[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1600 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1600

To enhance the ability of community banks to foster economic growth and 
 serve their communities, boost small businesses, increase individual 
                    savings, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 22, 2011

  Mr. Moran (for himself, Mr. Blunt, and Mr. Barrasso) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To enhance the ability of community banks to foster economic growth and 
 serve their communities, boost small businesses, increase individual 
                    savings, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Community Banks 
Serving Their Communities First Act'' or the ``Communities First Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
        TITLE I--TARGETED REGULATORY RELIEF FOR COMMUNITY BANKS

Sec. 101. Short form reports of condition for certain community banks.
Sec. 102. Community bank exemption from annual management assessment of 
                            internal controls requirement of the 
                            Sarbanes-Oxley Act of 2002.
Sec. 103. Changes required to small bank holding company policy 
                            statement on assessment of financial and 
                            managerial factors.
Sec. 104. Increase in shareholder registration threshold.
Sec. 105. FSOC review of Bureau regulations.
Sec. 106. Federal Reserve examination authority.
  TITLE II--REGULATORY RELIEF FOR COMMUNITY BANKS AND THEIR CUSTOMERS

Sec. 201. Escrow requirements.
Sec. 202. Exception to annual privacy notice requirement under the 
                            Gramm-Leach-Bliley Act.
Sec. 203. Agriculture loan guarantees.
Sec. 204. Reimbursement for production of mandated records.
Sec. 205. Loan amortization.
Sec. 206. Loan appraisals.
Sec. 207. Credit ratings.
Sec. 208. Small business data collection exclusion.
TITLE III--TAX RELIEF FOR BANK DEPOSITORS, RURAL BANKS, MUNICIPALITIES, 
    BANKS ORGANIZED AS LIMITED LIABILITY COMPANIES, AND YOUNG SAVERS

Sec. 301. Reduced rate and deferral of income recognition on long-term 
                            certificates of deposit.
Sec. 302. Exclusion for interest on loans secured by agricultural real 
                            property.
Sec. 303. Update in cap on qualified small issue bonds.
Sec. 304. Limited liability company tax treatment for FDIC-insured 
                            limited liability companies.
Sec. 305. Young savers' accounts.
     TITLE IV--TAX RELIEF FOR COMMUNITY BANKS AND HOLDING COMPANIES

Sec. 401. Limited tax credit.
Sec. 402. Qualifying investments in small bank issuers.
Sec. 403. 5-year NOL carryback for certain banks.
              TITLE V--SMALL BUSINESS SUBCHAPTER S REFORMS

Sec. 501. Increasing shareholder limit for subchapter S to 200.
Sec. 502. Issuance of preferred stock permitted for subchapter S 
                            corporations.
Sec. 503. IRA shareholders.

        TITLE I--TARGETED REGULATORY RELIEF FOR COMMUNITY BANKS

SEC. 101. SHORT FORM REPORTS OF CONDITION FOR CERTAIN COMMUNITY BANKS.

    (a) In General.--Section 7(a) of the Federal Deposit Insurance Act 
(12 U.S.C. 1817(a)) is amended by adding at the end the following:
            ``(12) Short form reports of condition for community 
        banks.--
                    ``(A) In general.--With respect to reports of 
                condition required under paragraph (3) for each 
                calendar quarter, an insured depository institution 
                described in subparagraphs (A), (B), (C), and (D) of 
                section 10(d)(4) may submit a short form of any such 
                report of condition in 2 nonsequential quarters of any 
                calendar year.
                    ``(B) Asset adjustments.--For purposes of this 
                paragraph--
                            ``(i) section 10(d)(4)(A) shall be applied 
                        by substituting `$10,000,000,000' for 
                        `$500,000,000'; and
                            ``(ii) section 10(d)(4)(C) shall be applied 
                        by substituting `$1,000,000,000' for 
                        `$100,000,000'.
                    ``(C) Short form defined.--In this paragraph, the 
                term `short form' means a report of condition required 
                under paragraph (3) that is in a format established by 
                the appropriate Federal banking agency, after notice 
                and opportunity for comment, that--
                            ``(i) is significantly and materially less 
                        burdensome for the insured depository 
                        institution to prepare than the format of the 
                        report of condition otherwise required under 
                        paragraph (3); and
                            ``(ii) provides sufficient material 
                        information for the appropriate Federal banking 
                        agency to assure the maintenance of the safe 
                        and sound condition of the depository 
                        institution and safe and sound practices.''.
    (b) Regulations.--Any regulation required to carry out section 
7(a)(12) of the Federal Deposit Insurance Act, as added by subsection 
(a), shall be published in final form not later than 6 months after the 
date of enactment of this Act.

