An Act to provide for the control and regulation of bank holding companies, and for other purposes
PL 84-511 (H.R.6227), enacted 05/09/1956

70 STAT.] 
PUBLIC LAW 511-MAY 9, 1966 
133 
Public Law 511 
CHAPTER 240 
-^N ACT 
May 9,1956 
To define bank holding companies, control their future expansion, and require 
[H. R. 6227] 
divestment of their nonbanking interests. 
Be it enacted hi/ the Senate and House of RepresentativeH of the 
United states of Anienca in Congress assembled. That this Act may c o ^ a n y ^
/
S
A
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be cited as the "Bank Holding Company Act of 1956". 
i9S6. 
DEFINITIONS 
SEC. 2 (a) '"Bank holding company"' means any company (1) 
which directly or indirectly OAvns, controls, or holds with power to 
vote, 25 per centum or more of the voting shares of each of two or 
more banks or of a com])any which is or becomes a bank holding com-
])any by virtue of tliis Act, or (2) which controls in any manner the 
election of a majority of the directors of each of two or more banks, or 
(3) for the benefit of whose shareholders or members 25 per centum or 
more of the voting shares of each of tw'o or more banks or a baiik 
holding company is held by trustees; and for the purposes of this Act, 
any successor to any such company shall be deemed to be a baiik 
holding company from the date as of w^liich such predecessor company 
became a bank holding company. 
Xotwdthstanding the foregoing 
(A) no bank shall be a bank holding company by virtue of its owner-
ship or control of shares in a fiduciary capacity, except where such 
shares are held for the benefit of the shareholders of such bank, (B) 
no company shall be a bank holding company Avhich is registered 
under the Investment Company Act of 1910, and Avas so registered 
1
5 usc*8(f»-*5i. 
prior to May 15, 1955 (or which is affiliated with any such company 
in such manner as to constitute an affiliated company within the mean-
ing of such Act), unless such company (or such affiliated company), 
as the case may be, directly owns 25 per centum or more of the voting 
shares of each of two or more banks, (C) no company shall be a 
bank holding company by virtue of its ow^nership or control of shares 
acquired by it in connection with its underwriting of securities and 
which are held only for such period of time as Avill permit the sale 
thereof upon a reasonable basis, (D) no company formed for the sole 
purpose of participating in a proxy solicitation shall be a bank holding 
company by virtue of its control of voting rights of shares acquired 
in the course of such solicitation, and (E) no company shall be a bank 
holding company if at least 80 per centum of its total assets are com-
jjosed of holdings in the field of agriculture. 
(b) "Company" means any corporation, business trust, association, 
or similar organization, but shall not include (1) any corporation the 
majority of the shares of which are owned by the United States or 
by any State, or (2) any corporation or community chest, fund, or 
foundation, organized and operated exclusively for religious, charita-
ble, or educational purposes, no part of the net earnings of which 
inures to the benefit of any private shareholder or individual, and 
no substantial part of the activities of which is carrying on propa-
ganda, or otherwise attempting to influence legislation, or (3) any 
partnership. 
(c) "Bank" means any national banking association or any State 
bank, savings bank, or trust company, but shall not include any organ-
ization operating under section 25 (a) of the Federal Reserve Act, 
12 usc'6^nf6i2. 
or any organization which does not do business within the United 
States. "State member bank" means any State bank which is a mem- bal^"*** member 
ber of the Federal Reserve System. "District bank" means any State 
"District bank". 
134 
PUBLIC LAW 511-MAY 9, 1956 
[70 STAT. 
bank organized or operating under the Code of Law for the District 
of Columbia. 
(d) "Subsidiary", with respect to a specified bank holding com-
pany, means (1) any company 25 per centum or more of whose voting 
shares (excluding shares owned by the United States or by any com-
pany wholly owned by the United States) is owned or controlled 
by such bank holding company; or (2) any company the election 
of a majority of whose directors is controlled in any manner by such 
bank holding company; or (3) any company 25 per centum or more 
of whose votmg shares are held by trustees for the benefit of the share-
holders or members of such bank holding company. 
(e) The term "successor" shall include any company which acquires 
directly or indirectly from a bank holding company shares of any 
bank, when and if the relationship between such company and the 
bank holding company is such that the transaction effects no substan-
tial change in the control of the bank or beneficial ownership of such 
shares of such bank. The Board may, by regulation, further define 
the term "successor" to the extent necessary to prevent evasion of the 
purposes of this Act. 
(f) "Board" means the Board of Governors of the Federal Reserve 
System. 
(g) "Agriculture", as used in section 2 (a), includes farming in 
all its branches including fruitgrowing, dairying, the raising of live-
stock, bees, fur-bearing animals, or poultry, forestry or lumbering 
operations, and the production of naval stores, and operations directly 
related thereto. 
ACQUISITION OF BANK SHARES OR ASSETS 
SEC. 3. (a) It shall be unlawful except with the prior approval of 
the Board (1) for any action to be taken which results in a company 
becoming a bank holding company under section 2 (a) of this Act; 
(2) for any bank holding company to acquire direct or indirect owner-
ship or control of any voting shares of any bank if, after such 
acquisition, such company will directly or indirectly own or control 
more than 5 per centum of the voting shares of such bank; (3) for 
any bank holding company or subsidiary thereof, other than a bank, 
to acquire all or substantially all of the assets of a bank; or (4) for 
any bank holding company to merge or consolidate with any other 
bank holding company. 
