
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC597]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter H--Banking Institutions
 
                   PART II--MUTUAL SAVINGS BANKS, ETC.
 
Sec. 597. Treatment of transactions in which Federal financial 
        assistance provided
        

(a) General rule

    The treatment for purposes of this chapter of any transaction in 
which Federal financial assistance is provided with respect to a bank or 
domestic building and loan association shall be determined under 
regulations prescribed by the Secretary.

(b) Principles used in prescribing regulations

             (1) Treatment of taxable asset acquisitions

        In the case of any acquisition of assets to which section 381(a) 
    does not apply, the regulations prescribed under subsection (a) 
    shall--
            (A) provide that Federal financial assistance shall be 
        properly taken into account by the institution from which the 
        assets were acquired, and
            (B) provide the proper method of allocating basis among the 
        assets so acquired (including rights to receive Federal 
        financial assistance).

                       (2) Other transactions

        In the case of any transaction not described in paragraph (1), 
    the regulations prescribed under subsection (a) shall provide for 
    the proper treatment of Federal financial assistance and appropriate 
    adjustments to basis or other tax attributes in connection with such 
    assistance.

                    (3) Denial of double benefit

        No regulations prescribed under this section shall permit the 
    utilization of any deduction (or other tax benefit) if such amount 
    was in effect reimbursed by nontaxable Federal financial assistance.

(c) Federal financial assistance

    For purposes of this section, the term ``Federal financial 
assistance'' means--
        (1) any money or other property provided with respect to a 
    domestic building and loan association by the Federal Savings and 
    Loan Insurance Corporation or the Resolution Trust Corporation 
    pursuant to section 406(f) of the National Housing Act or section 
    21A of the Federal Home Loan Bank Act (or under any other similar 
    provision of law), and
        (2) any money or other property provided with respect to a bank 
    or domestic building and loan association by the Federal Deposit 
    Insurance Corporation pursuant to section 11(f) or 13(c) of the 
    Federal Deposit Insurance Act (or under any other similar provision 
    of law),

regardless of whether any note or other instrument is issued in exchange 
therefor.

(d) Domestic building and loan association

    For purposes of this section, the term ``domestic building and loan 
association'' has the meaning given such term by section 7701(a)(19) 
without regard to subparagraph (C) thereof.

(Added Pub. L. 97-34, title II, Sec. 244(a), Aug. 13, 1981, 95 Stat. 
255; amended Pub. L. 99-514, title IX, Sec. 904(b)(1), Oct. 22, 1986, 
100 Stat. 2385; Pub. L. 100-647, title IV, Sec. 4012(b)(2)(A)-(D)(i), 
(c)(1), Nov. 10, 1988, 102 Stat. 3657, 3658; Pub. L. 101-73, title XIV, 
Sec. 1401(a)(3)(A), (b)(1), Aug. 9, 1989, 103 Stat. 548, 549; Pub. L. 
101-239, title VII, Sec. 7841(e)(1), Dec. 19, 1989, 103 Stat. 2429; Pub. 
L. 101-508, title XI, Sec. 11704(a)(7), Nov. 5, 1990, 104 Stat. 1388-
518.)

                       References in Text

    Section 406 of the National Housing Act, referred to in subsec. 
(c)(1), which was classified to section 1729 of Title 12, Banks and 
Banking, was repealed by Pub. L. 101-73, title IV, Sec. 407, Aug. 9, 
1989, 103 Stat. 363.
    Section 21A of the Federal Home Loan Bank Act, referred to in 
subsec. (c)(1), is classified to section 1441a of Title 12.
    Sections 11(f) and 13(c) of the Federal Deposit Insurance Act, 
referred to in subsec. (c)(2), are classified to sections 1821(f) and 
1823(c), respectively, of Title 12.


