ADJUSTMENTS FOR CHANGES IN INADMISSIBLE ASSETS IN CASE OF BANKS.

SEC. 506. ADJUSTMENTS FOR CHANGES IN INADMISSIBLE ASSETS IN CASE OF BANKS. (a) Amendment of Section 435 (g).—Section 435 (g) (relating to net capital addition or reduction) is hereby amended by redesignating paragraph (8) as paragraph (11) and by adding after paragraph (7) the following new paragraph: “(8) Adjustments for changes in inadmissible assets in case of banks.— In the case of a bank (as defined in section 104)— “(A) If the increase in total assets for the taxable year exceeds the net capital addition computed without regard to the adjustment under paragraph (1) for an increase in inadmissible assets, then the net capital addition for the taxable year shall not be less than the excess of— “(i) the amount determined under the first sentence of paragraph (1) over “(ii) an amount which bears the same ratio to the increase in inadmissible assets for the taxable year, determined under paragraph (5), as the amount computed under such first sentence bears to the increase in total assets for the taxable year. “(B) If the decrease in total assets for the taxable year exceeds the net capital reduction computed without regard to the adjustment under paragraph (2) for a decrease in inadmissible assets, then the net capital reduction for the taxable year shall not be less than the excess of— “(i) the amount determined under the first sentence of paragraph (2) over “(ii) an amount which bears the same ratio to the decrease in inadmissible assets for the taxable year, determined under paragraph (5), as the amount computed under such first sentence bears to the decrease in total assets for the taxable year. For the purpose of this paragraph, the increase or decrease in total assets for the taxable year shall be computed in the same manner as the increase or decrease in inadmissible assets for the taxable year is computed under paragraph (5), except that such computations shall be made with respect to all assets, whether admissible or inadmissible assets as defined in section 440.” (b) Amendment of Section 438.—Section 438 (relating to new capital credit changes) is hereby amended by adding after subsection (i) the following new subsection: “(g) Adjustments for Inadmissible Assets in Case of Banks.—In the case of a bank (as defined in section 104), if the increase in total assets for the taxable year (determined in the manner provided in the last sentence of section 435 (g) (8)) exceeds the net new capital addition computed without regard to the adjustment under subsection (b) 65 Stat. 547 for an increase in inadmissible assets, then the net new capital addition for the taxable year shall not be less than the excess of the amount determined under the first sentence of subsection (b) over an amount which bears the same ratio to the increase in inadmissible assets for the taxable year, determined under section 435 (g) (5), as the amount computed under such first sentence bears to such increase in total assets for the taxable year.” (c) Amendment of Section 435 (f).—Section 435 (f) (relating to capital additions in base period) is hereby amended as follows: (1) By inserting immediately after the word “reduced” in paragraph (1) thereof the following: “(but not below zero)”. (2) By adding at the end of paragraph (1) thereof the following: “For special rule in the case of banks, see paragraph (6).” (3) By renumbering paragraph (6) as paragraph (7), and by adding immediately after paragraph (5) the following new paragraph: “(6) Yearly base period capital of banks.— In the case of a bank (as defined in section 104), the yearly base period capital for any taxable year shall be determined as follows: “(A) A tentative yearly base period capital shall be computed under paragraph (1) without regard to paragraph (1) “(B) The tentative yearly base period capital so determined shall be reduced by the amount determined under section 440 (b) (relating to inadmissible assets). For the purpose of this subparagraph, the computation under section 440 (b) shall include only the daily amounts (described in such section) for the first day of such taxable year.” (d) Effective Date of Subsection (c) (3).—The amendment made by subsection (c) (3) (adding a new paragraph (6) to section 435 (f)) shall be applicable with respect to taxable years beginning on or after the date of the enactment of this Act, and, at the election of the tax payer made in accordance with regulations prescribed by the Secretary, shall be applicable to all taxable years ending after June 30, 1950.