An Act to amend the Internal Revenue Code of 1954 to allow a deduction for additions to a reserve for certain guaranteed debt obligations, and for other purposes
PL 89-722 (H.R.11782), enacted 11/02/1966

80 STAT.] 
PUBLIC LAW 8 9 - 7 2 2 - N O V . 2, 1966 
1151 
attributable to the carryback of any unused investment credit shall not 
expire before the close of December 31,1966. 
SEC. 3. (a) Section 6501 of the Internal Kevenue Code of 1954 26 use esoi. 
(relating to limitations on assessment and collection) is amended by 
inserting after subsection (1) the following new subsection: 
"(m) TENTATIVE CARRYBACK ADJUSTMENT ASSESSMENT PERIOD.— 
In a case where an amount has been applied, credited, or refunded 
under section 6411 (relating to tentative carryback adjustments) by 
reason of a net operating loss carryback or an investment credit carry-
back to a prior taxable year, the period described in subsection (a) of 
this section for assessing a deficiency for such prior taxable year shall 
be extended to include the period described in subsection (h) or (j), 
whichever is applicable; except that the amount which may be assessed 
solely by reason of this subsection shall not exceed the amount so 
applied, credited, or refunded under section 6411, reduced by any 
amount which may be assessed solely by reason of subsection (h) or (j), 
as the case may be." 
(b) The amendment made by subsection (a) shall apply in any case 
Avhere the application under section 6411 of the Internal Revenue Code 
of 1954 is filed after the date of the enactment of this Act. 
Approved November 2, 1966. 
Public Law 89-722 
A N A C T 
November 2, 1966 
To amend the Internal Revenue Code of 1954 to allow a deduction for additions 
[H. R. 11782] 
to a reserve for certain guaranteed debt obligations, and for other purposes. 
Taxes. 
68A Stat. 50. 
26 u s e 166. 
Be it eruwted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled. That (a) section 166 
of the Internal Revenue Code of 1954 (relating to bad debts) is tain^gua^ant°e'^e"'^" 
amended bv redesignating subsection (g) as subsection (h), and by debt obligations. 
inserting alter subsection (f) a new subsection (g) as follows: 
"(g) RESERVE FOR CERTAIN GUARANTEED DEBT OBLIGATIONS.— 
"(1) ALLOWANCE OF DEDUCTION.—In the case of a taxpayer 
who is a dealer in property, in lieu of any deduction under sub-
section (a), there shall be allowed (in the discretion of the Secre-
tary or his delegate) for any taxable year ending after October 21, 
1965, a deduction— 
"(A) for a reasonable addition to a reserve for bad debts 
which ma}^ arise out of his liability as a guarantor, endorser, 
or indemnitor of debt obligations arising out of the sale by 
him of real property or tangible personal property (including 
related services) in the ordinary course of his trade or busi-
ness; and 
"(B) for the amount of any reduction in the suspense 
account required by paragraph (4) (B) (i). 
"(2) DEDUCTION DISALLOWED IN OTHER CASES.—Except as pro-
vided in paragraph (1), no deduction shall be allowed to a tax-
payer for any addition to a reserve for bad debts which may arise 
out of his liability as guarantor, endorser, or indemnitor of debt 
obligations. 
"(3) OPENING BALANCE.—The opening balance of a reserve 
described in paragraph (1) (A) for the first taxable year ending 
after October 21, 1965, for which a taxpayer maintains such re-
serve shall, under regulations prescribed by the Secretary or his 
delegate, be determined as if the taxpayer had maintained such 
reserve for the preceding taxable years. 
1152 
PUBLIC LAW 89-722-NOV. 2, 1966 
[80 STAT. 
Infra-
68A Stat. 124. 
26 use 381. 
26 use 71. 
Supra. 
26 use 446. 
Effective date. 
26 use 166. 
"(4) SUSPENSE ACCOUNT.— 
"(A) 
REQUIREMENT.—Except as provided by subpara-
graph (C), each taxpayer who maintains a reserve described 
in paragraph (1) (A) shall, for purposes of this subsection 
and section 81, establish and maintain a suspense account. 
The initial balance of such account shall be equal to the 
opening balance described in paragraph (3), 
"(B) ADJUSTMENTS.—At the close of each taxable year the 
suspense account shall be— 
"(i) reduced by the excess of the suspense account 
at the beginning of the year over the reserve described in 
paragraph (1) (A) (after making the addition for such 
year provided in such paragraph), or 
"(ii) increased (but not to an amount greater than the 
initial balance of the suspense account) by the excess 
of the reserve described in paragraph (1)(A) 
(after 
making the addition for such year provided m such para-
graph) over the suspense account at the beginning of 
such year. 
"(C) LIMITATIONS.—Subparagraphs (A) and (B) shall 
not apply in the case of the taxpayer who maintained for his 
last taxable year ending before October 22, 1965, a reserve 
for bad debts under subsection (c) which included debt obli-
gations described in paragraph (1) (A). 
