Bank Holding Company Tax Act
PL 94-452 (H.R.11997), enacted 10/02/1976

PUBLIC LAW 94-452—OCT. 2, 1976 
90 STAT. 1503 
Public Law 94-452 
94th Congress 
An Act 
To amend the Internal Revenue Code of 1954 with resi^ect to the tax treatment 
of certain divestitures of a.ssets by bank holding companies. 
Be it enacted hy the Henate and House of Representatives 
of the 
United States of America in Congress 
assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the "Bank Holding Company Tax Act of 
1976". 
SEC. 2. DISTRIBUTIONS PURSUANT TO BANK HOLDING COMPANY ACT 
AMENDMENTS OF 1970. 
(a) TAX-FREE DISTRIBUTIOXS.—Part V I I I of subchapter O of chap-
ter 1 of the Internal Revenue Code of 1954 (relating to distributions 
l)uisuant to Bank Holding Company Act of 1956) is amended to read 
as follows: 
"PART VIII—DISTRIBUTIONS PURSUANT TO BANK 
HOLDING COMPANY ACT 
"Sec. 1101. Distributions pursuant to Bank Holding Company Act. 
"Sec. 1102. Special rules. 
"Sec. 1108. Definitions. 
"SEC. 1101. DISTRIBUTIONS PURSUANT TO BANK HOLDING COMPANY 
ACT. 
" (a) DISTRIBUTIONS OF CERTAIN NON-BANKING PROPERTY.— 
" (1) DISTRIBUTIONS OF PROHIBITED I'ROPERTY.—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 securi-
ties, 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, 
then no gain to the shareholder or security holder from the receipt 
of such property shall be recognized. 
"(2) DISTRIBUTIONS or STOCK AND SECURITIES RECEIVED IN AN 
EXCIIAXOE TO WHICH SUBSECTION (C) (2) APPLIES.—If— 
" (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 
Oct. 2, 1976 
[H.R. 11997] 
Bank Holding 
Company Tax Act 
of 1976. 
26 u s e 1101 
note. 
12 u s e 1841 
note. 
26 u s e 1101. 
89-194 O—78—Dt. 1 
9fl 
90 STAT. 1504 
PUBLIC LAW 94-452—OCT. 2, 1976 
"(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-
ties received have substantially the same terms as the securi-
ties 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 ) 
P R O KATA AND OTHER REQUIREMENTS. 
'trj 
" ( ^ ) IN GENERAL.—Paragraphs (1) and (2) of this sub-
section, or paragraphs (1) and (2) of subsection (b), as the 
case may be, shall apply to any distribution to the sharehold-
ers of a qualified bank holding corporation only if each 
distribution— 
"(i) which is made by such corporation to its share-
holders after July 7, 1970, and on or before the date on 
which the Board makes its final certification under sub-
section (e), and 
' > ' 
• 
"(ii) to which such paragraph (1) or (2) applies 
(determined without regard to this paragraph), 
meets the requirements of subparagraph (B), (C), or (D). 
"(B) PRO RATA REQUIREMENTS.—A distribution meets the 
requirements of this subparagraph if the distribution is pro 
rata with respect to all shareholders of the distributing quali-
fied bank holding corporation or with respect to all share-
holders of common stock of such corporation. 
"(C) REDEMPTIONS WHEN UNIFORM O
F
F
E
R IS M
A
D
E
.
—
^
A dis-
tribution meets the requirements of this subparagraph if the 
distribution is in exchange for stock of the distributing quali-
fied bank holding corporation and such distribution is pur-
suant to a good faith offer made on a uniform basis to all 
shareholders of the distributing qualified bank holding cor-
poration or to all shareholders of common stock of such 
corporation. 
"(D) NON-PRO RATA DISTRIBUTIONS F
R
O
M CERTAIN CLOSELY-
HELD CORPORATIONS.—A distribution meets the requirements 
of this subparagraph if such distribution is made by a quali-
fied bank holding corporation which does not have more than 
26 use 1371. 
10 shareholders (within the meaning of section 1371 (a) (1)) 
and does not have as a shareholder a person (other than an 
estate) which is not an individual, and if the Board (after 
consultation with the Secretary or his delegate) certifies 
that— 
"(i) a distribution which meets the requirements of 
subparagraph (B) or (C) is not appropriate to effectuate 
section 4 or the policies of the Bank Holding Company 
12 use 1843. 
