100 STAT. 2378
PUBLIC LAW 99-514—OCT. 22, 1986 such a group, i n t e r e s t s held by one m e m b e r of such group in a n other m e m b e r of such group shall be disregarded. "(B) DISQUALIFICATION YEAR.—The term 'disqualification year ' means, with respect to any bank, the 1st taxable year beginning after December 31, 1986, for which such bank was a large b a n k if such b a n k m a i n t a i n e d a reserve for bad debts for the preceding taxable year. "
(b) RESERVES O F DOMESTIC B U I L D I N G AND L O A N M U T U A L S A VI N G S B A N K S, AND COOPERATIVE B A N K S -
ASSOCIATIONS,
CD IN GENERAL.—Subsection (a) of section 593 (relating to reserves for losses on loans) is amended to read a s follows: "(a) RESERVE FOR B A D D E B T S. —
"(1) IN GENERAL.—Except a s provided in paragraph (2), in the case of— "(A) any domestic building and loan association, "(B) any m u t u a l savings b a n k, or "(C) any cooperative b a n k w i t h o u t capital stock organized and operated for m u t u a l purposes and without profit, the r e shall be allowed a deduction for a reasonable addition to a reserve for bad debts. Such deduction shall be in lieu of any deduction under section 166(a). "(2) ORGANIZATION MUST MEET 60-PERCENT ASSET TEST O F SEC-
TION 770i(axi9).—This section shall apply to a n association or bank referred to in paragraph (1) only if it m e e t s the requirements of section 7701(a)(19)(C)." (2) LIMITATION O N PERCENTAGE O F TAXABLE INCOME METHOD.—
Paragraph (2) of section 593(b) (relating to percentage of taxable income method) is amended— (A) by striking o u t subparagraph s (A), (B), and (C) and inserting in lieu thereof the following: "(A) IN GENERAL.—Subject to subparagraph s (B) and (C), the a m o u n t determined under this paragraph for the taxable year shall be a n a m o u n t equal to 8 percent of the tax a b l e income for such year. "(B) REDUCTION FOR AMOUNTS REFERRED TO IN PARAGRAPH
(IKA).—The a m o u n t determined under subparagraph (A) shall be reduced (but not below 0) by the a m o u n t determined under paragraph (1)(A).", and (B) by redesignating subparagraph s (D) and (E) a s subparagraph s (C) and (D), respectively. (3) R E P E A L O F PERCENTAGE METHOD O F COMPUTING RESERVES
FOR BAD DEBTS.—SubsectioD (b) of section 593 (relating to addition to reserves for bad debts) is amended by striking out paragraph s (3) and (5) and by redesignating paragraph (4) a s paragraph (3). (4) SECTION 593 RESERVES N O T TREATED AS PREFERENCE FOR
PURPOSES OF SECTION 291.—Subparagraph (A) of section 291(e)(1) (defining financial institution preference item) is amended by striking o u t "or 593". (c) REPEAL OF SECTION 586.—Section 586 (relating to reserves for losses on loans of small business investment companies, etc.) is hereby repealed. (d) CONFORMING AMENDMENTS. —
(1) AMENDMENT TO SECTION 585.—Paragraph (1) of section
585(b) is amended by striking out "section 166(c)" and inserting in lieu thereof "subsection (a)". (2) AMENDMENTS TO SECTION 593.—
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