SEC. 102. COMMUNITY BANK EXEMPTION FROM ANNUAL MANAGEMENT ASSESSMENT OF 
              INTERNAL CONTROLS REQUIREMENT OF THE SARBANES-OXLEY ACT 
              OF 2002.

    Section 404 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262) is 
amended by adding at the end the following:
    ``(d) Community Bank Exemption.--
            ``(1) In general.--This section and the rules prescribed 
        under this section shall not apply in any year to any insured 
        depository institution which, as of the close of the preceding 
        year, had total assets, as determined on a consolidated basis, 
        of $1,000,000,000 or less.
            ``(2) Adjustment of amount.--The Commission shall annually 
        adjust the dollar amount in paragraph (1) by an amount equal to 
        the percentage increase, for the most recent year, in total 
        assets held by all depository institutions, as reported by the 
        Federal Deposit Insurance Corporation.''.

SEC. 103. CHANGES REQUIRED TO SMALL BANK HOLDING COMPANY POLICY 
              STATEMENT ON ASSESSMENT OF FINANCIAL AND MANAGERIAL 
              FACTORS.

    (a) Small Bank Holding Company Policy Statement on Assessment of 
Financial and Managerial Factors.--
            (1) In general.--Not later than 6 months after the date of 
        enactment of this Act, the Board of Governors of the Federal 
        Reserve System shall publish in the Federal Register proposed 
        revisions to appendix C to part 225 of title 12, Code of 
        Federal Regulations (commonly referred to as the ``Small Bank 
        Holding Company Policy Statement on Assessment of Financial and 
        Managerial Factors'') that provide that the requirements of 
        such appendix C shall apply to a bank holding company that has 
        pro forma consolidated assets of less than $1,000,000,000.
            (2) Adjustment of amount.--The Board of Governors of the 
        Federal Reserve System shall annually adjust the dollar amount 
        referred to in paragraph (1) in the Small Bank Holding Company 
        Policy Statement on Assessment of Financial and Managerial 
        Factors--the maximum dollar amount of pro forma consolidated 
        assets required to qualify as a small bank holding company 
        under appendix C to part 225 of title 12, Code of Federal 
        Regulations, by an amount equal to the percentage increase, for 
        the most recent year, in total assets held by all insured 
        depository institutions, as determined by the Board.
    (b) Increase in Debt-to-Equity Ratio of Small Bank Holding 
Company.--Before the end of the 6-month period beginning on the date of 
enactment of this Act, the Board of Governors of the Federal Reserve 
System shall publish in the Federal Register proposed revisions to 
appendix C to part 225 of title 12, Code of Federal Regulations 
(commonly referred to as the ``Small Bank Holding Company Policy 
Statement on Assessment of Financial and Managerial Factors'') to 
increase the debt-to-equity ratio allowable for a small bank holding 
company in order to remain eligible to pay a corporate dividend and to 
remain eligible for expedited processing procedures under part 225 of 
title 12, Code of Federal Regulations (commonly referred to as 
``Regulation Y'') from 1:1 to 3:1.

SEC. 104. INCREASE IN SHAREHOLDER REGISTRATION THRESHOLD.

