110 STAT. 1856 PUBLIC LAW 104-188—AUG. 20, 1996 "(5) CONTINUED APPLICATION OF FRESH START UNDER SEC- TION 585 TRANSITIONAL RULES.— In the case of a taxpayer to which paragraph (1) appHed and which was not a large bank (as defined in section 585(c)(2)) for its first taxable year beginning after December 31, 1995: "(A) IN GENERAL. — For purposes of determining the net amount of adjustments referred to in section 585(c)(3)(A)(iii), there shall be taken into account only the excess (if any) of the reserve for bad debts as of the close of the last taxable year before the disqualification year over the balance taken into account by such taxpayer under paragraph (2)(A)(ii) of this subsection. " (B) TREATMENT UNDER ELECTIVE CUT-OFF METHOD.— For purposes of applying section 585(c)(4)— "(i) the balance of the reserve taken into account under subparagraph (B) thereof shall be reduced by the balance taken into account by such taxpayer under paragraph (2)(A)(ii) of this subsection, and "(ii) no amount shall be includible in gross income by reason of such reduction. "(6) SUSPENDED RESERVE INCLUDED AS SECTION 38i(c) ITEMS. —The balance taken into account by a taxpayer under paragraph (2)(A)(ii) of this subsection and the supplemental reserve shall be treated as items described in section 381(c). "(7) CONVERSIONS TO CREDIT UNIONS.— In the case of a taxpayer to which paragraph (1) applied which becomes a credit union described in section 501(c) and exempt from taxation under section 501(a)— "(A) any amount required to be included in the gross income of the credit union by reason of this subsection shall be treated as derived from an unrelated trade or business (as defined in section 513), and "(B) for purposes of paragraph (3), the credit union shall not be treated as if it were a bank. "(8) REGULATIONS. —The Secretary shall prescribe such regulations as may be necessary to carry out this subsection and subsection (e), including regulations providing for the application of such subsections in the case of acquisitions, mergers, spin-offs, and other reorganizations.", (b) CONFORMING AMENDMENTS.— (1) Subsection (d) of section 50 is amended by adding at the end the following new sentence: "Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) referred to in paragraph (1) of this subsection shall not apply to any taxable year beginning after December 31, 1995." (2) Subsection (e) of section 52 is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (3) Subsection (a) of section 57 is amended by striking paragraph (4). (4) Section 246 is amended by striking subsection (f). (5) Clause (i) of section 291(e)(1)(B) is amended by striking "or to which section 593 applies". (6) Subparagraph (A) of section 585(a)(2) is amended by striking "other than an organization to which section 593 applies".
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