Notwithstanding the foregoing this prohibi-
tion shall not apply to (A) shares acquired by a bank, (i) in good 
faith in a fiduciary capacity, except where such shares are held for 
the benefit of the shareholders of such bank, or (ii) in the regular 
course of securing or collecting a debt previously contracted in good 
faith, but any shares acquired after the date of enactment of this Act 
in securing or collecting any such previously contracted debt shall be 
disposed of within a period of two years from the date on which they 
were acquired; or (B) additional shares acquired by a bank holding 
company in a bank in which such bank holding company owned or 
controlled a majority of the voting shares prior to such acquisition. 
(b) Upon receiving from a company any application for approval 
under this section, the Board shall give notice to the Comptroller of 
the Currency, if the applicant company or any bank the voting shares 
or assets of which are sought to be acquired is a national banking 
association or a District bank, or to the appropriate supervisory 
authority of the interested State, if the applicant company or any 
bank the voting shares or assets of which are sought to be acquired 
is a State bank, and shall allow thirty days within which the views 
and recommendations of the Comptroller of the Currency or the State 
70 S T A T . ] 
PUBLIC LAW 511-MAY 9, 1956 
135 
supervisory authority, as the case may be, may be submitted. If the 
Comptroller of the Currency or the State supervisory authority so 
notified by the Board disapproves the application in writing within 
said thirty days, the Board shall forthwith give written notice of 
that fact to the applicant. Within three days after giving such notice 
to the applicant, the Board shall notify in writing the applicant and 
the disapproving authority of the date for commencement of a hear-
ing by it on such application. Any such hearing shall be commenced 
not less than ten nor more than thirty days after the Board has given 
written notice to the applicant of the action of the disapproving 
authority. The length of any such hearing shall be determined by 
the Board, but it shall afford all interested parties a reasonable oppor-
tunity to testify at such hearing. At the conclusion thereof, the Board 
shall by order grant or deny the application on the basis of the record 
made at such hearing. 
(c) In determining whether or not to approve any acquisition or 
merger or consolidation under this section, the Board shall take into 
consideration the following factors: (1) the financial history and 
condition of the company or companies and the banks concerned; (2) 
their prospects; (3) the character of their management; (4) the con-
venience, needs, and welfare of the communities and the area con-
cerned ; and (5) whether or not the effect of such acquisition or merger 
or consolidation would be to expand the size or extent of the bank 
holding company system involved beyond limits consistent with ade-
quate and sound banking, the public interest, and the preservation of 
competition in the field of banking. 
(d) Notwithstanding any other provision of this section, no appli-
cation shall be approved under this section which will permit any 
bank holding company or any subsidiary thereof to acquire, directly 
or indirectly, any voting shares of, interest in, or all or substantially all 
of the assets of any additional bank located outside of the State in 
which such bank holding company maintains its principal office and 
place of business or in which it conducts its principal operations unless 
the acquisition of such shares or assets of a State bank by an out-of-
State bank holding company is specifically authorized by the statute 
laws of the State in which such bank is located, by language to that 
effect and not merely by implication. 
INTERESTS I N NONBANKING ORGANIZATIONS 
SEC. 4, (a) Except as otherwise provided in this Act, no bank hold-
ing company shall— 
(1) after the date of enactment of this Act acquire direct or 
indirect ownership or control of any voting shares of any com-
pany which is not a bank, or 
(2) after two years from the date of enactment of this Act or 
from the date as of which it becomes a bank holding company, 
whichever is later, retain direct or indirect ownership or control 
of any voting shares of any company which is not a bank or a bank 
holding company or engage in any business other than that of 
banking or of managing or controlling banks or of furnishing 
services to or performing services for any bank of which it owns or 
controls 25 per centum or more of the voting shares. 
The Board is authorized, upon application by a bank holding company, 
to extend the period referred to in paragraph (2) above from time to 
time as to such bank holding company for not more than one year at a 
time if, in its judgment, such an extension would not be detrimental to 
the public interest, but no such extensions shall extend beyond a date 
136 
PUBLIC LAW 511-MAY 9, 1956 
[70 STAT. 
five years after the date of enactment of this Act or five years after the 
date as of which a company becomes a bank holding company, which-
ever is later. 
(b) After two years from the date of enactment of this Act, no 
certificate evidencing shares of any bank holding company shall bear 
any statement purporting to represent shares ot any other company 
except a bank or a bank holding company, nor shall the ownership, 
sale, or transfer of shares of any bank holding company be conditioned 
in any manner whatsoever upon the ownership, sale, or transfer of 
shares of any other company except a bank or a bank holding company, 
of i^^bmons. '^^^ 
(c) The prohibitions in this section shall not apply— 
(1) to shares owned or acquired by a bank holding company 
in any company engaged solely in holding or operating properties 
used wholly or substantially by any bank with respect to which it 
is a bank holding company in its operations or acquired for such 
future use or engaged solely in conducting a safe deposit business, 
or solely in the business of furnishing services to or performing 
services for such holding company and banks with respect to which 
it is a bank holding company, or in liquidating assets acquired 
from such bank holding company and such banks; 
(2) to shares acquired by a bank holding company which is a 
bank, or by any banking subsidiary of a bank holding company, 
in satisfaction of a debt previously contracted in good faith, but 
such bank holding company or such subsidiaries shall dispose of 
such shares within a period of two years from the date on which 
they were acquired or from the date of enactment of this Act, 
whichever is later; 
(3) to shares acquired by a bank holding company from any 
of its subsidiaries which subsidiary has been requested to dispose 
of such shares by any Federal or State authority having statutory 
power to examine such subsidiary, but such bank holding com-
pany shall dispose of such shares within a period of two years 
from the date on which they were acquired or from the date of 
enactment of this Act, whichever is later; 
(4) to shares which are held or acquired by a bank holding 
company which is a bank or by any banking subsidiary of a bank 
holding company, in good faith in a fiduciary capacity, except 
where such shares are held for the benefit of the shareholders 
of such bank holding company or any of its subsidiaries, or to 
shares which are of the kinds and amounts eligible for investment 
by National banking associations under the provisions of section 
12 use 24. 
