TREATMENT OF BANK DIRECTOR SHARES.

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.— “For treatment of certain distributions with respect to restricted bank director stock, see section 1368(f).”. (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) 121 STAT. 198 from an S corporation with respect to any restricted bank director stock (as defined in section 1361(f)), the amount of such distribu- tion—“(1) shall be includible in gross income of the director, and“(2) shall be deductible by the corporation for the taxable year of such corporation in which or with which ends the taxable year in which such amount in included in the gross income of the director.”.(c) Effective Dates.—(1) In general.—The amendments made by this section shall apply to taxable years beginning after December 31, 2006.(2) Special rule for treatment as second class of stock.—In the case of any taxable year beginning after December 31, 1996, restricted bank director stock (as defined in section 1361(f) of the Internal Revenue Code of 1986, as added by this section) shall not be taken into account in determining whether an S corporation has more than 1 class of stock.