Act, and 
"(ii) the distribution being made is necessary or 
appropriate to effectuate section 4 of the policies of such 
Act. 
v / 
PUBLIC LAW 94-452—OCT. 2, 1976 
90 STAT. 1505 
"(4) EXCEPTION.—This subsection shall not apply to any dis-
tribution by a corporation if such corporation, a corporation 
having control of such corporation, or a subsidiary of such cor-
poration has made any distribution pursuant to subsection (b) 
or has made an election under section 6158 with respect to bank Post, p. 1512. 
property (as defined in section 6158 (f) (3)). 
"(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 USC 2501. 
"(B) has the effect of the payment of compensation, see 
section 61. 
26 USC 61. 
"(b) 
CORPORATION CEASING To 
B E A B A N K HOLDING COMPANY.— 
"(1) 
DISTRIBUTIONS OF PROPERTY WHICH CAUSE A CORPORATION 
TO BE A BANK HOLDING COMPANY. 
I F 
" (A) a qualified bank holding corporation distributes prop-
erty (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), without 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 securities, 
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 Com-
pany Act) a bank or bank holding company, or such 
12 USC 1841. 
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 this subsection or exchanged under 
subsection (c) (3), and 
"(ii) the distribution is necessary or appropriate to 
effectuate the policies of such Act, 
; 
'?* i i i 
then no gain to the shareholder or security holder from the receipt 
of such property shall be recognized. 
"(2) 
DISTRIBUTIONS or STOCK AND SECURITIES RECEIVED I N AN 
EXCHANGE TO WHICH SUBSECTION ( c ) ( s ) APPLIES. 
I f 
"(A) a qualified bank holding corporation distributes— 
"(i) common stock received in 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 
"(iii) preferred stock or common stock received in an 
exchange to which subsection (c) (3) 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) (3) applies to a 
; .': 
security holder, in exchange for its securities, and 
90 STAT. 1506 
PUBLIC LAW 94-452—OCT. 2, 1976 
"(B) any preferred stock received has substantially the 
same terms as the preferred stock exchanged, and any securi-
ties received have substantially the same terms as the securi-
ties 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) PRO RATA AND OTHER REQUIREMENTS.—For pro rata and 
other requirements, see subsection (a) (3). 
"(4) EXCEPTION.—This subsection shall not apply to any dis-
tribution by a corporation if such corporation, a corporation 
having control of such corporation, or a subsidiary of such cor-
poration has made any distribution pursuant to subsection (a) or 
Post, p. 1512. 
has made an election under section 6158 with respect to prohibited 
property. 
"(5) 
DISTRIBUTIONS INVOLVING GIFT OR COMPENSATION.—In 
the case of a distribution to which paragraph (1) or (2) applies 
but which— 
26 use 2501. 
" (A) results in a gift, see section 2501 and following, or 
*'(B) has the effect of the payment of compensation, see 
26 use 61. 
section 61. 
"(c) PROPERTY ACQUIRED AFTER J U L Y 7,1970.-— 
"(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 after July 7, 1970, 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 property 
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 by the distributing corporation in a 
transaction in Avhich gain was not recognized under section 
26 use 305, 
305(a) or section 332, or under section 354 or 356 (but only 
332, 354, 356. 
with respect to property permitted by section 354 or 356 to 
be received without the recognition of gain or loss) with 
respect to a reorganization described in section 368(a)(1) 
26 use 368. 
(A), (B), ( E ) , o r ( 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 July 7, 1970, unless such stock was 
acquired by such corporation (i) in a distribution (with 
respect to stock held by it on July 7, 1970, 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 or 356 (but only with respect to property 
permitted by section 354 or 356 to be received without the 
recognition of gain or loss) with respect to a reorganization 
described in section 368(a) (1) (A), ( B ) , ( E ) , or ( F ) , or 
"(C) any property acquired by the distributing corporation 
in a transaction in which gain was not recognized under 
26 use 332. 
