The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-140991-09) under section 597 as guidance for banks and building and loan associations (and related parties) that receive federal financial assistance (FFA) from an “agency”—generally defined as the Resolution Trust Corporation, the FDIC, or a similar instrumentality of the U.S. government.
The proposed regulations [PDF 309 KB] are intended to modify and clarify the tax treatment of transactions in which FFA is provided to these entities.
Section 597 was added to the Code in 1981 following the savings and loan crisis, and then was amended twice by subsequent legislation. Regulations under section 597 were promulgated in 1995 (referred to in today’s release as the “current regulations”).
The preamble to today’s release states that the Treasury Department and IRS have received suggestions for changes to the current regulations under section 597. Today’s release addresses these comments and other concerns not raised in comments.
Today’s proposed regulations are intended to modify and clarify the treatment of certain transactions in which FFA is provided to banks and financial institutions (and related persons).
The proposed regulations:
Comments and requests for a public hearing are due by a date that is 90 days after the proposed regulations are published in the Federal Register, which is scheduled for Wednesday, May 20, 2015.
Specifically, Treasury and the IRS seek comments related to the following items:
Treasury and the IRS also received comments and inquiries on (1) the basis-step-up and six-year-inclusion rules, (2) the treatment of debt or equity issued to agencies, and (3) the tax treatment of agency payments under loss share agreements. While the preamble acknowledges the complexities of these issues, Treasury and the IRS ultimately decided not to address these issues in today’s proposed regulations.
The regulations will become effective on the date when final regulations are published in theFederal Register, except with respect to FFA provided pursuant to an agreement entered into before such date—and in that case, the current regulations will continue to apply unless the taxpayer elects to apply the final regulations on a retroactive basis.
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