    (a) Registration.--Section 12(g) of the Securities Exchange Act of 
1934 (15 U.S.C. 78l(g)) is amended--
            (1) in paragraph (1), by striking subparagraphs (A) and (B) 
        and inserting the following:
            ``(A) in the case of an issuer that is a bank or a bank 
        holding company, as that term is defined in section 2 of the 
        Bank Holding Company Act of 1956 (12 U.S.C. 1841), within 120 
        days after the last day of its first fiscal year on which the 
        issuer has a class of equity security (other than an exempted 
        security) held of record by 2,000 persons or more; and
            ``(B) in the case of an issuer that is not a bank or bank 
        holding company, not later than 120 days after the last day of 
        its first fiscal year on which the issuer has a class of equity 
        securities (other than an exempted security) held of record by 
        500 persons or more,''; and
            (2) in paragraph (4), by striking ``three hundred'' and 
        inserting ``300 persons, or, in the case of a bank or a bank 
        holding company, as that term is defined in section 2 of the 
        Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1700''.
    (b) Suspension.--Section 15(d) of the Securities Exchange Act of 
1934 (15 U.S.C. 78o(d)) is amended, in the third sentence, by striking 
``three hundred'' and inserting ``300 persons, or, in the case of bank 
or a bank holding company, as that term is defined in section 2 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1700''.

SEC. 105. FSOC REVIEW OF BUREAU REGULATIONS.

    Section 1023(a) of the Consumer Financial Protection Act of 2010 
(12 U.S.C. 5513(a)) is amended by striking ``would put the safety and 
soundness of the United States banking system or the stability of the 
financial system of the United States at risk.'' and inserting the 
following: ``is inconsistent with the safe and sound operation of 
United States financial institutions.''.

SEC. 106. FEDERAL RESERVE EXAMINATION AUTHORITY.

    Section 1012(c) of the Consumer Financial Protection Act of 2010 
(12 U.S.C. 5492(c)) is amended--
            (1) by striking paragraph (1); and
            (2) by redesignating paragraphs (2) through (5) as 
        paragraphs (1) through (4), respectively.

  TITLE II--REGULATORY RELIEF FOR COMMUNITY BANKS AND THEIR CUSTOMERS

SEC. 201. ESCROW REQUIREMENTS.

    (a) In General.--Section 129D(c) of the Truth in Lending Act (15 
U.S.C. 1639d(c)), as added by section 1461 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Public Law 111-203; 124 
Stat. 2178) is amended--
            (1) by redesignating paragraphs (1), (2), (3), and (4) as 
        subparagraph (A), (B), (C), and (D), respectively, and moving 
        the margins 2 ems to the right;
            (2) by striking ``The Bureau'' and inserting the following:
            ``(1) In general.--The Bureau''; and
            (3) by adding at the end the following:
            ``(2) Treatment of loans held by smaller institutions.--The 
        Bureau shall, by regulation, exempt from the requirements of 
        subsection (a) any loan secured by a first lien on the 
        principal dwelling of a consumer, if such loan is held by an 
        insured depository institution having assets of $10,000,000,000 
        or less.''.

SEC. 202. EXCEPTION TO ANNUAL PRIVACY NOTICE REQUIREMENT UNDER THE 
              GRAMM-LEACH-BLILEY ACT.

    Section 503 of the Gramm-Leach-Bliley Act (15 U.S.C. 6803) is 
amended by adding at the end the following:
    ``(f) Exception to Annual Notice Requirement.--A financial 
institution shall not be required to provide an annual disclosure under 
this section until such time as the financial institution--
            ``(1) fails to provide nonpublic personal information in 
        accordance with the provisions of subsection (b)(2) or (e) of 
        section 502 or regulations prescribed under section 504(b);
            ``(2) shares information with affiliates described in 
        section 603(d)(2)(A) of the Fair Credit Reporting Act; or
            ``(3) changes its policies and practices with regard to 
        disclosing nonpublic personal information from the policies and 
        practices that were disclosed in the most recent disclosure 
        sent to consumers in accordance with this subsection.
    ``(g) Exception to Notice Requirement.--A financial institution 
shall not be required to provide any disclosure under this section if--
            ``(1) the financial institution is licensed by a State and 
        is subject to existing regulation of consumer confidentiality 
        that prohibits disclosure of nonpublic personal information 
        without knowing and expressed consent of the consumer in the 
        form of laws, rules, or regulation of professional conduct or 
        ethics promulgated either by the court of highest appellate 
        authority or by the principal legislative body or regulatory 
        agency or body of any State, the District of Columbia, or any 
        territory of the United States; or
            ``(2) the financial institution is licensed by a State and 
        becomes subject to future regulation of consumer 
        confidentiality that prohibits disclosure of nonpublic personal 
        information without knowing and expressed consent of the 
        consumer in the form of laws, rules, or regulation of 
        professional conduct or ethics promulgated either by the court 
        of highest appellate authority or by the principal legislative 
        body or regulatory agency or body of any State, the District of 
        Columbia, or any territory of the United States.''.

