An Act to modify the application of the personal holding company tax in the case of consumer finance companies
PL 87-768 (H.R.8824), enacted 10/09/1962

7660 
PUBLIC LAW 87-768-OCT. 9, 1962 
[76 STAT. 
and the Commissioners of the District of Columbia are authorized and 
directed to effectuate said amendments on behalf of the United States 
for the District of Columbia. 
Repeal. 
SEC. 2. Sectiou 5 of Public Law 86-794 (74 Stat. 1050) is repealed. 
SEC. 3. The right of Congress to alter, amend, or repeal this Act is 
hereby expressly reserved. 
Approved October 9, 1962. 
Public Law 87-768 
October 9, 1962 
A N A C T 
[H. R. 8824] 
rpQ modify the application of the personal holding company tax in the case of 
consumer finance companies. 
Be it enacted hy the Senate and House of Representatives 
of the 
Consumer fi- 
United States 
of America 
in Congress 
assembled, 
That section 
TIrsonThoid-' 542(c) (7) of the Internal Revenue Code of 1954 (relating to excep-
ing company tax, 
tious to tiie term "personal holding company") is amended to read as 
exception- 
f n l l n w c i -
68A Stat. 182. 
lOllOWS. 
26 use 542. 
"(7) a lending company, not otherwise excepted by this sub-
section, authorized to engage in and actively and regularly 
engaged in the small loan business (consumer finance business) 
under one or more State statutes providing for the direct regula-
tions of such business, 80 percent or more of the gross income of 
which consists of either or both of the following— > 
"(A) lawful interest, discount, or other authorized charges 
received from loans made to individuals in accordance with 
the provisions of applicable State law, and 
"(B) lawful income received from domestic^ subsidiary 
corporations (of which stock possessing at least 80 percent 
of the voting power of all classes of stock and/of which at 
least 80 percent of each class of the nonvoting stock is owned 
directly by such lending company), which a p themselves 
excepted under this paragraph or paragraph/ (6), (8), or 
(9) of this subsection, 
i 
if at least 60 percent of the gross income is lawful interest, dis-
count, or other authorized charges received from loans made in 
accordance with the provisions of such small loan (consumer 
finance) laws to individuals, each of whose indebtedness to such 
company did not at any time during the taxable year exceed in 
principal amount the limit prescribed for small loans by such law 
(or, if there is no such limit, $1,500), and if the deductions allowed 
68A Stat. 45. 
to such compauy under section 162 (relating to trade or business 
expenses), other than for compensation for personal services 
rendered by shareholders (including members of the shareholder's 
68A Stat. 188. 
family as described in section 544(a) (2)), constitute 15 percent 
or more of its gross income, and the loans to a person, who is a 
shareholder in such company during the taxable year by or for 
whom 10 percent or more m value of its outstanding stock is owned 
directly or indirectly (including, in the case of an individual, 
stock owned by the members of his family as defined in section 
544(a)(2)), outstanding at any time during such year do not 
exceed $5,000 in principal amount;". 
Effective date. 
SEC. 2. The amendment made by the first section of this Act shall 
apply with respect to taxable years beginning after December 31,1961. 
Approved October 9, 1962.