5j^3g fyf fi^Q Revised Statutes, or to shares lawfully acquired and 
owned prior to the date of enactment of this Act by a bank which 
is a bank holding company, or by any of its wholly owned 
subsidiaries; 
(5) to shares of any company which are held or acquired by 
a bank holding company which do not include more than 5 per 
centum of the outstanding voting securities of such company, and 
do not have a value greater than 5 per centum of the value of the 
total assets of the bank holding company, or to the ownership 
by a bank holding company of shares, securities, or obligations of 
an investment company which is not a bank holding company 
and which is not engaged in any business other than investing 
in securities, which securities do not include more than 5 per 
centum of the outstanding voting securities of any company and do 
not include any single asset having a value greater than 5 per 
centum of the value of the total assets of the bank holding com-
pany; 
26 u s e 501. 
70 S T A T . ] 
PUBLIC LAW 511-MAY 9, 1956 
137 
(6) to shares of any company all the activities of which are of 
a financial, fiduciary, or insurance nature and which the Board 
after due notice and hearing, and on the basis of the record made 
at such hearing, by order has determined to be so closely related 
to the business of banking or of managing or controlling banks 
as to be a proper incident thereto and as to make it unnecessary 
for the prohibitions of this section to apply in order to carry out 
the purposes of this Act; 
(7) to any bank holding company which is a labor, agricultural, 
or horticultural organization and which is exempt from taxation 
under section 501 of the Internal Revenue Code of 1954; or 
f 
l^ilr^lnV!^* 
(8) to shares held or acquired by a bank holding company in 
any company which is organized under the laws of a foreign 
country and which is engaged principally in the banking business 
outside the United States. 
ADMINISTRATION 
SEC. 5. (a) Within one hundred and eighty days after the date of 
enactment of this Act, or within one hundred and eighty days after 
becoming a bank holding company, whichever is later, each bank 
holding company shall register with the Board on forms prescribed 
by the Board, which shall include such information with respect to the 
financial condition and operations, management, and intercompany 
relationships of the bank holding company and its subsidiaries, and 
related matters, as the Board may deem necessary or appropriate to 
carry out the purposes of this Act. 
The Board may, in its discretion, 
extend the time within which a bank holding company shall register 
and file the requisite information. 
(b) The Board is authorized to issue such regulations and orders as 
may be necessary to enable it to administer and carry out the purposes 
of this Act and prevent evasions thereof. 
(c) The Board from time to time may require reports under oath 
to keep it informed as to whether the provisions of this Act and such 
regulations and orders issued thereunder liave been complied with; 
and the Board may make examinations of each bank holding company 
and each subsidiary thereof, the cost of which shall be assessed against, 
and paid by, such holding company. 
The Board shall, as far as pos-
sible, use the reports of examinations made by the Comptroller of the 
Currenc}', the Federal Deposit Insurance Corporation, or the appro-
priate State bank supervisory authority for the purposes of this 
section. 
(d) Before the expiration of two years following the date of enact-
ment of this Act, and each year thereafter in the Board's annual 
report to the Congress, the Board shall report to the Congress the 
results of the administration of this Act, stating what, if any, sub-
stantial difficulties have been encountered in carrying out the purposes 
of this Act, and any recommendations as to changes in the law which 
in the opinion of the Board would be desirable. 
BORROWING BY BANK HOLDING COMPANY OR ITS SUBSIDIARIES 
SEC. 6. (a) From and after the date of enactment of this Act, it 
shall be unlawful for a bank— 
(1) to invest any of its funds in the capital stock, bonds, deben-
tures, or other obligations of a bank holding company of which 
it is a subsidiary, or of any other subsidiary of such bank holding 
company; 
(2) to accept the capital stock, bonds, debentures, or other obli-
gations of a bank holding company of which it is a subsidiary or 
any other subsidiary of such bank holding company, as collateral 
Report to C o n -
gress. 
138 
PUBLIC LAW 511-MAY 9, 1956 
[TO STAT. 
security for advances made to any person or company: Provided^ 
however^ That any bank may accept such capital stock, bonds, 
debentures, or other obligations as security for debts previously 
contracted, but such collateral shall not be held for a period of 
over two years; 
(3) to purchase securities, other assets or obligations under 
repurchase agreement from a bank holding company of which 
it is a subsidiary or any other subsidiary of such bank holding 
company; and 
(4) to make any loan, discount or extension of credit to a bank 
holding company of which it is a subsidiary or to any other 
subsidiary of such bank holding company. 
Non-interest-bearing deposits to the credit of a bank shall not be 
deemed to be a loan or advance to the bank of deposit, nor shall the 
giving of immediate credit to a bank upon uncollected items received 
in the ordinary course of business be deemed to be a loan or advance 
* 
to the depositing bank. 
