Proposed Legislation Would Reverse Benefit To Bank Acquirers and Restrict Deductions On Losses

January 29, 2009
William Dantzler Jr., John T. Lillis, Steven Gee

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A bill passed by the US House of Representatives on January 28, 2009 could dramatically change the tax consequences for any bank that undergoes an ownership change after January 16.

A previous IRS Notice exempted banks from the Internal Revenue Code's limit on deductions for losses on loans and bad debts when a corporation undergoes an ownership change. But if the "American Recovery and Reinvestment Tax Act of 2009" becomes law — which could happen within the next two weeks — then these types of losses would no longer be fully deductible to banks that have undergone an ownership change.

To help you start planning now, here's a quick explanation of what's at stake for banks and their transaction partners.       

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