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), or 
PUBLIC LAW 94-452—OCT. 2, 1976 
90 STAT. 1507 
" ( D ) any property acquired by the distributing corporation 
in a transaction in which gain was not recognized under sec-
tion 354 or 356 with respect to a reorganization described in 26 USC 354, 
section 368(a)(1) 
(A) or (B), unless such property was 356. 
acquired by the distributing corporation in exchange for prop- 26 USC 368. 
erty which the distributing corporation could have distributed 
under subsection (a)(1) or (b)(1). 
"(2) 
EXCHANGES INVOLVING PROHIBITED PROPERTY.—If— 
" (A) any qualified bank holding corporation exchanges (i) 
property, which, under subsection (a) (1), such corporation 
could distribute directly to its shareholders or security hold-
ers without the recognition of gain to such shareholders or 
security holders, and other property (except property de-
scribed 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 distribution, the I3oard 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 without 
the recognition of gain) that the exchange and distribution 
are necessary or appropriate to effectuate section 4 of the Bank 
Holding Company Act, 
12 USC 1843. 
then paragraph 
(1) 
shall not apply with respect to such 
distribution. 
" (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 
security holders, and other property (except prohibited prop-
erty), 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 man-
ner prescribed in subsection (b) (2) (A), and 
"(C) before such distribution, 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 
withouttherecognitionof 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 Company 
Act) a bank or bank holding company, or such property 
12 USC 1841. 
is part of the property by reason of which such corpora-
tion 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 
distribution. 
90 STAT. 1508 
PUBLIC LAW 94-452—OCT. 2, 1976 
"(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 July 7, 1970, to 
*
* 
any corporation, property (other than prohibited property) as 
part of a plan one of the principal purposes of which is the dis-
tribution 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-
tributing corporation retains, or transfers after July 7, 1970 to 
any corporation, property (other than property described in sub-
section (b) (1) (B) (i)) as part of a plan one of the principal pur-
poses of which is the distribution of the earnings and profits of 
any corporation. 
"(e) FINAL CERTIFICATION.— 
"(1) FOR SUBSECTION (a).—Subsection (a) shall not apply with 
respect to any distribution by a corporation unless the Board cer-
tifies, before the close of the calendar year following the calendar 
year in which the last distribution occurred, that the corporation 
has (before the expiration of the period prohibited property is 
12 use 1841 
permitted under the Bank Holding Company Act to be held by a 
°°*®- 
bank holding company) disposed of all of the property the dis-
position of which is necessary or appropriate to effectuate sec-
12 use 1843. 
tion 4 of the Bank Holding Company Act. 
"(2) FOR SUBSECTION (b).—Subsection (b) shall not apply with 
respect to any distribution by a corporation unless the Board 
certifies, before the close of the calendar year following the calen-
dar year in which the last distribution occurred, that the corpora-
tion has (before the expiration of the period prohibited property is 
permitted under the Bank Holding Company Act to be held by a 
bank holding company) ceased to be a bank holding company. 
"(f) CERTAIN EXCHANGES OF SECURITIES.—In the case of an exchange 
described in subsection ( a ) ( 2 ) ( A ) ( i v ) or subsection ( b ) ( 2 ) ( A ) ( i v ) , 
subsection (a) or subsection (b) (as the case may be) shall apply only 
to the extent that the principal amount of the securities received does 
not exceed the principal amount of the securities exchanged. 
26 use 1102. 
"SEC. 1102. SPECIAL RULES. 
Regulations. 
" (a) BASIS OF PROPERTY ACQUIRED I N 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— 
"(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 respect 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 the amount of gain to the taxpayer recognized on 
the property received. 
"(b) PERIODS OF LIMITATION.—The periods of limitation provided 
26 use 6501. 
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 
PUBLIC LAW 94-452—OCT. 2, 1976 
90 STAT. 1509 
shareholders in a distribution which is certified by the Board under sub-
section (a), (b), or (c) of section 1101, until 5 years after the dis-
tributing 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) — 
"(1) that the final certification required by subsection (e) of 
section 1101 has been made, or 
'' (2) that such final certification will not be made; 
and such assessment may be made notwithstanding any provision 
of law or rule of law which would otherwise prevent such assessment. 