(b) The provisions of this section shall not apply (1) to the capital 
stock, bonds, debentures, or other obligations of any company described 
Ante, p. 136. 
jj^ scctiou 4 (c) (1) of this Act, or (2) to any company whose subsid-
iary status has arisen out of a bona fide debt to tlie bank contracted 
prior to the date of the creation of such status, or (3) to any company 
whose subsidiary status exists by reason of the ownership or control 
of voting shares thereof by the bank as executor, administrator, trus-
tee, receiver, agent, or depositary, or in any other fiduciary capacity, 
except where such shares are held for the benefit of all or a majority 
of the stockholders of such bank. 
RESERVATION OF RIGHTS TO STATES 
SEC. 7. The enactment by the Congress of the Bank Holding Com-
pany Act of 1956 shall not be construed as preventing any State from 
exercising such powers and jurisdiction which it now has or may 
hereafter have with respect to banks, bank holding companies, and 
subsidiaries thereof. 
PENALTIES 
SEC. 8. Any company which willfully violates any provision of 
this Act, or any regulation or order issued by the Board pursuant 
thereto, shall upon conviction be fined not more than $1,000 for each 
day during which the violation continues. Any individual who will-
fully participates in a violation of any provision of this Act shall 
upon conviction be fined not more than $10,000 or imprisoned not 
more than one year, or both. 
Every officer, director, agent, and em-
ployee of a bank holding company shall be subject to the same pen-
alties for false entries in any book, report, or statement of such bank 
holding company as are applicable to officers, directoi^s, agents, and 
employees of member banks for false entries in any books, reports, or 
62 Stat. 750. 
statements of member banks under section 1005 of title 18, United 
States Code. 
JUDICIAL R E V I E W 
SEC. 9. Any party aggrieved by an order of tlie Board under this 
Act may obtain a review of such order in the United States Court 
of Appeals within any circuit wherein such party has its principal 
])lace of business, or in the Court of Appeals in the District of Colum-
bia, by filing in the court, within sixty days after the entry of the 
Board's order, a petition praying that the order of the Board be set 
aside. A copy of such petition shall be forthwith served upon the 
70 S T A T . ] 
PUBLIC LAW 51 1 - M A Y 9, 1956 
139 
Board, and thereupon the Board shall certify and file in the court 
a transcript of the record made before the Board. 
Upon the filing 
of the transcript the court shall have jurisdiction to affirm, set aside, 
or modify the order of the Board and to require the Board to take 
such action with regard to the matter under review as the court deems 
proper. 
The findings of the Board as to the facts, if supported by 
substantial evidence, shall be conclusive. 
AMENDMENTS TO INTERNAL REVENUE CODE OF 1954 
SEC. 10. (a) Subchapter O of chapter 1 of the Internal Revenue 
f 
1^^1*0 lo^oi-
Code of 1954 is amended by adding at the end thereof the following io9i. 
new part: 
"PART VIII—DISTRIBUTIONS PURSUANT TO BANK 
HOLDING COMPANY ACT OF 1956 
"Sec. 1101. Distributions pursuant to Bank Holding Company Act of 
1956. 
"Sec. 1102. Special rules. 
"Sec. 1103. Definitions. 
"SEC. 1101. DISTRIBUTIONS PURSUANT TO BANK HOLDING COMPANY 
ACT OF 1956. 
"(a) 
DISTRIBUTIONS OF CERTAIN NON-B.\NKING PROPERTY,— 
"(1) DISTRIBUTIONS or PROHIBITED PROPERTY.—If— 
"(A) a qualified bank holding corporation distributes pro-
hibited property (other than stock received in an exchange to 
which subsection (c) (2) applies)— 
"(i) to a shareholder (with respect to its stock held by 
such shareholder), without the surrender by such share-
holder of stock in such corporation; or 
"(ii) to a shareholder, in exchange for its preferred 
stock; or 
"(iii) to a security holder, in exchange for its secu-
rities; and 
"(B) the Board has, before the distribution, certified that 
the distribution of such prohibited property is necessary 
or appropriate to effectuate section 4 of the Bank Holding 
Company Act of 1956, 
then no gain to the shareholder or security holder from the receipt 
of such property shall be recognized. 
"(2) 
DISTRIBUTIONS OF STOCK AND SECURITIES RECEIVED IN AN 
EXCHANGE TO WHICH SUBSECTION (C) (2) APPLIES. 
I f 
"(A) a qualified bank holding corporation distributes— 
"(i) common stock received in an exchange to which 
subsection (c) (2) applies to a shareholder (with respect 
to its stock held by such shareholder), without the sur-
render by such shareholder of stock in such corporation; 
or 
"(ii) common stock received in an exchange to which 
subsection (c) (2) applies to a shareholder, in exchange 
for its common stock; or 
"(iii) preferred stock or common stock received in an 
exchange to which subsection (c) (2) applies to a share-
holder, in exchange for its preferred stock; or 
"(iv) securities or preferred or common stock received 
in an exchange to which subsection (c) (2) applies to a 
security holder, in exchange for its securities; and 
"(B) any preferred stock received has substantially the 
same terms as the preferred stock exchanged, and any securi-
Ante, p« 135* 
140 
PUBLIC LAW 511-MAY 9, 1956 
[70 STAT. 
ties received have substantially the same terms as the securities 
exchanged, 
then, except as provided in subsection (f), no gain to the share-
holder or security holder from the receipt of such stock or such 
securities or such stock and securities shall be recognized. 