SEC. 203. AGRICULTURE LOAN GUARANTEES.

    (a) Fees.--Section 310B(g)(5) of the Consolidated Farm and Rural 
Development Act (7 U.S.C. 1932(g)(5)) is amended by inserting before 
the period the following: ``, except that for a loan in an amount of 
less than $5,000,000, the Secretary may assess a 1-time fee of 1 
percent or less of the guaranteed principal portion of the loan''.
    (b) Guarantee Amounts.--Section 364 of the Consolidated Farm and 
Rural Development Act (7 U.S.C. 2006f) is amended--
            (1) in subsection (a)--
                    (A) in paragraph (3)--
                            (i) by striking ``may'' and inserting 
                        ``shall''; and
                            (ii) by striking ``standards that are not 
                        less stringent than''; and
                    (B) in paragraph (4), by inserting before the 
                period the following: ``, except that the Secretary may 
                guarantee not more than 90 percent of a loan made by a 
                certified lender if such loan is in an amount of less 
                than $5,000,000''; and
            (2) in subsection (b)--
                    (A) in paragraph (1)--
                            (i) in subparagraph (B), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (C), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(D) in the absence of a demand for or experience 
                with guaranteed loans made under a rural development 
                program, proven experience in making small business 
                loans.''; and
                    (B) in paragraph (5)(A), by inserting before the 
                semicolon the following: ``, except that the Secretary 
                may guarantee not more than 90 percent of a loan made 
                by a certified lender if such loan is in an amount of 
                less than $5,000,000''.

SEC. 204. REIMBURSEMENT FOR PRODUCTION OF MANDATED RECORDS.

    (a) Corporate Records.--Section 1101(4) of the Right to Financial 
Privacy Act of 1978 (12 U.S.C. 3401(4)) is amended by inserting before 
the semicolon the following: ``, except that, for purposes of section 
1115, such term includes any person''.
    (b) Clarification of Scope.--Section 1115 of the Right to Financial 
Privacy Act of 1978 (12 U.S.C. 3415) is amended by adding at the end 
the following new subsection:
    ``(c) Clarification of Scope.--Notwithstanding subsection (a), the 
fee for reimbursement described under such subsection shall by paid by 
a Government authority for all records required to be assembled or 
provided for any Federal law enforcement or investigative purpose 
outside of the regular examination process by any financial institution 
with total assets of $1,000,000,000 or less.''.

SEC. 205. REPORT ON LOAN LOSS AMORTIZATION.

    (a) In General.--Not later than 90 days after the date of enactment 
of this Act, the Federal Deposit Insurance Corporation (hereafter in 
this title referred to as the ``Corporation'') shall submit to the 
Committee on Banking, Housing, and Urban Affairs of the Senate and the 
Committee on Financial Services of the House of Representatives, a 
report containing an analysis of the costs and benefits of allowing an 
insured depository institution having less than $10,000,000,000 in 
assets the ability to amortize any loan loss or write-down (resulting 
from FASB Statement 114 or 144) over a 10-year period.
    (b) FDIC Authority.--If the Corporation concludes that the costs of 
an approach described in subsection (a) outweigh the benefits thereof, 
the Corporation shall also include in its report to Congress under 
subsection (a) any recommended alternatives to a 10-year loan loss 
amortization which could provide relief for insured depository 
institutions having less than $10,000,000,000 in assets.
    (c) Consultation.--In preparing the report required by this 
section, the Corporation shall consult with the other prudential 
banking supervisors.

SEC. 206. REPORT ON LOAN APPRAISALS.

    (a)  In General.--Not later than 90 days after the date of 
enactment of this Act, the Corporation shall submit to the Committee on 
Banking, Housing, and Urban Affairs of the Senate and the Committee on 
Financial Services of the House of Representatives, a report containing 
the feasibility, costs, and benefits of allowing an insured depository 
institution having less than $10,000,000,000 in assets to use a 5-year 
average of the appraised value of any real estate securing a loan held 
by the institution, for purposes determining capital levels.
    (b) Consultation.--In preparing the report required by this 
section, the Corporation shall consult with the other prudential 
banking supervisors.