                               Amendments

    1990--Subsec. (c). Pub. L. 101-508 substituted ``For purposes of'' 
for ``The purposes of''.
    1989--Pub. L. 101-73, Sec. 1401(b)(1), repealed amendment made by 
Pub. L. 99-514, Sec. 904(b)(1), see 1986 Amendment note below.
    Pub. L. 101-73, Sec. 1401(a)(3)(A), amended section generally, 
substituting present provisions for former provisions which contained 
section catchline that read ``FSLIC or FDIC financial assistance'' and 
which provided: in subsec. (a) for an exclusion from gross income; in 
subsec. (b) for no reduction in basis of assets; in subsec. (c) for a 
reduction of tax attributes by 50 percent of amounts excludable under 
subsection (a); and in subsec. (d) for a definition of ``domestic 
building and loan association''.
    Subsec. (b)(2). Pub. L. 101-239 substituted ``in connection with 
such assistance'' for ``to reflect such treatment''.
    1988--Pub. L. 100-647, Sec. 4012(b)(2)(D)(i), substituted ``FSLIC or 
FDIC'' for ``FSLIC'' in section catchline.
    Subsec. (a). Pub. L. 100-647, Sec. 4012(b)(2)(A), inserted at end 
``Gross income of a bank does not include any amount of money or other 
property received from the Federal Deposit Insurance Corporation 
pursuant to sections 13(c), 15(c)(1), and 15(c)(2) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(f) and 1823(c)(1) and (c)(2)), 
regardless of whether any note or other instrument is issued in exchange 
therefor.''
    Subsec. (b). Pub. L. 100-647, Sec. 4012(b)(2)(C), substituted 
``association or bank'' for ``association''.
    Subsec. (c). Pub. L. 100-647, Sec. 4012(c)(1), added subsec. (c).
    Subsec. (d). Pub. L. 100-647, Sec. 4012(b)(2)(B), which directed 
amendment of section 597(b), as amended by section 4012(c)(1) of Pub. L. 
100-647, by adding at the end thereof subsec. (d), was executed by 
adding subsec. (d) at the end of section 597, as amended by section 
4012(c)(1) of Pub. L. 100-647, as the probable intent of Congress.
    1986--Pub. L. 99-514, Sec. 904(b)(1), (c)(2)(A), as amended by Pub. 
L. 100-647, title IV, Sec. 4012(a)(2), which (applicable to transfers 
after Dec. 31, 1989, in taxable years ending after such date, with 
exceptions) directed repeal of this section, was repealed by Pub. L. 
101-73, Sec. 1401(b)(1), (c)(4), eff. Oct. 22, 1986, and I.R.C. of 1986 
applicable as if the amendments made by such section had not been 
enacted.


                    Effective Date of 1989 Amendments

    Section 7841(e)(2) of Pub. L. 101-239 provided that: ``The amendment 
made by this subsection [amending this section] shall apply as if 
included in the amendments made by section 1401 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 [Pub. L. 101-
73].''
    Section 1401(c)(3)-(5) of Pub. L. 101-73 provided that:
    ``(3) Subsection (a)(3).--
        ``(A) In general.--The amendments made by subsection (a)(3) 
    [amending this section and repealing provisions set out below] shall 
    apply to any amount received or accrued by the financial institution 
    on or after May 10, 1989, except that such amendments shall not 
    apply to transfers on or after such date pursuant to an acquisition 
    to which the amendment made by subsection (a)(1) [amending section 
    368 of this title] does not apply.
        ``(B) Interim rule.--In the case of any payment pursuant to a 
    transaction on or after May 10, 1989, and before the date on which 
    the Secretary of the Treasury (or his delegate) takes action in 
    exercise of his regulatory authority under section 597 of the 
    Internal Revenue Code of 1986 (as amended by subsection (a)(3)), the 
    taxpayer may rely on the legislative history for the amendments made 
    by subsection (a)(3) in determining the proper treatment of such 
    payment.
    ``(4) Subsection (b)(1).--The provisions of subsection (b)(1) [set 
out below] shall take effect on the date of the enactment of the Tax 
Reform Act of 1986 [Oct. 22, 1986].
    ``(5) Subsection (b)(2).--The amendment made by subsection (b)(2) 
[amending provisions set out below] shall take effect on the date of the 
enactment of the Technical and Miscellaneous Revenue Act of 1988 [Nov. 
10, 1988].''