"(3) NoN PRO R
A
T
A DISTRIBUTIONS.—Paragraphs (1) and (2) 
shall apply to a distribution whether or not the distribution is 
pro rata with respect to all of the shareholders of the distributing 
qualified bank holding corporation. 
"(4) EXCEPTION.—This subsection shall not apply to any dis-
tribution by a corporation which has made any distribution pur-
suant to subsection (b). 
"(5) 
DISTRIBUTIONS INVOLVING GIFT OR COMPENSATION.— 
"In the case of a distribution to which paragraph (1) or (2) applies, 
but which— 
26USC 250°^ 
"(-^^ results in a gift, see section 2501, and following, or 
„, ,.__ ^, * 
"(B) has the effect of the payment of compensation, see 
2^"^^^^* 
section 61 (a) (1). 
"(b) 
CORPORATION CEASING TO B E A BANK HOLDING COMPANY.— 
"(1) 
DISTRIBUTIONS OF PROPERTY WHICH CAUSE A CORPORATION 
TO BE A BANK HOLDING COMPANY.—If— 
"(A) a qualified bank holding corporation distributes 
property (other than stock received in an exchange to which 
subsection (c) (3) applies) — 
"(i) to a shareholder (with respect to its stock held 
by such shareholder), Avithout the surrender by such 
shareholder of stock in such corporation; or 
"(ii) to a shareholder, in exchange for its preferred 
stock; or 
"(iii) to a security holder, in exchange for its securi-
ties; and 
"(B) the Board has, before the distribution, certified 
that— 
"(i) such property is all or part of the property by 
reason of which such corporation controls (within the 
meaning of section 2 (a) of the Bank Holding Company 
Ante, p. 133. 
^^^.^ ^f 1956) a bank or bank holding company, or such 
property is part of the property by reason of which such 
corporation did control a bank or a bank holding com-
pany before any property of the same kind was distrib-
uted imder this subsection or exchanged under subsection 
(c) (3) ; and 
"(ii) the distribution is necessary or appropriate to 
effectuate the policies of such Act, 
then no gain to the shareholder or security holder from the receipt 
of such property shall be recognized. 
" ( 2 ) 
IDlSTRIBUTIONS OF STOCK AND SECURITIES RECEIVED IN AN 
EXCHANGE TO WHICH SUBSECTION (c) (3) APPLIES. 
I f 
"(A) a qualified bank holding corporation distributes— 
"(i) common stock received m an exchange to which 
subsection (c) (3) applies to a shareholder (with respect 
to its stock held by such shareholder), without the sur-
render by such shareholder of stock in such corporation; 
or 
"(ii) common stock received in an exchange to which 
subsection (c) (3) applies to a shareholder, in exchange 
for its common stock; or 
70 S T A T . ] 
PUBLIC LAW 511-MAY 9, 1956 
141 
"(iii) preferred stock or common stock received in 
an exchange to which subsection (c) (3) applies to a 
shareholder, in exchange for its preferred stock; or 
" (iV) securities or preferred or common stock received 
in an exchange to which subsection (c) (3) applies to a 
security holder, in exchange for its securities; and 
"(B) any preferred stock received has substantially the 
same terms as the preferred stock exchanged, and any se-
curities received have substantially the same terms as the 
securities exchanged, 
then, except as provided in subsection (f), no gain to the share-
holder or security holder from the receipt of such stock or such 
securities or such stock and securities shall be recognized. 
"(3) Nox PRO R
A
T
A DISTRIBUTIONS.—Paragraphs (1) and (2) 
shall apply to a distribution whether or not the distribution is 
pro rata with respect to all of the shareholders of the distributing 
qualified bank holding corporation. 
"(4) EXCEPTION.—This subsection shall not apply to any dis-
tribution by a corporation which has made any distribution pur-
suant to subsection (a). 
"(5) 
DISTRIBUTIONS INVOLVING GIFT OR COMPENSATION.— 
"In the case of a distribution to which paragraph (1) or (2) applies, 
but- which— 
"(A) results in a gift, see section 2501, and following, or 
26^i<f*2soi* 
"(B) has the effect of the payment of compensation, see 
j~, ^.„^ f, 
section 61 (a) (1). 
^^ "^^ ^^' 
"(c) PROPERTY ACQUIRED AFTER MAY 15, 1955.— 
"(1) I N GENERAL.—Except as provided in paragraphs (2) and 
(3), subsection (a) or (b) shall not apply to— 
"(A] any property acquired by the distributing corpora-
tion alter May 15, 1955, unless (i) gain to such corporation 
with respect to the receipt of such property was not recog-
nized by reason of subsection (a) or (b), or (ii) such prop-
erty was received by it in exchange for all of its stock in 
an exchange to which paragraph (2) or (3) applies, or (iii) 
such property was acquired b^ the distributing corporation 
in a transaction in which gain was not recognized under 
section 305 (a) or section 332, or under section 354 with ,5!*^!^^°*'^^^ 
respect to a reorganization described in section 368 (a) (1) 
(E) or ( F ) , o r 
"(B) any property which was acquired by the distributing 
corporation in a distribution with respect to stock acquired 
by such corporation after May 15,1955, unless such stock was 
acquired by such corporation (i) in a distribution (with 
respect to stock held by it on May 15, 1955, or with respect 
to stock in respect of which all previous applications of this 
clause are satisfied) with respect to which gain to it was not 
recognized by reason of subsection (a) or (b), or (ii) in 
exchange for all of its stock in an exchange to which para-
graph (2) or (3) applies, or (iii) in a transaction in which 
gain was not recognized under section 305 (a) or section 332, 
or under section 354 with respect to a reorganization described 
in section 368,(a) (1) (E) or (F),or 
"(C) any property acquired by the distributing corpora-
tion in a transaction in which gain was not recognized under 
section 332, unless such property was acquired from a corpo-
ration which, if it had been a qualified bank holding corpora-
tion, could have distributed such property under subsection 
(a) (1) or (b) (1). 