"(D) SECTION 381 ACQUISITIONS.—The application of this 
paragraph in any acquisition to which section 381(a) applies 
shall be determined under regulations prescribed by the Sec-
retary or his delegate." 
(b) (1) Part I I of subchapter B of chapter 1 of the Internal Revenue 
Code of 1954 (relating to items specifically included in gross income) 
is amended by inserting after section 80 the following new section: 
"SEC. 81. INCREASES IN SUSPENSE ACCOUNT UNDER SECTION 16€(g). 
"The amount of any increase in the suspense account required by 
paragraph (4) (B) (ii) of section 166(g) (relating to certain debt obli-
gations guaranteed by dealers) shall be included in gross income for 
the taxable year for which such increase is required." 
(2) The table of sections for part I I of subchapter B of cliapter 1 
is amended by adding at the end thereof the following: 
"Sec. 81. Increases in suspense account under se<»tion 166(g)." 
(c) If the taxpayer establishes a reserve described in section 166 
(g) (1) of the Internal Revenue Code of 1954 (as amended by sub-
section (a) of this section) for a taxable year ending after October 21, 
1965, and beginning before August 2, 1966, the establishment of such 
reserve shall not be considered as a change in method of accounting for 
purposes of section 446 (e) of such Code. 
SEC. 2. (a) Except as provided in subsections (b) and (c), tlie 
amendments made by the first section of this Act shall apply to taxable 
years ending after October 21, 1965. 
(b) I f -
(1) the taxpayer before October 22, 1965, claimed a deduction, 
for a taxable year ending before such date, under section 166(c) 
of the Internal Revenue Code of 1954 for an addition to a reserve 
for bad debt^ on account of debt obligations described in section 
166(^)(1)(A) of such Code (as amended by the first section 
of this Act), and 
(2) the assessment of a deficiency of the tax imposed by chap-
ter 1 of such Code for such taxable year and each subsequent 
80 STAT. ] 
PUBLIC LAW 89-724-NOV. 2, 1966 
1153 
taxable year ending before October 22, 1965, is not prevented on 
December 31,1966, by the operation of any law or rule of law, 
then such deduction on account of such debt obligations shall be 
allowed for each such taxable year under such section 166(c) to tlie 
extent that the deduction would have been allowable under the pro-
visions of such section 166(g)(1)(A) if such provisions applied to 
such taxable years. 
(c) Section 166(g)(2) of the Internal Revenue Code of 1954 (as 
amended by the first section of this Act) shall apply to taxable years 
beginning after December 31,1953, and ending after August 16,1954. 
Approved November 2, 1966. 
Public Law 89-723 
A N A C T 
November 2, 1966 
To authorize the disposal of industrial diamond stones from the national stock- 
[H. R.13320] 
pile and the supplemental stockpile. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That the Adminis- 
industrial dia-
trator of General Services is hereby authorized to dispose of, by nego- ^oisp^osar.^ 
tiation or otherwise, approximately one million and eight hundred 
thousand carats of industrial diamond stones now held in the national 
stockpile established pursuant to the Strategic and Critical Materials 
Stock Piling Act (50 U.S.C. 98-98h) and the supplemental stockpile 
^o stat. 596. 
established pursuant to section 104(b) of the Agricultural Trade 
Development and Assistance Act of 1954, as amended (7 U.S.C. 1704 
(b)). 
Such disposition may be made without regard to the provisions 
^^ stat. eo?. 
of section 3 of the Strategic and Critical Materials Stock Piling Act: 
Provided^ That the time and method of disposition shall be fixed with 
due regard to the protection of the United States against avoidable 
loss and the protection of producers, processors, and consumers against 
avoidable disruption of their usual markets. 
Approved November 2, 1966. 
Public Law 89-724 
A N A C T 
November 2, 1966 
To ;intlii»ri/,e the dispo-sal of fused crude iiluminuni oxide from the nntional 
[H. R. 13370] 
stockpile !ind the supplemental stockjHle. 
Be it enacted by the Senate arid House of tiep-re-sentatires of the. 
United States of America in Congress asse/mbUd^ That the Adminis- 
Fused crude 
trator of (xeneral Services is hereby authorized to dis})ose of, by ^ DTSPOSL°.^^ 
negotiation or otherwise, approximately one hundred and thirty thou-
sand short tons of fused crude aluminum oxide now lield in the 
national stockpile established pursuant to the Strategic and (^ritical 
Materials Stock Piling Act (50 U.S.C. 98-98h) and the supplemental 
^o stat. 596. 
stockpile established pursuant to section 104(b) of the Agricultural 
Trade Development and Assistance Act of 1954, as amended (7 U.S.C. 
1704(b)). 
Snch disposition may be made without regard to the pro- 
'^^ ^'^'- ^°^-
visions of section 3 of the Strategic and Critical Materials Stock 
Piling Act: Prodded, That the time and method of disposition shall 
be fixed with due regard to the protection of the Ignited States against 
avoidable loss and the protection of producers, processors, and con-
sumers against avoidable disruption of their usual markets. 
Approved November 2, 1966.