SEC. 207. CREDIT RATINGS.

    Section 939A(b) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (15 U.S.C. 78o-7 note) is amended--
            (1) by striking ``to remove'' and all that follows through 
        the first period and inserting the following: ``to specify 
        appropriate levels of due diligence for regulated entities to 
        use for purposes of evaluating the creditworthiness of the 
        obligor or assets underlying a rated security or instrument 
        based on the characteristics of such obligor or assets.''; and
            (2) in the second sentence--
                    (A) by striking ``credit-worthiness for use'' and 
                inserting ``due diligence for use''; and
                    (B) by striking ``such standards'' and inserting 
                ``such evaluations''.

SEC. 208. SMALL BUSINESS DATA COLLECTION EXCLUSION.

    Section 704B(h)(1) of the Equal Credit Opportunity Act (15 U.S.C. 
1691c-2(h)(1)) is amended by inserting before the period the following: 
``and that has assets of more than $1,000,000,000''.

TITLE III--TAX RELIEF FOR BANK DEPOSITORS, RURAL BANKS, MUNICIPALITIES, 
    BANKS ORGANIZED AS LIMITED LIABILITY COMPANIES, AND YOUNG SAVERS

SEC. 301. REDUCED RATE AND DEFERRAL OF INCOME RECOGNITION ON LONG-TERM 
              CERTIFICATES OF DEPOSIT.

    (a) Deferral of Income Recognition.--Section 451 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subsection:
    ``(j) Certificates of Deposits Held by Cash Basis Individuals.--In 
the case of an individual on the cash receipts and disbursements method 
of accounting who holds a nonnegotiable certificate of deposit, 
interest income which is not made available for withdrawal before 
maturity of the certificate without penalty shall not be includible in 
gross income before the certificate is redeemed or matures.''.
    (b) Interest Income on Long-Term Certificates of Deposit.--
Subparagraph (A) of section 1(h)(11) of such Code is amended by 
striking ``increased by qualified dividend income'' and inserting the 
following: ``increased by--
                            ``(i) qualified dividend income, and
                            ``(ii) interest income on any nonnegotiable 
                        certificate of deposit--
                                    ``(I) with a fixed maturity date 
                                which is 1 year or more from the date 
                                of issue, and
                                    ``(II) the interest on which is not 
                                made available for withdrawal before 
                                maturity without penalty.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of enactment of this 
Act.

SEC. 302. EXCLUSION FOR INTEREST ON LOANS SECURED BY AGRICULTURAL REAL 
              PROPERTY.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
139D the following new section:

``SEC. 139E. INTEREST ON LOANS SECURED BY AGRICULTURAL REAL PROPERTY.

    ``(a) Exclusion.--Gross income shall not include interest received 
by a qualified lender on any qualified real estate loan.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified lender.--The term `qualified lender' means 
        any bank or savings association the deposits of which are 
        insured under the Federal Deposit Insurance Act (12 U.S.C. 1811 
        et seq.).
            ``(2) Qualified real estate loan.--The term `qualified real 
        estate loan' means any loan secured by agricultural real estate 
        or by a leasehold mortgage (with a status as a lien) on 
        agricultural real estate. For purposes of the preceding 
        sentence, the determination of whether property securing such 
        loan is agricultural real estate shall be made as of the time 
        the interest income on such loan is accrued.
            ``(3) Agricultural real estate.--The term `agricultural 
        real estate' means--
                    ``(A) real property used for the production of 1 or 
                more agricultural products, and
                    ``(B) any single family residence--
                            ``(i) which is the principal residence 
                        (within the meaning of section 121) of its 
                        occupant,
                            ``(ii) which is located in a rural area (as 
                        determined by the Secretary of Agriculture), 
                        which is not within a Metropolitan Statistical 
                        Area (as defined by the Office of Management 
                        and Budget) and which has a population 
                        (determined on the basis of the most recent 
                        decennial census for which data are available) 
                        of 2,500 or less, and
                            ``(iii) which is purchased or improved with 
                        the proceeds of the qualified real estate loan.
    ``(c) Coordination With Section 265.--Qualified real estate loans 
shall be treated as obligations described in section 265(a)(2) the 
interest on which is wholly exempt from the taxes imposed by this 
subtitle.''.
    (b) Clerical Amendment.--The table of sections for such part III is 
amended by inserting after the item relating to section 139D the 
following new item:

``Sec. 139E. Interest on loans secured by agricultural real 
                            property.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of enactment of this 
Act.