354, 368. 
142 
PUBLIC LAW 511-MAY 9, 1956 
[70 S T A T . 
" (2) 
EXCHANGES INVOLVING PROHIBITED PROPERTY.—If— 
"(A) Any qualified bank holding corporation exchanges 
(i) property, which, under subsection (a) (1), such corpo-
ration could distribute directly to its shareholders or se-
curity holders without the recognition of gain to such share-
holders or security holders, and other property (except prop-
erty described in subsection (b) (1) (B) (i)),for (ii) all of 
the stock of a second corporation created and availed of solely 
for the purpose of receiving such property; 
"(B) immediately after the exchange, the qualified bank 
holding corporation distributes all of such stock in a manner 
prescribed in subsection (a) (2) ( A ) ; and 
"(C) before such exchange, the Board has certified (with 
respect to the property exchanged which consists of property 
which, under subsection (a) (1), such corporation could dis-
tribute directly to its shareholders or security holders with-
out the recognition of gain) that the exchange and distribu-
tion are necessary or appropriate to effectuate section 4 of the 
^"*«' P* 135. 
Bank Holding Company Act of 1956, 
then paragraph (1) shall not apply with respect to such distribu-
tion. 
"(3) 
EXCHANGES INVOLVING INTERESTS IN BANKS.—If— 
" (A) any qualified bank holding corporation exchanges (i) 
property which, under subsection (b) (1), such corporation 
could distribute directly to its shareholders or security holders 
without the recognition of gain to such shareholders or secur-
ity holders, and other property (except prohibited property), 
for (ii) all of the stock of a second corporation created and 
availed of solely for the purpose of receiving such property; 
"(B) immediately after the exchange, the qualified bank 
holding corporation distributes all of such stock in a manner 
prescribed in subsection (b) (2) ( A ) ; and 
"(C) before such exchange, the Board has certified (with 
respect to the property exchanged which consists of property 
which, under subsection (b) (1), such corporation could 
distribute directly to its shareholders or security holders 
without the recognition of gain) that— 
"(i) such property is all or part of the property by 
reason of which such corporation controls (within the 
meaning of section 2 (a) of the Bank Holding Com-
Ante, p. 133. 
pauy Act of 1956) a bank or bank holding company, 
or such property is part of the property by reason of 
which such corporation did control a bank or a bank 
holding company before any property of the same kind 
was distributed under subsection (b) (1) or exchanged 
under this paragraph; and 
"(ii) the exchange and distribution are necessary or 
appropriate to effectuate the policies of such Act, 
then paragraph (1) shall not apply with respect to such distri-
bution. 
"(d) 
DISTRIBUTIONS To AVOID FEDERAL INCOME TAX.— 
"(1) PROHIBITED PROPERTY.—Subsection (a) shall not apply 
to a distribution if, in connection with such distribution, the dis-
tributing corporation retains, or transfers after May 15, 1955, 
to any corporation, property (other than prohibited property) 
as part of a plan one of the principal purposes of which is the 
distribution of the earnings and profits of any corporation. 
"(2) BANKING PROPERTY.—Subsection (b) shall not apply to 
a distribution if, in connection with such distribution, the dis-
70 S T A T . ] 
PUBLIC LAW 511-MAY 9, 1956 
143 
tributing corporation retains, or transfers after May 15, 1955, 
to any corporation, property (other than property described in 
subsection (b) (1) (B) (i)) as part of apian one of the principal 
purposes of which is the distribution of the earnings and profits 
of any corporation, 
"(3) CERTAIN CONTRIBUTIONS TO CAPITAL.—In the case of a dis-
tribution a portion of which is attributable to a transfer which 
is a contribution to the capital of a corporation, made after May 
15, 1955, and prior to the date of the enactment of this part, if 
subsection (a) or (b) Avould apply to such distribution but for 
the fact that, under paragraph (1) or (2) (as the case may be) 
of this subsection, such contribution to capital is part of a plan 
one of the principal purposes of which is to distribute the earnings 
and profits of any corporation, then, notwithstanding paragraph 
(1) or (2), subsection (a) or (b) (as the case may be) shall apply 
to that portion of such distribution not attributable to such con-
tribution to capital, and shall not apply to that portion of such 
distribution attributable to such contribution to capital. 
"(e) 
FINAL CERTIFICATION.— 
"(1) FOR SUBSECTION (a).—Subsection (a) shall not apply 
with respect to any distribution by a corporation unless the Board 
certifies that, before the expiration of the period permitted under 
section 4 (a) of the Bank Holding Company Act of 1956 (includ-
ing any extensions thereof granted to such corporation under 
such section 4 (a)), the corporation has disposed of all the 
property the disposition of which is necessary or appropriate to 
effectuate section 4 of such Act (or would have been so necessary 
or appropriate if the corporation had continued to be a bank hold-
ing company). 
