PUBLIC LAW 110–28—MAY 25, 2007
121 STAT. 197
lending or finance business (as defined in section 542(d)(1)). ‘‘(iv) TREATMENT OF CERTAIN DIVIDENDS.—If an S corporation holds stock in a C corporation meeting the requirements of section 1504(a)(2), the term ‘passive investment income’ shall not include dividends from such C corporation to the extent such dividends are attributable to the earnings and profits of such C corporation derived from the active conduct of a trade or business. ‘‘(v) EXCEPTION FOR BANKS, ETC.—In the case of a bank (as defined in section 581) or a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1)), the term ‘passive investment income’ shall not include— ‘‘(I) interest income earned by such bank or company, or ‘‘(II) dividends on assets required to be held by such bank or company, including stock in the Federal Reserve Bank, the Federal Home Loan Bank, or the Federal Agricultural Mortgage Bank or participation certificates issued by a Federal Intermediate Credit Bank.’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
26 USC 1362 note.
SEC. 8232. TREATMENT OF BANK DIRECTOR SHARES.
(a) IN GENERAL.—Section 1361 (defining S corporation) is amended by adding at the end the following new subsection: ‘‘(f) RESTRICTED BANK DIRECTOR STOCK.— ‘‘(1) IN GENERAL.—Restricted bank director stock shall not be taken into account as outstanding stock of the S corporation in applying this subchapter (other than section 1368(f)). ‘‘(2) RESTRICTED BANK DIRECTOR STOCK.—For purposes of this subsection, the term ‘restricted bank director stock’ means stock in a bank (as defined in section 581) or a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1)), if such stock— ‘‘(A) is required to be held by an individual under applicable Federal or State law in order to permit such individual to serve as a director, and ‘‘(B) is subject to an agreement with such bank or company (or a corporation which controls (within the meaning of section 368(c)) such bank or company) pursuant to which the holder is required to sell back such stock (at the same price as the individual acquired such stock) upon ceasing to hold the office of director. ‘‘(3) CROSS REFERENCE.—
26 USC 1361.
‘‘For treatment of certain distributions with respect to restricted bank director stock, see section 1368(f).’’.
dkrause on GSDDPC44 with PUBLAW
(b) DISTRIBUTIONS.—Section 1368 (relating to distributions) is amended by adding at the end the following new subsection: ‘‘(f) RESTRICTED BANK DIRECTOR STOCK.—If a director receives a distribution (not in part or full payment in exchange for stock)
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