"(c) ALLOCATION OF EARNINGS AND PROFITS,— 
" (1) DISTRIBUTION OF STOCK IN A CONTROLLED CORPORATION.—In Regulations, 
the case of a distribution by a qualified bank holding corporation 
under section 1101 (a)(1) or (b)(1) of stock in a controlled 
corporation, proper allocation with respect to the earning and 
profits of the distributing corporation and the controlled corpora-
tion shall be made under regulations prescribed by the Secretary 
or his delegate. 
"(2) EXCHANGES DESCRIBED IN SECTION 1101(C) (2) OR (3).—In Regulations, 
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 
receiving such property shall be made under regulations prescribed 
by the Secretary or his delegate. 
"(3) 
DEFINITION OF CONTROLLED CORPORATION.—For purposes 
of paragraph (1), the term 'controlled corporation' means a cor-
poration 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 hold-
ing corporation. 
"(d) 
ITEMIZATION OF PROPERTY.—In any certification under this 
part, 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) B A N K HOLDING COMPANY; B A N K HOLDING COMPANY ACT.— 
For purposes of this part— 
"(1) B A N K HOLDING COMPANY.—The term 'bank holding com 
pany' means—• 
" ( A ) a bank holding company within the meaning of sec 
tion 2(a) of the Bank Holding Company Act, or 
"(B) a bank holding company subsidiary within the mean-
ing of section 2(d) of such Act. 
"(2) B A N K HOLDING COMPANY ACT.—The term 'Bank Holding 
Company Act' means the Bank Holding Company Act of 1956, 
j 
as amended through December 31, 1970 (12 U.S.C. 1841 et seq.). 
" (b) QUALIFIED B A N K 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)) 
26 USC 7701 
which is a bank holding company and which holds prohibited 
property acquired by it—• 
" (A) on or before July 7,1970, 
"(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) of section 1101, or 
26 USC 1103. 
12 USC 1841 
note. 
12 USC 1841. 
90 STAT. 1510 
PUBLIC LAW 94-452—OCT. 2, 1976 
"(C) in exchange for all of its stock in an exchange 
described 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 hold-
ing company on July 7, 1970, if the Bank Holding Company 
12 use 1841 
Act Amendments of 1970 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 July 7, 1970, 
" (ii) property acquired by it in a distribution in which 
^.^, 
gain to such corporation with respect to the receipt of 
such property was not recognized by reason of subsec-
tion (a) or (b) of section 1101, or 
"(iii) property acquired by it in exchange for all of 
its stock in an exchange described in section 1101(c) (2) 
or (3). 
For purposes of this subparagraph, property held by a cor-
; J 
poration having control of the corporation or by a subsidiary 
of the corporation shall be treated as held by the corporation. 
"(B) A bank holding company si.all not be a qualified bank 
holding corporation by reason of property described in sub-
paragraph (B) of paragraph (1) or clause (ii) of subpara-
graph (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 July 7,1970, 
"(ii) in a distribution (with respect to stock held by 
it on July 7, 1970, or with respect to stock in respect of 
w^hich all previous applications of this clause are satis-
fied) 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 satis-
fies the foregoing requirements of this subsection. 
"(3) 
CERTAIN SUCCESSOR CORPORATIONS.—For purposes of this 
subsection, a successor corporation in a reorganization described 
26 use 368. 
in section 368(a) (1) (F) shall succeed to the status of its prede-
cessor corporation as a qualified bank holding corporation. 
"(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 
12 use 1843. 
Bank Holding Company Act if such company continued to be a bank 
holding company beyond the period 
(including any extensions 
thereof) specified in subsection (a) of such section. The term 'pro-
hibited property' also includes shares of any company not in excess 
of 5 percent of the outstanding voting shares of such company if the 
prohibitions of section 4 of such Act apply to the shares of such 
company in excess of such 5 percent. 
"(d) NONEXEMPT PROPERTY.— For purposes of this part, the term 
'nonexempt property' means— 
"(1) obligations (including notes, drafts, bills of exchange, 
and bankers' acceptances) having a maturity at the time of issu-
ance of not exceeding 24 months, exclusive of days of grace, 
PUBLIC LAW 94-452—OCT. 2, 1976 
90 STAT. 1511 
'i' 
"(2) securities issued by or guaranteed as to principal or inter-
est by a <>o\ernnient or subdivision thereof or by any instru-
mentality of a goverjinient or subdivision, or 
"(3) money, and the right to receive money not evidenced by 
a security or obligation (other than a security or obligation 
described in paragraph (1) or (2)). 
