Page:United States Statutes at Large Volume 100 Part 3.djvu/569

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2377

"(ii) EXCEPTION FOR ELECTIVE RECAPTURE FOR IST

YEAR.—Clause (i) shall not apply to the 1st taxable year referred to in subparagraph (A)(iiiXD if the taxpayer designates an amount in accordance with such subparagraph. "(iii) FINANCIALLY TROUBLED BANK.—For purposes of clause (i), the term 'financially troubled bank' means any bank if, for the taxable year, the nonperforming loan percentage of such bank exceeds 75 percent. "(iv) NONPERFORMING LOAN PERCENTAGE.—For purposes of clause (iii), the term 'nonperforming loan percentage' means the percentage determined by dividing— "(I) the sum of the outstanding balances of nonperforming loans of the bank as of the close of each quarter of the taxable year, by "(II) the sum of the amounts of equity of the bank as of the close of each such quarter. In the case of a bank which is a member of a parentsubsidiary controlled group for the taxable year, the preceding sentence shall be applied with respect to such group. "(v) OTHER DEFINITIONS.—For purposes of this subparagraph— "(I) NONPERFORMING LOANS.—The term 'nonperforming loan' means any loan which is considered to be nonperforming by the primary Federal regulatory agency with respect to the bank. "(II) EQUITY.—The term 'equity' means the equity of the bank as determined for Federal regulatory purposes. "(C) COORDINATION WITH ESTIMATED TAX PAYMENTS.—For

purposes of applying section 6655(d)(3) with respect to any installment, the determination under subparagraph (B) of whether an adjustment is required to be taken into account under subparagraph (A) shall be made as of the last day prescribed for payment of such installment. "(4) ELECTIVE CUT-OFF METHOD.—If a bank makes an election under this paragraph for the disqualification year— "(A) the provisions of this subsection shall not be treated as a change in the method of accounting of the taxpayer for purposes of section 481, "(B) the taxpayer shall continue to maintain its reserve for loans held by the bank as of the 1st day of the disqualification year and charge against such reserve any losses resulting from loans held by the bank as of such 1st day, and "(C) no deduction shall be allowed under this section (or any other provision of this subtitle) for any addition to such reserve for the disqualification year or any subsequent taxable year. "(5) DEFINITIONS.—For purposes of this subsection— "(A) PARENT-SUBSIDIARY CONTROLLED GROUP.—The term 'parent-subsidiary controlled group' means any controlled group of corporations described in section 1563(a)(l). In determining the average adjusted bases of assets held by

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