"(2) 
FOR SUBSECTION (b).— 
"(A) Subsection (b) shall not apply with respect to any 
distribution by any corporation unless the Board certifies 
that, before the expiration of the period specified in subpara-
graph (B), the corporation has ceased to be a bank holding 
company. 
"(B) The period referred to in subparagraph (A) is the 
period which expires 2 years after the date of the enactment 
of this part or 2 years after the date on which the corporation 
becomes a bank holding company, whichever date is later. 
The Board is authorized, on application by any corporation, 
to extend such period from time to time with respect to 
such corporation for not more than one year at a time if, in 
its judgment, such an extension would not be detrimental 
to the public interest; except that such period may not in 
any case be extended beyond the date 5 years after the date 
of the enactment of this part or 5 years after the date on 
which the corporation becomes a bank holding company, 
whichever date is later. 
"(f) 
CERTAIN EXCHANGES OF SECURITIES.—In the case of an ex-
change described in subsection (a) (2) (A) (iv) or subsection (b) 
(2) (A) (iv), subsection (a) or subsection (b) (as the case may be) 
shall apply only to the extent that the principal amount of the securi-
ties received does not exceed the principal amount of the securities 
exchanged. 
"SEC. 1102. SPECIAL RULES. 
" (a) BASIS OF PROPERTY ACQUIRED IN DISTRIBUTIONS.—If, by reason 
of section 1101, gain is not recognized with respect to the receipt of any 
property, then, under regulations prescribed by the Secretary or his 
delegate— 
Ante, p» 135* 
Ante, p. 139. 
Ii4 
PUBLIC LAW 511-MAY 9, 1956 
[70 ST AT. 
68A Stat. 803. 
26 use 6501. 
Ante, p. 135. 
Ante, p. 143. 
Ante, p. 139. 
Ante, p. 142. 
Ante, p. 133. 
"(1) if the property is received by a shareholder with respect 
to stock, without the surrender by such shareholder of stock, the 
basis of the property received and of the stock with respept to 
which it is distributed shall, in the distributee's hands, be deter-
mined by allocating between such property and such stock the 
adjusted basis of such stock; or 
"(2) if the property is received by a shareholder in exchange 
for stock or by a security holder in exchange for securities, the 
basis of the property received shall, in the distributee's hands, be 
the same as the adjusted basis of the stock or securities exchanged, 
increased by— 
"(A) the amount of the property received which was 
treated as a dividend, and 
"(B) the amount of gain to the taxpayer recognized on 
the property received (not including any portion of such gain 
which was treated as a dividend). 
" (b) PERIODS OF LIMITATION.—The periods of limitation provided 
in section 6501 (relating to limitations on assessment and collection) 
shall not expire, with respect to any deficiency (including interest and 
additions to the tax) resulting solely from the receipt of property 
by shareholders in a distribution which is certified by the Board 
under subsection (a), (b), or (c) of section 1101, until five years after 
the distributing corporation notifies the Secretary or his delegate 
(in such manner and with such accompanying information as the 
Secretary or his delegate may by regulations prescribe) that the 
period (including extensions thereof) prescribed in section 4 (a) of 
the Bank Holding Company Act of 1956, or section 1101 (e) (2) (B), 
whichever is applicable, has expired; and such assessment may be 
made notwithstanding any provision of law or rule of law which 
would otherwise prevent such assessment. 
" ( c ) AlXOCATION OF EARNINGS AND PROFITS. 
"(1) 
DISTRIBUTION OF STOCK IN A CONTROLLED CORPORATION.— 
In the case of a distribution by a qualified bank holding corpora-
tion under section 1101 (a) (1) or (b) (1) of stock in a controlled 
corporation, proper allocation with respect to the earnings and 
profits of the distributing corporation and the controlled corpora-
tion shall be made under regulations prescribed by the Secretary 
or his delegate. 
" ( 2 ) 
E X C H A N G E S DESCRIBED I N SECTION 1101 ( o 
(2) OR ( s ) . — I n 
the case of any exchange described in section 1101 (c) (2) or (3), 
proper allocation with respect to the earnings and profits of the 
corporation transferring the property and the corporation receiv-
ing such property shall be made under regulations prescribed by 
the Secretary or his delegate. 
"(3) 
DEFINITION OF CONTROLLED CORPORATION.—For purposes 
of paragra])h (1), the term 'controlled corporation- means a 
corporation with respect to which at least 80 percent of the 
total combined voting power of all classes of stock entitled to 
vote and at least 80 percent of the total number of shares of all 
other classes of stock is owned by the distributing qualified bank 
holding corporation. 
"(d) ITEMIZATION OF PROPERTY.—In any certification under this 
j)art, the Board shall make such specification and itemization of prop-
erty as may be necessary to carry out the provisions of this part. 
"SEC. 1103. DEFINITIONS. 
"(a) BANK HOLDING COMPANY.—For purposes of this part, the 
term 'bank holding company' has the meaning assigned to such term 
by section 2 of the Bank Holding Company Act of 1956. 
70 S T A T . ] 
PUBLIC LAW 511-MAY 9, 1956 
145 
"(b) 
QUALIFIED BANK HOLDING CORPORATION.— 
"(1) I N GENERAL.—Except as provided in paragraph (2), for 
purposes of this part the term 'qualified bank holding corpora-
tion' means any corporation (as defined in section 7701 (a) (3)) 
which is a bank holding company and which holds prohibited 
property acquired by it— 
"(A) on or before May 15, 1955, 
"(B) in a distribution in which gain to such corporation 
with respect to the receipt of such property was not recog-
nized by reason of subsection (a) or (b) or section 1101, or 
"(C) in exchange for all of its stock in an exchange de-
scribed in section 1101 (c) (2) or (c) (3). 