"(e) BOARD.—For purposes of this part, the terra 'Board' means 
the Board of Governors of the Federal Reserve System, 
"'(f) CoNTKOi>: SUBSIDIARY.—For purposes of this part— 
"(1) CONTROL.—Except as provided in section 1102(c)(3), a 
corporation shall be treated as having control of another corpora-
tion if such corporation has control (within the meaning of 
section 2(a)(2) of the Bank Holding Company Act) of such 
12 USC 1841. 
other corporation. 
"(2) SUBSIDIARY.—The term 'subsidiaiy' has the meaning given 
to such term by section 2(d) of the Bank Holding Company 
Act. 
" ( g ) FLECTIOX T O FOREGO GRANDFATHER PROVISION FOR A L L PROP-
ERTY REPRESENTING P R E - J U N E 30, 1968, ACTIVITIES.—Any bank hold-
ing company may elect, for purposes of this part and section 6158, to Post, p. 1512. 
have the determination of whether property is property described in 
subsection (c) or is property eligible to be distributed without recog-
nition of gain under section 1101 (b)(1) made under the Baiik Holding 
Company Act as if sucli Act did not contain the proviso of section 
4(a) (2) thereof. Any election under tliis subsection shall appl.y to all Regulations. 
pro])erty described in such proviso and shall be made at such time and 
in such manner as the Secretary or his delegate nuiy by regulations 
prescribe. Any such election, once made, shall be irrevocable. An elec-
tion under this subsection or subsection (h) shall not apply unless the 
final certification referred to in section 1101(e) or section 6ir)8(c) (2), 
as the case may be, includes a certification by the Board that the bank 
holding company has disposed of either all banking property or all 
nonbanking property. 
"(h) ELECTION T O UIVEST ALL BANKING OR XONBANKING PROPERTY 
IX CASE OF CERTAIN CLOSELY HELD BANK HOLDING COMPANIES.—Any 
i)ank holding company may elect, for purposes of this part and section 
6158, to ha\e the determination of whether ])roperty is property 
described in subsection (c) or is property eligible to be distributed 
without i-ecognition of gain undei- section 1101(b) (1) made under the 
Bank Holding Company Act as if such Act did not contain clause (ii) 
of section 4(c) of such Act. Any election under this sul)section shall 
12 USC 1843. 
apply to all proi)ei'ty described in subsection (c), or to all property 
eligible to be distributed without recognition of gain under section 
1101 (b) (1), as the case may be. and shall be made at such time and in 
such nuinner as the Secretary or his delegate may by regulations pre-
scribe. Any such election, once made, shall be irrevocable." 
(b) AMENDMENT OF SECTION 311(d).—Paragraph (2) of section 
311(d) of such Code (relating to exceptions and limitations to the 
recognition of gain where appreciated property is used to redeem 
stock) is amended by striking out "and" at the end of subpai'agraph 
( F ) . by striking out the period at the end of subparagra])h (G) and 
insei'ting in lieu thereof " ; and", and by adding at the end thei'eof the 
following new subparagraph: 
''(H) a distribution of stock to a distributee which is not an 
organization exempt from tax under section 501(a), if with 
26 USC 501. 
respect to such distributee, subsection (a) (1) or (b) (1) of 
section 1101 (relating to distributions ]>ui'suant to Bank 
Holding Company Act) applies to such distribution." 
26 USC 311. 
90 STAT. 1512 
PUBLIC LAW 94-452—OCT. 2, 1976 
(c) CLERICAL AMENDMENT.—The table of parts for subchapter O of 
chapter 1 of such Code is amended by striking out "of 1956". 
26 use 1101 
(d) EFFECTIVE DATE.— 
note. 
(1) FOR SUBSECTION (a).—The amendments made by subsections 
(a) and (c) shall take effect on October 1, 1977, with respect to 
distributions after July 7, 1970, in taxable years ending after 
July 7,1970, but only in the case of qualified bank holding corpo-
rations (within the meaning of section 1103(b) of the Internal 
Revenue Code of 1954, as amended by subsection (a) of this 
section). 