                    Effective Date of 1988 Amendment

    Section 4012(b)(2)(E) of Pub. L. 100-647 provided that: ``The 
amendments made by this paragraph [amending this section] shall apply to 
any transfer--
        ``(i) after the date of the enactment of this Act [Nov. 10, 
    1988], and before January 1, 1990, unless such transfer is pursuant 
    to an acquisition occurring on or before such date of enactment, and
        ``(ii) after December 31, 1989, if such transfer is pursuant to 
    an acquisition occurring after such date of enactment and before 
    January 1, 1990.''
    Section 4012(c)(3) of Pub. L. 100-647, as amended by Pub. L. 101-73, 
title XIV, Sec. 1401(b)(2), Aug. 9, 1989, 103 Stat. 549, provided that: 
``The amendments made by this subsection [amending this section and 
provisions set out below] shall apply to any transfer--
        ``(A) after December 31, 1988, and before January 1, 1990, 
    unless such transfer is pursuant to an acquisition occurring before 
    January 1, 1989, and
        ``(B) after December 31, 1989, if such transfer is pursuant to 
    an acquisition occurring after December 31, 1988, and before January 
    1, 1990.
In the case of any bank or any institution treated as a domestic 
building and loan association for purposes of section 597 of the 1986 
Code by reason of the amendment made by subsection (b)(2)(B), the 
amendments made by this subsection shall also apply to any transfer 
before January 1, 1989, to which the amendments made by subsection 
(b)(2) [amending this section] apply.''


                        Effective Date of Repeal

    Pub. L. 99-514, title IX, Sec. 904(c)(2), Oct. 22, 1986, 100 Stat. 
2385, as amended by Pub. L. 100-647, title IV, Sec. 4012(a)(2), (c)(2), 
Nov. 10, 1988, 102 Stat. 3656, 3660, which provided that repeal of this 
section was to be applicable to transfers after Dec. 31, 1989, in 
taxable years ending after such date, with exceptions, and which related 
to clarification of treatment of amounts excluded under this section, 
was repealed by Pub. L. 101-73, title XIV, Sec. 1401(a)(3)(B), (b)(1), 
Aug. 9, 1989, 103 Stat. 549.


                             Effective Date

    Section 246(c) of Pub. L. 97-34 provided that: ``The amendment made 
by section 244 [enacting this section] shall apply to any payment made 
on or after January 1, 1981.''

                          Transfer of Functions

    Federal Savings and Loan Insurance Corporation abolished and its 
functions transferred, see sections 401 to 406 of Pub. L. 101-73, set 
out as a note under section 1437 of Title 12, Banks and Banking.


Repeal of Provisions Relating to Repeal of Special Reorganization Rules 
                       for Financial Institutions

    Section 1401(b)(1) of Pub. L. 101-73 provided that: ``Section 904 of 
the Tax Reform Act of 1986 [Pub. L. 99-514, amending section 368 of this 
title, repealing this section and enacting provisions set out as notes 
under sections 368 and 597 of this title] (other than subsection 
(c)(2)(B) thereof [section 904(c)(2)(B) of Pub. L. 99-514, formerly set 
out as a note above]) is hereby repealed and the Internal Revenue Code 
of 1986 shall be applied as if the amendments made by such section had 
not been enacted.''


      References to Federal Savings and Loan Insurance Corporation

    Section 1401(c)(7) of Pub. L. 101-73 provided that: ``Any reference 
to the Federal Savings and Loan Insurance Corporation in section 597 of 
the Internal Revenue Code of 1986 (as in effect on the day before the 
date of the enactment of this Act [Aug. 9, 1989]) shall be treated as 
including a reference to the Resolution Trust Corporation and the FSLIC 
Resolution Fund.''


  Annual Reports on Transactions in Which Federal Financial Assistance 
                                Provided

    Pub. L. 101-73, title XIV, Sec. 1403, Aug. 9, 1989, 103 Stat. 551, 
which required the Secretary of the Treasury to submit annual reports to 
the Senate and to the Committee on Ways and Means of the House of 
Representatives on transactions with respect to which Federal financial 
assistance subject to this section was provided, terminated, effective 
May 15, 2000, pursuant to section 3003 of Pub. L. 104-66, as amended, 
set out as a note under section 1113 of Title 31, Money and Finance. 
See, also, page 142 of House Document No. 103-7.

                  Section Referred to in Other Sections

    This section is referred to in section 593 of this title.
