Community Bank Flexibility Act

Community Bank Flexibility Act

This bill amends the Internal Revenue Code, with respect to the tax treatment of small banks, to: (1) allow such banks to reorganize as either corporations or partnerships for tax purposes, (2) permit such banks to reorganize without incurring an additional tax for liquidation, and (3) impose a five-year recognition period of the built-in gains of such banks.

[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3287 Introduced in House (IH)]

114th CONGRESS
  1st Session
                                H. R. 3287

To amend the Internal Revenue Code of 1986 to clarify the treatment of 
            banks organized as limited liability companies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 29, 2015

  Mr. Marchant (for himself and Mrs. Black) introduced the following 
      bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to clarify the treatment of 
            banks organized as limited liability companies.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Community Bank Flexibility Act''.

SEC. 2. TREATMENT OF BANKS ORGANIZED AS LIMITED LIABILITY COMPANIES.

    (a) In General.--Section 581 of the Internal Revenue Code of 1986 
is amended--
            (1) by striking ``For purposes of'' and inserting the 
        following:
    ``(a) In General.--For purposes of'', and
            (2) by adding at the end the following new subsection:
    ``(b) Treatment of Limited Liability Companies, etc.--
            ``(1) In general.--An entity shall not fail to be treated 
        as a bank under subsection (a) merely because such entity is a 
        specified entity (or because such entity elects to be treated 
        either as a corporation or as a partnership for purposes of 
        this title).
            ``(2) Specified entity.--For purposes of this subsection, 
        the term `specified entity' means any entity which may elect to 
        be treated either as a corporation or as a partnership for 
        purposes of this title.
            ``(3) Transitional rules.--
                    ``(A) Reorganizations.--In the case of any 
                acquisition or transfer during the 5-year period 
                beginning on the date of the enactment of this 
                subsection, any specified entity which (after such 
                acquisition or transfer) qualifies as a bank under 
                paragraph (1) shall be treated as a corporation for 
                purposes of applying section 368(a)(1).
                    ``(B) Tax imposed on certain built-in gains.--
                            ``(i) In general.--In the case of any 
                        specified entity with respect to which any 
                        transfer or acquisition is treated as a 
                        reorganization under section 368(a)(1) by 
                        reason of this paragraph, rules similar to the 
                        rules of section 1374 shall apply with respect 
                        to such specified entity by treating such 
                        reorganization in the same manner as an 
                        election under section 1362(a) (and by treating 
                        the specified entity as an S corporation and 
                        the other corporation with respect to such 
                        reorganization as the small business 
                        corporation making such election).
                            ``(ii) Special rule for reorganizations 
                        during recognition period of an s corporation 
                        bank.--In the case of a transfer or acquisition 
                        to which clause (i) applies, if--
                                    ``(I) the other corporation 
                                referred to in clause (i) is an S 
                                corporation, and
                                    ``(II) such transfer or acquisition 
                                occurs during the recognition period 
                                (as defined in section 1374(d)(7)) of 
                                such S corporation,
                        the recognition period of the specified entity 
                        determined by reason of the application of 
                        clause (i) shall not include any taxable year 
                        of the specified entity which begins after the 
                        recognition period of such S corporation.
                    ``(C) Election to have transition rules not 
                apply.--Subparagraphs (A) and (B) shall not apply if 
                the specified entity referred to in such subparagraphs 
                elects under this subparagraph to have such 
                subparagraphs not apply. Any such election shall, 
                except as otherwise provided by the Secretary, be made 
                contemporaneously with the acquisition or transfer 
                referred to in subparagraph (A).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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