(2) 
SPECIAL RULE FOR CERTIFYING DISTRIBUTIONS WHICH HAVE 
ALREADY TAKEN PLACE.—For purposes of scctions 1101 ( a ) ( 1 ) ( B ) , 
- ^ = 
1101(a)(3)(D), 
1101(b)(1)(B), 
1101(c)(2)(C), 
1101(c)(3) 
(C), 
and 1101(e) of the Internal Revenue Code of 1954 (as 
amended by subsection (a) of this section), in the case of any dis-
tribution which takes place on or before the 90th day after the 
date of the enactment of this Act, a certification by the Federal 
Reserve Board described in any such section shall be treated as 
made before the distribution (or, in the case of section 1101(e), 
' I 
before the close of the calendar year following the calendar year 
in which the last distribution occurred) if application for such 
certification is made before the close of the 90th day after the date 
of the enactment of this Act. 
(3) PERIOD OF LIMITATIONS.—If refund or credit of any over-
payment of income tax attributable to the amendment made by 
subsection (a) is prevented at any time before October 1,1978, by 
the operation of any law or rule of law, refund or credit of such 
overpayment may, nevertheless, be made or allowed if claim 
therefor is filed before October 1,1978. 
26use311 note. 
(4) FOR SUBSECTION (b).—The amendment made by subsection 
(b) shall take effect on October 1, 1977, with respect to distri-
butions after December 31, 1975. in taxable years ending after 
December 31,1975. 
SEC. 3. INSTALLMENT PAYMENT OF TAX. 
(a) INSTALLMENT PAYMENT.—Subchapter A of chapter 62 of the 
Internal Revenue Code of 1954 (relating to place and due date for pay-
ment of tax) is amended by adding at the end thereof the following 
new section: 
26 use 6158. 
"SEC. 6158. INSTALLMENT PAYMENT OF TAX ATTRIBUTABLE 
TO 
DIVESTITURES PURSUANT TO BANK HOLDING COMPANY 
ACT AMENDMENTS OF 1970. 
"(a) ELECTION OF EXTENSION.—If, after July 7, 1970, a qualified 
bank holding corporation sells bank property or prohibited property, 
the divestiture of either of which the Board certifies, before such sale, 
is necessary or appropriate to effectuate section 4 or the policies of the 
12 use 1843. 
Bank Holding Company Act, the tax under chapter 1 attributable to 
such sale shall, at the election of the taxpayer, be payable in equal 
annual installments beginning with the due date (determined without 
e.:tension) for the taxpayer's return of tax under chapter 1 for the 
taxable year in which the sale occurred and ending with the corre-
sponding date in 1985. If the number of installments determined under 
the preceding sentence is less than 10, such number shall be increased 
to 10 equal annual installments which begin as provided in the pre-
ceding sentence and which end on the corresponding date 10 years 
Regulations. 
later. An election under this subsection shall be made at such time and 
in such manner as the Secretary or his delegate may by regulations 
prescribe. 
PUBLIC LAW 94-452—OCT. 2, 1976 
90 STAT. 1513 
"(b) LIMITATIONS.— 
"(1) TREATMENT NOT AVAILABLE TO TAXPAYER FOR BOTH BANK 
PROPERTY AND PROHIBITED PROPERTY. 
T h i s Sectioil sliall IlGt a p p l y 
to any sale of prohibited property if the taxpayer (or a corpora-
tion having control of the taxpayer or a subsidiary of the tax-
payer) has made an election under subsection (a) with respect to 
bank property or has made any distribution pursuant to section 
1101 (b). This section shall not apply to bank property if the tax-
payer (or a corporation having control of the taxpayer or a sub-
sidiary of the taxpayer) has made an election under subsection 
(a) with respect to prohibited property or has made any distri-
bution pursuant to section 1101 (a). 
26 USC 1101. 
"(2) 
TREATMENT NOT AVAILABLE FOR CERTAIN INSTALLMENT 
SALES.—No election may be made under subsection (a) with 
respect to a sale if the income from such sale is being returned at 
the time and in the manner provided in section 453 (relating to 26 USC 453. 
installment method). 
