ‘‘except that 
the Secretary may guarantee not more than 90 
percent of a loan made by a certified lender if 
such loan is in an amount of less than 
$5,000,000’’. 
SEC. 204. REIMBURSEMENT FOR PRODUCTION OF MAN-
DATED RECORDS. 
(a) CORPORATE RECORDS.—Section 1101(4) of the 
Right to Financial Privacy Act of 1978 (12 U.S.C. 
3401(4)) is amended by inserting before the semicolon the 
following: ‘‘, except that, for purposes of section 1115, 
such term includes any entity’’. 
(b) CLARIFICATION OF SCOPE.—Section 1115 of the 
Right to Financial Privacy Act of 1978 (12 U.S.C. 3415) 
is amended by adding at the end the following new sub-
section: 
‘‘(c) CLARIFICATION
OF SCOPE.—Notwithstanding 
subsection (a), the fee for reimbursement described under 
such subsection shall by paid by a Government authority 
for all records required to be assembled or provided for 
any Federal law enforcement or investigative purpose by 
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any 
financial 
institution 
with 
total 
assets 
of 
$10,000,000,000 or less.’’. 
SEC. 205. LOAN AMORTIZATION. 
(a) IN GENERAL.—For purposes of capital calcula-
tion under the Financial Institutions Examination Coun-
cil’s Consolidated Reports of Condition, an eligible institu-
tion may choose to amortize any loss or write-down, on 
a quarterly straight-line basis over the 10-year period be-
ginning with the month in which such loss or write-down 
occurs, resulting from the application of FASB Statement 
114 or 144 to— 
(1) other real estate owned (as defined under 
section 34.81 of title 12, Code of Federal Regula-
tions); or 
(2) an impaired loan secured by real estate, 
provided that the institution discloses the difference 
in the amount of the institution’s capital, when cal-
culated taking into account the temporary amortiza-
tion, from the amount of the institution’s capital 
when calculated without taking into account the 
temporary amortization on the Financial Institutions 
Examination Council’s Consolidated Reports of Con-
dition. 
(b) ELIGIBLE INSTITUTION DEFINED.—For pur-
poses of this section, the term ‘‘eligible institution’’ has 
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the meaning given such term under section 4102(11) of 
the Small Business Jobs Act of 2010. 
(c) EFFECTIVE DATE.—The provisions of this section 
shall apply to loan originations that occurred on or after 
January 1, 2003, and before January 1, 2008. 
SEC. 206. LOAN APPRAISALS. 
For purposes of determining capital requirements or 
measuring capital of an insured depository institution 
under section 38 of the Federal Deposit Insurance Act (12 
U.S.C. 1831o) or any other provision of law, an insured 
depository institution may average, over a five-year period, 
the appraised value of any real estate securing a loan held 
by the institution. 
SEC. 207. CREDIT RATINGS. 
Section 939A(b) of the Dodd-Frank Wall Street Re-
form and Consumer Protection Act is amended by striking 
the first sentence and inserting: ‘‘Each such agency shall 
modify any such regulations identified by the review con-
ducted under subsection (a) and require that ratings- 
based determinations be confirmed by an analysis of the 
probability of a loss from holding such an asset, but only 
in circumstances where external credit ratings present an 
incomplete picture of the risks presented to an institution, 
or where those risks are heightened due to concentrations 
in particular assets classes.’’. 
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SEC. 208. SMALL BUSINESS DATA COLLECTION EXCLUSION. 
Section 704B(h)(1) of the Equal Credit Opportunity 
Act is amended by inserting before the period the fol-
lowing: 
‘‘and 
that 
has 
assets 
of 
more 
than 
$1,000,000,000’’. 
TITLE 
III—TAX 
RELIEF 
FOR 
BANK 
DEPOSITORS, 
RURAL 
BANKS, 
MUNICIPALITIES, 
BANKS ORGANIZED AS LIM-
ITED LIABILITY COMPANIES, 
AND YOUNG SAVERS 
SEC. 301. REDUCED RATE AND DEFERRAL OF INCOME REC-
OGNITION ON LONG-TERM CERTIFICATES OF 
DEPOSIT. 
(a) DEFERRAL OF INCOME RECOGNITION.—Section 
451 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection: 
‘‘(j) CERTIFICATES OF DEPOSITS HELD BY CASH 
BASIS INDIVIDUALS.—In the case of an individual on the 
cash receipts and disbursements method of accounting 
who holds a nonnegotiable certificate of deposit, interest 
income which is not made available for withdrawal before 
maturity of the certificate without penalty shall not be in-
cludible in gross income before the certificate is redeemed 
or matures.’’. 