SEC. 303. UPDATE IN CAP ON QUALIFIED SMALL ISSUE BONDS.

    (a) In General.--Clause (i) of section 144(a)(4)(A) of the Internal 
Revenue Code of 1986 is amended by striking ``$10,000,000'' and 
inserting ``$30,000,000''.
    (b) Adjustment of Cap for Inflation.--Subsection (a) of section 144 
of such Code is amended by redesignating paragraph (12) as paragraph 
(13) and by inserting after paragraph (11) the following new paragraph:
            ``(12) Inflation adjustment.--In the case of any issue 
        issued during a calendar year after 2011, the $30,000,000 
        amount contained in paragraph (4)(A)(i) shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 2010' for `calendar year 
                1992' in subparagraph (B) thereof.
        Any increase under the preceding sentence which is not a 
        multiple of $100,000 shall be rounded to the next lowest 
        multiple of $100,000.''.
    (c) Conforming Amendment.--The heading of paragraph (4) of section 
144(a) of such Code is amended by striking ``$10,000,000 limit'' and 
inserting ``Increased limitation''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) obligations issued after the date of enactment of this 
        Act, and
            (2) capital expenditures made after such date with respect 
        to obligations issued on or before such date.

SEC. 304. LIMITED LIABILITY COMPANY TAX TREATMENT FOR FDIC-INSURED 
              LIMITED LIABILITY COMPANIES.

    (a) In General.--Paragraph (2) of section 7701(a) of the Internal 
Revenue Code of 1986 (defining partnership and partner) is amended to 
read as follows:
            ``(2) Partner and partnership.--
                    ``(A) In general.--The term `partnership' includes 
                a syndicate, group, pool, joint venture, or other 
                unincorporated organization, through or by means of 
                which any business, financial operation, or venture is 
                carried on, and which is not, within the meaning of 
                this title, a trust or estate or a corporation; and the 
                term `partner' includes a member in such a syndicate, 
                group, pool, joint venture, or organization.
                    ``(B) Election by certain banks to be taxed as 
                partnerships.--
                            ``(i) In general.--An eligible corporation 
                        may elect to be treated as a partnership for 
                        purposes of this title.
                            ``(ii) Tax treatment.--In the case of an 
                        eligible corporation making an election under 
                        clause (i)--
                                    ``(I) no gain or loss shall be 
                                recognized to the corporation or the 
                                shareholders by reason of an election 
                                under clause (i), and
                                    ``(II) section 1374 shall apply to 
                                the entity after such election.
                            ``(iii) Eligible corporation.--The term 
                        `eligible corporation' means any entity 
                        described in clause (iv) if--
                                    ``(I) such entity would (but for 
                                this subparagraph) be treated as a C 
                                corporation for purposes of this title, 
                                and
                                    ``(II) the gross assets of such 
                                entity (determined under the rules of 
                                section 1202(d)) are $10,000,000,000 or 
                                less.
                            ``(iv) Entities described.--The entities 
                        described in this clause are the following:
                                    ``(I) Any bank (as defined in 
                                section 581).
                                    ``(II) Any bank holding company (as 
                                defined in section 2(a) of the Bank 
                                Holding Company Act of 1956 (12 U.S.C. 
                                1841(a))).
                                    ``(III) Any savings association (as 
                                defined in section 3(b) of the Federal 
                                Deposit Insurance Act (12 U.S.C. 
                                1813)).
                                    ``(IV) Any savings and loan holding 
                                company (as defined in section 
                                10(a)(1)(D) of the Home Owners Loan 
                                Act).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of enactment of this Act.

SEC. 305. YOUNG SAVERS' ACCOUNTS.

