MUTUAL SAVINGS BANKS, BUILDING AND LOAN ASSOCIATIONS, COOPERATIVE BANKS.

SEC. 311 MUTUAL SAVINGS BANKS, BUILDING AND LOAN ASSOCIATIONS, COOPERATIVE BANKS. (a) Mutual Savings Banks.—Section 101 (2) (relating to exemption from tax of mutual savings banks) is hereby repealed. (b) Building and Loan Associations and Cooperative Banks.—Section 101 (4) (relating to exemption from tax of building and loan associations and cooperative banks) is hereby amended to read as follows: “(4) Credit unions without capital stock organized and operated for mutual purposes and without profit; and corporations or associations without capital stock organized prior to September 1, 1951, and operated for mutual purposes and without profit for the purpose of providing reserve funds for, and insurance of, shares or deposits in— “(A) domestic building and loan associations, “(B) cooperative banks without capital stock organized and operated for mutual purposes and without profit, or “(C) mutual savings banks not having capital stock represented by shares (c) Exemptions From Excess Profits Tax.—Section 454 (corporations exempt from the excess profits tax) is hereby amended by adding at the end thereof the following: “(h) Any mutual savings bank not having capital stock represented by shares, any domestic building and loan association (as defined in section 3797 (a) (19)), and any cooperative bank without capital stock organized and operated for mutual purposes and without profit.” (d) Federal Savings and Loan Associations.—Section 5 (h) of the Home Owners’ Loan Act of 1933, as amended (12 U. S. C. 1464 (h)), is hereby amended by striking out “date)” and inserting in lieu thereof the following: “date, and except, in the case of taxable years beginning after December 31, 1951, income, war-profits, and excess-profits taxes)”. (e) Bad Debt Reserves.—Section 23 (k) (1) (relating to deduction from gross income of bad debts) is hereby amended by adding at the end thereof the following: “In the case of a mutual savings bank not having capital stock represented by shares, a domestic building and loan association, and a cooperative bank without capital stock organ- 65 Stat. 491 ized and operated for mutual purposes and without profit, the reasonable addition to a reserve for bad debts shall be determined with due regard to the amount of the taxpayer’s surplus or bad debt reserves existing at the close of December 31, 1951. In the case of a taxpayer described in the preceding sentence, the reasonable addition to a reserve for bad debts for any taxable year shall in no case be less than the amount determined by the taxpayer as the reasonable addition for such year; except that the amount determined by the taxpayer under this sentence shall not be greater than the lesser of (A) the amount of its net income for the taxable year, computed without regard to this subsection, or (B) the amount by which 12 per centum of the total deposits or withdrawable accounts of its depositors at the close of such year exceeds the sum of its surplus, undivided profits, and reserves at the beginning of the taxable year.” (f) Dividends Paid to Depositors.—Section 23 (r) (relating to the deduction from gross income of certain dividends paid by banking corporations) is hereby amended to read as follows: “(r) Dividends Paid by Banking Corporations.— “(1) In the case of mutual savings banks, cooperative banks, and domestic building and loan associations, amounts paid to, or credited to the accounts of, depositors or holders of accounts as dividends on their deposits or withdrawable accounts, if such amounts paid or credited are withdrawable on demand subject only to customary notice of intention to withdraw. “(2) For deduction of dividends paid by certain other banking corporations, see section 121.” (g) Deduction for Repayment of Certain Loans.—Section 23 (relating to deductions from gross income) is hereby amended by adding at the end thereof the following: “(dd) Repayment by Mutual Savings Banks, Etc., of Certain Loans.—In the case of a mutual savings bank not having capital stock represented by shares, a domestic building and loan association, or a cooperative bank without capital stock organized and operated for mutual purposes and without profit, amounts paid by the taxpayer during the taxable year in repayment of loans made prior to September 1, 1951, by (1) the United States or any agency or instrumentality thereof which is wholly owned by the United States, or (2) any mutual fund established under the authority of the laws of any State.” (h) Definition of Bank.—Section 104 (a) (relating to definition of bank) is hereby amended by inserting at the end thereof the following: “Such term also means a domestic building and loan association.” (i) Definition of Domestic Building and Loan Association.—Section 3797 (a) (relating to definitions for the purposes of the Internal Revenue Code) is hereby amended by adding at the end thereof the following new paragraph: “(19) Domestic building and loan association.—The term ‘domestic building and loan association’ means a domestic building and loan association, a domestic savings and loan association, and a Federal savings and loan association, substantially all the business of which is confined to making loans to members.” (j) Effective Date.—The amendments made by this section shall be applicable only with respect to taxable years beginning after December 31, 1951.