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(b) INTEREST INCOME
ON LONG-TERM CERTIFI-
CATES
OF
DEPOSIT.—Subparagraph (A) of section 
1(h)(11) of such Code is amended by striking ‘‘increased 
by qualified dividend income’’ and inserting the following: 
‘‘increased by— 
‘‘(i) qualified dividend income, and 
‘‘(ii) interest income on any nonnego-
tiable certificate of deposit— 
‘‘(I) with a fixed maturity date 
which is 1 year or more from the date 
of issue, and 
‘‘(II) the interest on which is not 
made available for withdrawal before 
maturity without penalty.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 302. EXCLUSION FOR INTEREST ON LOANS SECURED 
BY AGRICULTURAL REAL PROPERTY. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting after section 139D the following new section: 
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‘‘SEC. 139E. INTEREST ON LOANS SECURED BY AGRICUL-
TURAL REAL PROPERTY. 
‘‘(a) EXCLUSION.—Gross income shall not include in-
terest received by a qualified lender on any qualified real 
estate loan. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED LENDER.—The term ‘qualified 
lender’ means any bank or savings association the 
deposits of which are insured under the Federal De-
posit Insurance Act (12 U.S.C. 1811 et seq.). 
‘‘(2) QUALIFIED
REAL
ESTATE
LOAN.—The 
term ‘qualified real estate loan’ means any loan se-
cured by agricultural real estate or by a leasehold 
mortgage (with a status as a lien) on agricultural 
real estate. For purposes of the preceding sentence, 
the determination of whether property securing such 
loan is agricultural real estate shall be made as of 
the time the interest income on such loan is accrued. 
‘‘(3) AGRICULTURAL REAL ESTATE.—The term 
‘agricultural real estate’ means— 
‘‘(A) real property used for the production 
of 1 or more agricultural products, and 
‘‘(B) any single family residence— 
‘‘(i) which is the principal residence 
(within the meaning of section 121) of its 
occupant, 
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‘‘(ii) which is located in a rural area 
(as determined by the Secretary of Agri-
culture), which is not within a Metropoli-
tan Statistical Area (as defined by the Of-
fice of Management and Budget) and 
which has a population (determined on the 
basis of the most recent decennial census 
for which data are available) of 2,500 or 
less, and 
‘‘(iii) which is purchased or improved 
with the proceeds of the qualified real es-
tate loan. 
‘‘(c) COORDINATION WITH SECTION 265.—Qualified 
real estate loans shall be treated as obligations described 
in section 265(a)(2) the interest on which is wholly exempt 
from the taxes imposed by this subtitle.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for such part III is amended by inserting after the item 
relating to section 139D the following new item: 
‘‘Sec. 139E. Interest on loans secured by agricultural real property.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 303. UPDATE IN CAP ON QUALIFIED SMALL ISSUE 
BONDS. 
(a) IN GENERAL.—Clause (i) of section 144(a)(4)(A) 
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘$10,000,000’’ and inserting ‘‘$30,000,000’’. 
(b) ADJUSTMENT OF CAP FOR INFLATION.—Sub-
section (a) of section 144 of such Code is amended by re-
designating paragraph (12) as paragraph (13) and by in-
serting after paragraph (11) the following new paragraph: 
‘‘(12) INFLATION ADJUSTMENT.—In the case of 
any issue issued during a calendar year after 2011, 
the $30,000,000 amount contained in paragraph 
(4)(A)(i) shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar 
year by substituting ‘calendar year 2010’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
Any increase under the preceding sentence which is 
not a multiple of $100,000 shall be rounded to the 
next lowest multiple of $100,000.’’. 
(c) CONFORMING AMENDMENT.—The heading of 
paragraph (4) of section 144(a) of such Code is amended 
by striking ‘‘$10,000,000 LIMIT’’ and inserting ‘‘INCREASED 
LIMITATION’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to— 
(1) obligations issued after the date of the en-
actment of this Act, and 
(2) capital expenditures made after such date 
with respect to obligations issued on or before such 
date. 
SEC. 304. LIMITED LIABILITY COMPANY TAX TREATMENT 
FOR FDIC-INSURED LIMITED LIABILITY COM-
PANIES. 
