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All 70 Stat. 141. tributing corporation retains, or transfers after May 15, 1955, to any corporation, property (other than property described in subsection (b), (1) (B) (i)) as part of a plan one of the principal purposes of which is the distribution of the earnings and profits of

any corporation.

“(3) CERTAIN CONTRIBUTIONS TO CAPITAL.-In the case of a distribution a portion of which is attributable to a transfer which is a contribution to the capital of a corporation, made after May 15, 1955, and prior to the date of the enactment of this part, if subsection (a) or (b) would apply to such distribution but for the fact that, under paragraph® (1) or (2) (as the case may be) of this subsection, such contribution to capital is part of a plan one of the principal purposes of which is to distribute the earnings and profits of any corporation, then, notwithstanding paragraph (1) or (2), subsection (a) or (b) (as the case may be) shall apply to that portion of such distribution not attributable to such contribution to capital, and shall not apply to that portion of such

distribution attributable to such contribution to capital. “(e) FINAL CERTIFICATION.

(1) FOR SUBSECTION (a).-Subsection (a) shall not apply with respect to any distribution by a corporation unless the Board certifies that, before the expiration of the period permitted under section 4 (a) of the Bank Holding Company Act of 1956 (includ- Ante, po 135. ing any extensions thereof granted to such corporation under such section 4. (a)), the corporation has disposed of all the property the disposition of which is necessary or appropriate to effectuate section 4 of such Act (or would have been so necessary or appropriate if the corporation had continued to be a bank hold. ing company). (2) FOR SUBSECTION (b).

“(A) Subsection (b) shall not apply with respect to any distribution by any corporation unless the Board certifies that, before the expiration of the period specified in subparagraph (B), the corporation has ceased to be a bank holding company:

"(B) The period referred to in subparagraph (A) is the period which expires 2 years after the date of the enactment of this part or 2 years after the date on which the corporation becomes a bank holding company, whichever date is later. The Board is authorized, on application by any corporation, to extend such period from time to time with respect to such corporation for not more than one year at a time if, in its judgment, such an extension would not be detrimental to the public interest; except that such period may not in any case be extended beyond the date 8 years after the date of the enactment of this part or 8 years after the date on which the corporation becomes a bank holding company,

whichever dato is later.
(f) CERTAIN. EXCHANGEA OF SECURITIES.- In the case of an ex-
change described in subsection (a), (2), (A) (iv) or subsection (b)

(2). (A) (iv), subsection (a) or subsection (b) (as the case may be)
shall apply only to the extent that the principal amount of the securi-
ties received does not exceed the principal amount of the securities
exchanged.
"SEC. 1102. SPECIAL RULES.

“(a) Basis or PROPERTY ACQUIRED IN DISTRIBUTION8.—If, by reason of section 1101, gain is not recognized with respect to the receipt of any Anto, p. 139. property, then, under regulations prescribed by the Secretary or his delegate

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68A Stat. 803. 26 USC 6501.

Ante, p. 135.
Ante, p. 143.

All 70 Stat. 144.

“(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 determined 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

“(A) the amount of the property received which was treated as a dividend, and

“(B) the amount of gain to the taxpayer recognized on the property received (not including any portion of such gain

which was treated as a dividend): “(b) PERIODS OF LIMITATION.—The periods of limitation provided 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 shareholders in á distribution which is certified by the Board under subsection (a), (b), or (c) of section 1101, until five years

after the distributing 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) that the period (including extensions thereof) prescribed in section 4 (a) of the Bank Holding Company Act of 1956, or section 1101 (e) (2) (B), whichever is applicable, has expired; 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 STUCK IN A CONTROLLED CORPORATION.In 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 earnings and profits of the distributing corporation and the controlled corporation shall be made under regulations prescribed by the Secretary or his delegate.

"(2) EXCHANGES DESCRIBED IN SECTION 1101 (C) (2) OR (3).--In 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 corporation 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

holding corporation. *(d) ITEMIZATION OF PROPERTY.-In any certification under this part, the Board shall make such specification and itemization of property as may be necessary to carry out the provisions of this part. "SEC. 1103. DEFINITIONS.

“(a) Bank HOLDING COMPANY.–For purposes of this part, the term 'bank holding company has the meaning assigned to such term by section 2 of the Bank Holding Company Act of 1956.

Ante, p. 139.

Ante, p. 142.

Ante, p. 133.

All 70 Stat. 145. “(b) QUALIFTED BANK HOLDING CORPORATION.

“(1) IN GENERAL.-Except as provided in paragraph (2), for purposes of this part the term 'qualified bank holding corporation means any corporation (as defined in section 7701 (a) (3)) 68A Stat, 911. which is a bank holding company and which holds prohibited 26 USC 7701. property acquired by it

(A) on or before May 15, 1955,
(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

Anto, p. 139.
"(C) in exchange for all of its stock in an exchange de-
scribed in section 1101 (c) (2) or (c) (3).

Ante, p. 142. “(2) LIMITATIONS.

(A) A bank holding company shall not be a qualified bank holding corporation, unless it would have been a bank holding company on May 15, 1955, if the Bank Holding Company Act of 1956 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 May 15, 1955,

“(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 subsection (a) or (b) of section 1101, and

Anto, p. 139, “(iii) property acquired by it in exchange for all of its stock in an exchange described in section 1101 (c) (2) or (3).