"(2) 
LIMITATIONS.— 
"(A) A bank holding company shall not be a qualified 
bank holding corporation, unless it would have been a bank 
holding company on May 15,1955, if the Bank Holding Com-
pany Act of 1956 had been in effect on such date, or unless 
it is a bank holding company determined solely by reference 
to— 
"(i) property acquired by it on or before May 15, 
1955, 
"(ii) property acquired by it in a distribution in 
which gain to such corporation with respect to the re-
ceipt of such property was not recognized by reason of 
subsection (a) or (b) of section 1101, and 
"(iii) property acquired by it in exchange for all of 
its stock in an exchange described in section 1101 (c) 
(2) or (3). 
"(B) A bank holding company shall not be a qualified 
bank holding corporation by reason of property described 
in subparagraph (B) of paragraph (1) or clause (ii) of 
subparagraph (A) of this paragraph, unless such property 
was acquired in a distribution with respect to stock, which 
stock was acquired by such bank holding company— 
"(i) on or before May 15, 1955, 
"(ii) in a distribution (with respect to stock held by 
it on May 15, 1955, or with respect to stock in respect 
of which all previous applications of this clause are 
satisfied) with respect to which gain to it was not 
recognized by reason of subsection (a) or (b) of section 
1101, or 
"(iii) in exchange for all of its stock in an exchange 
described in section 1101 (c) (2) or (3). 
"(C) A corporation shall be treated as a qualified bank 
holding corporation only if the Board certifies that it satisfies 
the foregoing requirements of this subsection. 
"(c) PROHIBITED PROPERTY.—^For purposes of this part, the term 
'prohibited property' means, in the case of any bank holding com-
pany 
.property (other than nonexempt property) the disposition of 
which* would be necessary or appropriate to effectuate section 4 of 
the Bank Holding Company Act of 1956 if such company continued 
to be a bank holding company beyond the period (including any exten-
sions thereof) specified in subsection (a) of such section or in section 
1101 (e) (2) (B) of this j>art, as the case may be. The term 'pro-
hibited property' does not include shares of any company held by a 
bank holding company to the extent that the prohibitions of section 4 
of the Bank Holding Company Act of 1956 do not apply to the owner-
ship by such bank holding company of such property by reason of 
subsection (c) (5) of such section. 
68A Stat. 911. 
26 u s e 7701. 
Ante, p. 139. 
Ante, p. 142* 
Ante, p. 139. 
Ante, p. 142* 
Ante, p. 139. 
Ante, p. 142. 
Ante, p. 135, 
" P r o h i b i t e d 
proper^". 
69225 O - 57 - 14 (Vol. 70) 
U6 
PUBLIC LAW 512-MAY 9, 1956 
[70 ST 
AT. 
"(d) NoNEXEMPT PRorERTY.—For purposes of this part, the term 
'iionexempt property' means— 
"(1) obligations (including notes, drafts, bills of exchange, 
and bankers' acceptances) having a maturity at the time of 
issuance of not exceeding 24 months, exclusive of days of grace; 
"(2) securities issued by or guaranteed as to principal or in-
terest by a government or subdivision thereof or by any instru-
mentality of a government or subdivision; or 
"(3) money, and the right to receive money not evidenced by 
a security or obligation (other than a security or obligation de-
scribed in paragraph (1) or (2)). 
"(e) BOARD.—For purposes of this part, the term 'Board' means 
the Board of Governors of the Federal Reserve System." 
(b) The table of parts for subchapter O of chapter 1 of the Internal 
2V^us°c 10^01- Revenue Code of 1954 is amended by adding at the end thereof the 
1091. 
following: 
"Part VIII. Distribiitions pursuant to Bank Holding Company Act 
of 1956." 
(c) The amendments made by this section shall apply "with respect 
to taxable years ending after the date of the enactment of this Act. 
SAVING PROVISIOX 
SEC. 11. Nothing herein contained shall be interpreted or construed 
as approving any act, action, or conduct which is or has been or may 
be in violation of existing law, nor shall anything herein contained 
constitute a defense to any action, suit, or proceeding pending or here-
after instituted on account of anj' prohibited antitrust or monopolistic 
act, action, or conduct. 
SEPARABILITY OF PROVISIONS 
SEC. 12. If any provision of this Act, or the application of such 
provision to any person or circumstance, shall be held invalid, the 
remainder of the Act, and the application of such provision to persons 
or circumstances other than those to which it is held invalid, shall 
not be affected thereby. 
Approved May 9, 1956. 
Public Law 512 
CHAPTER 241 
M«y9.1956 
^ 
A C T 
[H. R. 6573] 
rj^Q authorize renewals of a lease of the Annette Island Airport to the United 
States. 
Be it enacted hy the Senate and House of Repremntatives 
of the 
Ai^rt^'Aiask^** United States of America in Congress assembled^ That the Congress 
of the United States hereby approves the extension, from year to year, 
until June 30, 1999, of a lease of certain land comprising part of 
Annette Island, Alaska, for use by the Civil Aeronautics Administra-
tion as an airport, entered into by the United States of America and the 
Council of the Annette Island Keserve on December 13,1948, section 5 
of which lease provides that no renewal thereof shall extend beyond 
June 30, 1959, unless approved by Congress. 
Approved May 9, 1956.