(a) IN GENERAL.—Paragraph (2) of section 7701(a) 
of the Internal Revenue Code of 1986 (defining partner-
ship and partner) is amended to read as follows: 
‘‘(2) PARTNER AND PARTNERSHIP.— 
‘‘(A) IN
GENERAL.—The term ‘partner-
ship’ includes a syndicate, group, pool, joint 
venture, or other unincorporated organization, 
through or by means of which any business, fi-
nancial operation, or venture is carried on, and 
which is not, within the meaning of this title, 
a trust or estate or a corporation; and the term 
‘partner’ includes a member in such a syn-
dicate, group, pool, joint venture, or organiza-
tion. 
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‘‘(B) ELECTION BY CERTAIN BANKS TO BE 
TAXED AS PARTNERSHIPS.— 
‘‘(i) IN
GENERAL.—An eligible cor-
poration may elect to be treated as a part-
nership for purposes of this title. 
‘‘(ii) TAX TREATMENT.—In the case 
of an eligible corporation making an elec-
tion under clause (i)— 
‘‘(I) no gain or loss shall be rec-
ognized to the corporation or the 
shareholders by reason of an election 
under clause (i), and 
‘‘(II) section 1374 shall apply to 
the entity after such election. 
‘‘(iii) ELIGIBLE
CORPORATION.—The 
term ‘eligible corporation’ means any enti-
ty described in clause (iv) if— 
‘‘(I) such entity would (but for 
this subparagraph) be treated as a C 
corporation for purposes of this title, 
and 
‘‘(II) the gross assets of such en-
tity (determined under the rules of 
section 1202(d)) are $10,000,000,000 
or less. 
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‘‘(iv) ENTITIES DESCRIBED.—The en-
tities described in this clause are the fol-
lowing: 
‘‘(I) Any bank (as defined in sec-
tion 581). 
‘‘(II) Any bank holding company 
(as defined in section 2(a) of the 
Bank Holding Company Act of 1956 
(12 U.S.C. 1841(a))). 
‘‘(III) Any savings association 
(as defined in section 3(b) of the Fed-
eral Deposit Insurance Act (12 U.S.C. 
1813)). 
‘‘(IV) Any savings and loan hold-
ing company (as defined in section 
10(a)(1)(D) of the Home Owners 
Loan Act).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 305. YOUNG SAVERS’ ACCOUNTS. 
(a) IN GENERAL.—Section 408A of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
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‘‘(g) SPECIAL RULES FOR ROTH IRAS FOR CHIL-
DREN.— 
‘‘(1) GENERAL RULE.—In the case of a Roth 
IRA maintained for the benefit of an individual who 
has not attained age 26 before the close of the tax-
able year, the limitation on contributions under 
paragraph (2) shall apply in lieu of paragraphs (2) 
and (3) of subsection (c). 
‘‘(2) LIMITATION
ON
CONTRIBUTIONS.—The 
aggregate amount of contributions for any taxable 
year to all Roth IRAs maintained for the benefit of 
an individual described in paragraph (1) with re-
spect to such taxable year shall not exceed the max-
imum amount allowable as a deduction under sub-
section (b)(1) of section 219 for such taxable year 
(computed without regard to subsections (b)(1)(B), 
(d)(1), and (g) of such section).’’. 
(b) ENFORCEMENT
OF CONTRIBUTION LIMITS.— 
Paragraphs (1)(B) and (2)(B) of section 4973(f) of such 
Code are each amended by striking ‘‘and (c)(3)’’ and in-
serting ‘‘, (c)(3), and (g)(2)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
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TITLE IV—TAX RELIEF FOR COM-
MUNITY BANKS AND HOLD-
ING COMPANIES 
SEC. 401. LIMITED TAX CREDIT. 
(a) C CORPORATIONS.—Section 11 of the Internal 
Revenue Code of 1986 (relating to tax imposed) is amend-
ed by adding at the end the following new subsection: 
‘‘(e) REDUCTION OF TAX ON COMMUNITY BANKS.— 
‘‘(1) IN GENERAL.—In the case of a C corpora-
tion which is a community bank, the aggregate tax 
imposed by this section, section 55, and section 
1201 shall be 80 percent of the aggregate tax which 
would (but for this subsection) be imposed by such 
sections. 
‘‘(2) MAXIMUM REDUCTION.—The reduction in 
tax by reason of this subsection shall not exceed 
$250,000. Corporations treated as 1 corporation 
under section 1202(d)(3) shall be so treated under 
this subsection, and the limitation under the pre-
ceding sentence shall be allocated among such cor-
porations in such manner as the Secretary shall pre-
scribe. 