Ante, p. 142. "(B) A bank holding company shall not be a qualified bank holding corporation by reason of property described in subparagraph (B) of paragraph (1) or clause (ii) of subparagraph (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 May 15, 1955,

“(ii) in a distribution (with respect to stock held by it on May 15, 1955, 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) of section 1101, or

Anto, p. 139. "(iii) in exchange for all of its stock in an exchange described in section 1101 (c) (2) or (3).

Ante, p. 142. "(C) A corporation shall be treated as a qualified bank holding corporation only if the Board certifies that it satisfies

the foregoing requirements of this subsection. "(c) PROHIBITED PROPERTY.–For purposes of this part, the term 'prohibited property' means, in the case of any bank holding company, property (other than nonexempt property) the disposition of which would be necessary or appropriate to effectuate section 4 of the Bank Holding Company Act of 1956 if such company continued Ante, p.135. to be a bank holding company beyond the period (including any extensions thereof) specified in subsection (a) of such section or in section 1101 (e) (2) (B) of this part, as the case may be. The term 'pro-"Prohibited hibited property does not include shares of any company held by a property". bank holding company to the extent that the prohibitions of section 4 of the Bank Holding Company Act of 1956 do not apply to the ownership by such bank holding company of such property by reason of subsection (c) (5) of such section.

All 70 Stat. 146.

"(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 á maturity at the time of issuance of not exceeding 24 months, exclusive of days of grace;

“(2) securities issued by or guaranteed as to principal or interest by a government or subdivision thereof or by any instrumentality of a government or subdivision; or

“(3) money, and the right to receive money not evidenced by & security or obligation (other than a security or obligation described in paragraph (1) or (2)). "(c) BOARD.-For purposes of this part, the term 'Board' means the Board of Governors of the Federal Reserve System."

(b) The table of parts for subchapter 0 of chapter 1 of the Internal 68A Stat. 295. Revenue Code of 1964 is amended by adding at the end thereof the 26 USC 1001- following: 1091.

"Part VIII. Distrựbutions pursuant to Bank Holding Company Act

of 1986." (c) The amendments made by this section shall apply with respect to taxable years ending after the date of the enactment of this Act.

SAVING PROVISION Sec. 11. Nothing herein contained shall be interpreted or construed as approving any act, action, or conduct which is or has been or may be in violation of existing law, nor shall anything herein contained constitute a defense to any action, suit, or proceeding pending or hereafter instituted on account of any prohibited antitrust or monopolistic act, action, or conduct.

SEPARABILITY OF PROVISIONS

Sro. 12. If any provision of this Act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of the Act, and the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.

Approved May 9, 1956.

Public Law 86-374
86th Congress, H. R. 7244
September 23, 1959

AN ACT

To promote and preserve local management of savings and loan associations by

protecting them against encroachment by holding companies.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That title IV of the Savings and National Housing Act, as amended (12 U.S.C., sec. 1724 et seq.), is loan holdamended by adding at the end thereof the following new section: ing compa

nies. "REGULATION OF HOLDING COMPANIES

Regulation.

48 Stat. 1255. “Sec. 208. (a)(1) As used in this section, the term 'company means Definitions. any corporation, business trust, association, or similar organization, but does not include the Federal Savings and' Loan Insurance Corporation, any partnership, or any company the majority of the shares of which is owned by the United States or by any State.

“(2) As used in this section. (except when used in subsection (f)), the term 'stock' means nonwithdrawable stock, underlying ownership stock other than mutual shares in a mutual institution, permanent stock, guaranty_stock, or stock of a similar nature (as defined by the Federal Home Loan Bank Board by regulation) by whatever name called.

“(3) For the purposes of this section, a company shall be con. sidered as having control of an institution or other organization if such company owns, controls, or holds with power to vote more than 73 STAT. 691. 10 per centum of the stock of such institution or other organization, 73 STAT. 692. or if the Federal Home Loan Bank Board determines, after reasonable notice and opportunity for hearing, that such company directly or indirectly exercises a controlling influence over the management and policies of such institution or other organization. “(b)(1) The Corporation shall reject any application made for

Insurance insurance under this title on or after the date of the enactment of this

applications. section if it finds that the applicant is controlled by any company which also controls any insured institution or any other applicant for insurance.

“(2) If an application of any institution for insurance under this title is approved on or after the date of the enactment of this section, and the Federal Home Loan Bank Board subsequently determines, after reasonable notice and opportunity for hearing, that at the time of such approval such institution was controlled by a company which also controlled another insured institution (or another applicant for insurance if the application of such other applicant was approved), the Board shall either

(A) terminate the insured status of such institution; or

“B) require such company, in the manner provided in subsection (e) of this section, to dispose of so much of the stock of such institution, or take such other action, or both, as may

be necessary to divest itself of its control of such institution. If the insured status of an institution is terminated under subparagraph (A), the provisions of section 407 relating to continuation of 12 USC 1730. insurance of accounts, examination by the Corporation during the period of such continuation, final insurance premium, and notice to insured members shall be applicable as though the termination had been ordered under such section 407.

“(c) It shall be unlawful for any company on or after the date Restriotions. of the enactment of this section

(295)

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