"(c) ACCELERATION OF PAYMENTS.—If an election is made under 
subsection (a) and before the tax attributable to such sale is paid in 
full— 
"(1) any installment under this section is not paid on or before 
the date fixed by this section for its payment, or 
"(2) the Board fails to make a certification similar to the 
v 
applicable certification provided in section 1101(e) within the 
time prescribed therein (for this purpose treating the last such 
sale as constituting the last distribution), 
then the extension of time for payment of tax provided in this section 
shall cease to apply, and any portion of the tax payable in installments 
shall be paid on notice and demand from the Secretary or his delegate. 
"(d) PRORATION OF DEFICIENCY TO INSTALLMENTS.—If an election 
is made under subsection (a) and a deficiency attributable to the sale 
has been assessed, the deficiency shall be prorated to such installments. 
The part of the deficiency so prorated to any installment the date for 
payment of which has not arrived shall be collected at the same time 
as, and as part of, such installment. The part of the deficiency so 
prorated to any installment the date for payment of which has arrived 
shall be paid on notice and demand from the Secretary or his delegate. 
This subsection shall not apply if the deficiency is due to negligence, 
to intentional disregard of rules and regulations, or to fraud with intent 
to evade tax. 
"(e) BOND MAY B E REQUIRED.—If an election is made under this 
section, section 6165 shall apply as though the Secretary were extending 
26 USC 6165, 
tlie time for payment of the tax. 
"(f) DEFINITIONS.—For purposes of this section— 
"(1) TERMS HAVE MEANINGS GIVEN TO TTI7.M BY SECTION iios.— 
The terms 'qualified bank holding corporation', 'Bank Holding 
Company Act', 'Board'; 'control', and 'subsidiary' have the 
respective meanings given to such terms by section 1103. 
''(2) 
PROHIBITED PROPERTY.—The term 'prohibited 
property' 
means property held by a qualified bank holding corporation 
which could be distributed without recognition of gain under 
section 1101(a)(1). 
"(3) BANK PROPERTY.—The term 'bank property' means prop-
erty held by a qualified bank holding corporation which could be 
distributed without recognition of gain under section 1101 (b) (1). 
"(g) CROSS REFERENCES.— 
"(1) Security.—For authority of the Secretary or his delegate to 
require security in the case of an extension under this section, see 
section 6165. 
90 STAT. 1514 
PUBLIC LAW 94-452—OCT. 2, 1976 
"(2) Period of limitation.—For extension of the period of limitation 
in the case of an extension under this section, see section 6503(i)." 
(b) EXTENSION OF T I M E FOR COLLECTION OF TAX.—Section 6503 of 
26 use 6503. 
such Code (relating to suspension of running of period of limitation) 
is amended by redesignating subsection (i) as subsection (j) and by 
inserting after subsection (li) the following new subsection: 
"(i) 
EXTENSION OF T I M E FOR COLLECTING TAX ATTRIBUTABLE TO 
DIVESTITURES PURSUANT TO B A N K HOLDING COMPANY A C T AMEND-
12 use 1841 
MENTS OF 1970.—The running of the period of limitations for collection 
note. 
of the tax attributable to a sale with respect to which the taxpayer 
makes an election under section 6158(a) shall be suspended for the 
period during which there are any unpaid installments of such tax." 
(c) TECHNICAL AMENDMENTS.— 
(1) The table of sections for subchapter A of chapter 62 of 
such Code is amended by adding at the end thereof the follow-
ing new" item: 
"Sec. 6158. Installment payment of tax attributable to divestitures pur-
suant to Bank Holding Company Act Amendments of 
1970." 
26 use 6151 
(2) Subsection (a) of section 6151 of such Code (relating to 
time and place for paying tax shown on returns) is amended by 
striking out "section," and inserting in lieu thereof "subchapter,". 
26 use 6601. 
(3) Paragraph (2) of section 6601 (b) of such Code (relating 
to interest) is amended— 
(A) by striking out "or 6156(a)" and inserting in lieu 
thereof ", 6156(a), or 6158(a)", 
(B) by striking out "or 6156(b)" and inserting in lieu 
thereof ", 6156(b), or 6158 ( a ) " ; and 
(C) by inserting at the end thereof the following new 
sentence: 
"For purposes of subparagraph ( A ) , section 6158(a) shall be 
treated as providing that the date prescribed for payment of 
each installment shall not be later than the date prescribed for 
payment of the 1985 installment." 