‘‘(3) INCREASED BENEFIT FOR BANKS OPER-
ATING IN DISTRESSED AREAS, ETC.— 
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‘‘(A) IN GENERAL.—In the case of a bank 
operating in an area referred to in subpara-
graph (B)— 
‘‘(i) paragraph (1) shall be applied by 
substituting ‘50 percent’ for ‘80 percent’, 
and 
‘‘(ii) paragraph (2) shall be applied by 
substituting ‘$500,000’ for ‘$250,000’. 
‘‘(B) AREAS DESCRIBED.—The areas re-
ferred to in this subparagraph are— 
‘‘(i) empowerment zones and enter-
prise communities designated under section 
1391, 
‘‘(ii) renewal communities designated 
under section 1400E, 
‘‘(iii) low-income communities (as de-
fined in section 45D(e)), and 
‘‘(iv) distressed communities (within 
the meaning of section 233 of the Bank 
Enterprise Act of 1991 (12 U.S.C. 
1834a(b)). 
‘‘(4) COMMUNITY BANK.—For purposes of this 
section, the term ‘community bank’ means any of 
the following entities the gross assets of which (de-
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termined under the rules of section 1202(d)) are 
$10,000,000,000 or less: 
‘‘(A) Any bank (as defined in section 581). 
‘‘(B) Any bank holding company (as de-
fined in section 2(a) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1841(a))). 
‘‘(C) Any savings association (as defined in 
section 3(b) of the Federal Deposit Insurance 
Act (12 U.S.C. 1813)). 
‘‘(D) Any savings and loan holding com-
pany (as defined in section 10(a)(1)(D) of the 
Home Owners Loan Act).’’. 
(b) S CORPORATIONS.—Subsection (a) of section 
1366 of such Code is amended by adding at the end the 
following new paragraph: 
‘‘(3) REDUCTION
OF
TAX
ON
COMMUNITY 
BANKS.— 
‘‘(A) IN GENERAL.—In the case of a S cor-
poration which is a community bank (as defined 
in section 11(e)(4)), the net amount required to 
be taken into account by shareholders (without 
regard to this paragraph) shall be reduced by 
the lesser of— 
‘‘(i) 20 percent of such net amount, or 
‘‘(ii) $1,250,000. 
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‘‘(B) INCREASED BENEFIT FOR BANKS OP-
ERATING IN DISTRESSED AREAS, ETC.—In the 
case of a bank operating in an area referred to 
in section 11(e)(3)(B)— 
‘‘(i) subparagraph (A)(i) shall be ap-
plied by substituting ‘50 percent’ for ‘20 
percent’, and 
‘‘(ii) subparagraph (A)(ii) shall be ap-
plied by substituting ‘$2,500,000’ for 
‘$1,250,000’.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 402. QUALIFYING INVESTMENTS IN SMALL BANK 
ISSUERS. 
(a) GENERALLY.—The principles of Internal Revenue 
Service Notice 2010–2 shall apply to any qualifying invest-
ment by any person in a small bank issuer in the same 
manner as if such investment had been made by the 
Treasury Department pursuant to any of the Programs 
(as defined in Notice 2010–2). 
(b) DEFINITIONS.—For purposes of this section— 
(1) The term ‘‘qualifying investment’’ means 
any investment in the equity of a small bank issuer 
that otherwise would have constituted an ownership 
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change under section 382(g) of the Internal Revenue 
Code of 1986 (relating to limitations on net oper-
ating loss carryforwards and certain built-in losses 
following an ownership change). 
(2) The term ‘‘small bank issuer’’ means any 
insured depository institution as defined in section 
3(c)(2) of the Federal Deposit Insurance Act (12 
U.S.C. 1813(c)(2)) which— 
(A) was required under a Prompt Correc-
tive Action order issued pursuant to section 38 
of the Federal Deposit Insurance Act (12 
U.S.C. 1831o), or a formal or informal enforce-
ment order, to raise capital as a result of an ex-
amination that took place during calendar years 
2008 through 2012 by the Board of Governors 
of the Federal Reserve System, the Office of 
the Comptroller of the Currency, the Office of 
Thrift Supervision, or the Federal Deposit In-
surance Corporation, and 
(B) at the time of the order referred to in 
subparagraph (A), had total consolidated assets 
of $10,000,000,000 or less. 
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SEC. 403. 5-YEAR NOL CARRYBACK FOR CERTAIN BANKS. 
(a) IN GENERAL.—Subparagraph (H) of section 
172(b)(1) of the Internal Revenue Code of 1986 is amend-
ed to read as follows: 
‘‘(H) CARRYBACK FOR 2010 AND 2011 NET 
OPERATING LOSSES OF CERTAIN BANKS.— 
‘‘(i) IN GENERAL.—In the case of an 
applicable 2010 or 2011 net operating loss 
of a specified bank with respect to which 
the taxpayer has elected the application of 
this subparagraph— 
‘‘(I) subparagraph (A)(i) shall be 
applied by substituting any whole 
number elected by the taxpayer which 
is more than 2 and less than 6 for ‘2’, 
‘‘(II) subparagraph (E)(ii) shall 
be applied by substituting the whole 
number which is one less than the 
whole number substituted under sub-
clause (I) for ‘2’, and 
‘‘(III) subparagraph (F) shall not 
apply. 
‘‘(ii) APPLICABLE 2010 OR 2011 NET 
OPERATING
LOSS.—For purposes of this 
subparagraph, the term ‘applicable 2010 
or 2011 net operating loss’ means— 
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(b) ANTI-ABUSE RULES.—The Secretary of Treasury 
or the Secretary’s designee shall prescribe such rules as 
are necessary to prevent the abuse of the purposes of the 
amendments made by this section, including anti-stuffing 
rules, antichurning rules (including rules relating to sale- 
leasebacks), and rules similar to the rules under section 
1091 of the Internal Revenue Code of 1986 relating to 
losses from wash sales. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to net operating losses arising in 
taxable years ending after December 31, 2009. 
TITLE V—SMALL BUSINESS 
SUBCHAPTER S REFORMS 
SEC. 501. INCREASING SHAREHOLDER LIMIT FOR SUB-
CHAPTER S TO 200. 
(a) IN GENERAL.—Subparagraph (A) of section 
1361(b)(1) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘100’’ and inserting ‘‘200’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
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SEC. 502. ISSUANCE OF PREFERRED STOCK PERMITTED 
FOR SUBCHAPTER S CORPORATIONS. 
(a) IN GENERAL.—Section 1361 (defining S corpora-
tion) is amended by adding at the end the following new 
subsection: 
‘‘(h) TREATMENT
OF
QUALIFIED
PREFERRED 
STOCK.— 
‘‘(1) IN GENERAL.—For purposes of this sub-
chapter— 
‘‘(A) qualified preferred stock shall not be 
treated as a second class of stock, and 
‘‘(B) no person shall be treated as a share-
holder of the corporation by reason of holding 
qualified preferred stock. 
‘‘(2) 
QUALIFIED
PREFERRED
STOCK
DE-
FINED.—For purposes of this subsection, the term 
‘qualified preferred stock’ means stock which meets 
the requirements of subparagraphs (A), (B), and (C) 
of section 1504(a)(4). Stock shall not fail to be 
treated as qualified preferred stock merely because 
it is convertible into other stock. 
‘‘(3) DISTRIBUTIONS.—A distribution (not in 
part or full payment in exchange for stock) made by 
the corporation with respect to qualified preferred 
stock shall be includible as ordinary income of the 
holder and deductible to the corporation as an ex-
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pense in computing taxable income under section 
1363(b) in the year such distribution is received.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (1) of section 1361(b) is amend-
ed by inserting ‘‘, except as provided in subsection 
(f),’’ before ‘‘which does not’’. 
(2) Subsection (a) of section 1366 is amended 
by adding at the end the following new paragraph: 
‘‘(3) ALLOCATION
WITH
RESPECT
TO
QUALI-
FIED PREFERRED STOCK.—The holders of qualified 
preferred stock (as defined in section 1361(h)) shall 
not, with respect to such stock, be allocated any of 
the items described in paragraph (1).’’. 
(3) So much of clause (ii) of section 
354(a)(2)(C) as precedes subclause (II) is amended 
to read as follows: 
‘‘(ii) RECAPITALIZATION OF FAMILY- 
OWNED
CORPORATIONS
AND
S
CORPORA-
TIONS.— 
‘‘(I) IN
GENERAL.—Clause (i) 
shall not apply in the case of a recapi-
talization under section 368(a)(I)(E) 
of a family-owned corporation or S 
corporation.’’. 
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(4) Subsection (a) of section 1373 is amended 
by striking ‘‘and’’ at the end of paragraph (1), by 
striking the period at the end of paragraph (2) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(3) no amount of an expense deductible under 
this subchapter by reason of section 1361(h)(3) shall 
be apportioned or allocated to the income referred to 
in such section.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
SEC. 503. IRA SHAREHOLDERS. 
Clause (vi) of section 1361(c)(2)(A) of the Internal 
Revenue Code of 1986 is amended by striking ‘‘as of the 
date of the enactment of this clause’’. 
Æ 
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