26 use 1101 
(d) APPLICABILITY TO CERTAIN SUCCESSOR CORPORATIONS.—If, after 
note. 
July 7,1970, and before August 1,1974— 
(1) a corporation acquires substantially all of the properties 
of a qualified bank holding corporation (as defined in section 
1103(b) of the Internal Revenue Code of 1954) in a transac-
26 use 368. 
tion described in sections 368 (a) (1) (A) and 368 (a) (2) ( D ) , and 
(2) the acquiring corporation (or a corporation in control of 
the acquiring corporation) acquires beneficial interests in shares 
12 use 1841. 
described in section 2(g) (2) of the Bank Holding Company Act 
(as defined in section 1103(a) (2) of the Internal Revenue Code 
12 use 351. 
of 1954) in a transaction to which section 351 applies, 
then, the acquiring corporation (or a corporation which is in con-
trol (within the meaning of section 2(a)(2) of such Act) of the 
acquiring corporation or a subsidiary (within the meaning of section 
2(d) of such Act) of the corporation so in control) shall be treated 
as a qualified bank holding corporation for purposes of section 1103 
(b) and 6158 of the Internal Revenue Code of 1954 and the shares 
described in such section 2(g) (2) shall be considered property which 
is acquired by such corporation, for purposes of section 1101(c) (1) 
(A) (iii) of the Internal Revenue Code of 1954, after July 7, 1970. 
26 use 6158 
(e) EFFECTIVE DATES.— 
note. 
PUBLIC LAW 94-452-~0CT. 2, 1976 
90 STAT. 1515 
(1) I N GENERAL.—The amendments made by this section shall 
take effect on October 1, 1977, with respect to sales after July 7, 
1970, in taxable years ending after July 7, 1970, but only in 
the case of qualified bank holding corporations (within the mean-
ing of section 1103(b) of the Internal Revenue Code of 1954, 
as amended by section 2(a) of this Act). 
(2) SPECIAL RULE FOR CERTIFYING SALES WHICH HAVE ALREADY 
TAKEN PLACE.—For purposes of section 6158(a) of the Internal 
Revenue Code of 1954 (as added by subsection (a) of this sec- Ante, p. 1512. 
tion) in the case of any sale which takes place on or before 
the 90th day after the date of the enactment of this Act, a 
certification by the Federal Reserve Board described in sec-
tion 6158 (a) shall be treated as made before the sale if application 
for such certification is made before the close of the 90th day 
after the date of the enactment of this Act. 
(3) R E F U N D OF TAX.— 
(A) I N GENERAL.—If any tax attributable to a sale which 
occurred before October 1, 1977, is payable in annual install-
ments by reason of an election under section 6158(a) of the 
Internal Revenue Code of 1954, any portion of such tax for 
which the due date of the installment does not occur before 
October 1, 1977, shall, on application of the taxpayer, be 
treated as an overpayment of tax. 
(B^ INTEREST ON OVERPAYMENTS.—For purposes of section 
6611 (b), in the case of any overpayment attributable to sub-
paragraph (A), the date of the overpayment shall be the day 
which is 6 months after the latest of the following: 
(i) the date on which application for refund or credit 
of such overpayment is 
filed, 
H f 
(ii) the due date prescribed by law (determined with-
out extensions) for filing the return of tax under chapter 
1 of the Internal Revenue Code of 1954 for the taxable 
year the tax of which is being refunded or credited, or 
(iii) the date of the enactment of this Act. 
(C) EXTENSION OF PERIOD OF LIMITATIONS.—If any refund 
or credit of tax attributable to the application of subpara-
graph (A) is prevented at any time before October 1, 1978, 
by the operation of any law or rule of law, refund or credit 
of such overpayment may, nevertheless, be made or allowed if 
claim therefor is filed before October 1,1978. 
Approved October 2, 1976. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 94-879 (Comm. on Ways and Means). 
SENATE REPORT No. 94-1192 (Comm. on Finance). 
CONGRESSIONAL RECORD, Vol. 122 (1976): 
Mar. 15, considered and passed House. 
Sept. 21, considered and passed Senate.