    (a) In General.--Section 408A of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(g) Special Rules for Roth IRAs for Children.--
            ``(1) General rule.--In the case of a Roth IRA maintained 
        for the benefit of an individual who has not attained age 26 
        before the close of the taxable year, the limitation on 
        contributions under paragraph (2) shall apply in lieu of 
        paragraphs (2) and (3) of subsection (c).
            ``(2) Limitation on contributions.--The aggregate amount of 
        contributions for any taxable year to all Roth IRAs maintained 
        for the benefit of an individual described in paragraph (1) 
        with respect to such taxable year shall not exceed the maximum 
        amount allowable as a deduction under subsection (b)(1) of 
        section 219 for such taxable year (computed without regard to 
        subsections (b)(1)(B), (d)(1), and (g) of such section).''.
    (b) Enforcement of Contribution Limits.--Paragraphs (1)(B) and 
(2)(B) of section 4973(f) of such Code are each amended by striking 
``and (c)(3)'' and inserting ``, (c)(3), and (g)(2)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2011.

     TITLE IV--TAX RELIEF FOR COMMUNITY BANKS AND HOLDING COMPANIES

SEC. 401. LIMITED TAX CREDIT.

    (a) C Corporations.--Section 11 of the Internal Revenue Code of 
1986 (relating to tax imposed) is amended by adding at the end the 
following new subsection:
    ``(e) Reduction of Tax on Community Banks.--
            ``(1) In general.--In the case of a C corporation which is 
        a community bank, the aggregate tax imposed by this section, 
        section 55, and section 1201 shall be 80 percent of the 
        aggregate tax which would (but for this subsection) be imposed 
        by such sections.
            ``(2) Maximum reduction.--The reduction in tax by reason of 
        this subsection shall not exceed $250,000. Corporations treated 
        as 1 corporation under section 1202(d)(3) shall be so treated 
        under this subsection, and the limitation under the preceding 
        sentence shall be allocated among such corporations in such 
        manner as the Secretary shall prescribe.
            ``(3) Increased benefit for banks operating in distressed 
        areas, etc.--
                    ``(A) In general.--In the case of a bank operating 
                in an area referred to in subparagraph (B)--
                            ``(i) paragraph (1) shall be applied by 
                        substituting `50 percent' for `80 percent', and
                            ``(ii) paragraph (2) shall be applied by 
                        substituting `$500,000' for `$250,000'.
                    ``(B) Areas described.--The areas referred to in 
                this subparagraph are--
                            ``(i) empowerment zones and enterprise 
                        communities designated under section 1391,
                            ``(ii) renewal communities designated under 
                        section 1400E,
                            ``(iii) low-income communities (as defined 
                        in section 45D(e)), and
                            ``(iv) distressed communities (within the 
                        meaning of section 233 of the Bank Enterprise 
                        Act of 1991 (12 U.S.C. 1834a(b))).
            ``(4) Community bank.--For purposes of this section, the 
        term `community bank' means any of the following entities the 
        gross assets of which (determined under the rules of section 
        1202(d)) are $10,000,000,000 or less:
                    ``(A) Any bank (as defined in section 581).
                    ``(B) Any bank holding company (as defined in 
                section 2(a) of the Bank Holding Company Act of 1956 
                (12 U.S.C. 1841(a))).
                    ``(C) Any savings association (as defined in 
                section 3(b) of the Federal Deposit Insurance Act (12 
                U.S.C. 1813)).
                    ``(D) Any savings and loan holding company (as 
                defined in section 10(a)(1)(D) of the Home Owners Loan 
                Act).''.
    (b) S Corporations.--Subsection (a) of section 1366 of such Code is 
amended by adding at the end the following new paragraph:
            ``(3) Reduction of tax on community banks.--
                    ``(A) In general.--In the case of an S corporation 
                which is a community bank (as defined in section 
                11(e)(4)), the net amount required to be taken into 
                account by shareholders (without regard to this 
                paragraph) shall be reduced by the lesser of--
                            ``(i) 20 percent of such net amount, or
                            ``(ii) $1,250,000.
                    ``(B) Increased benefit for banks operating in 
                distressed areas, etc.--In the case of a bank operating 
                in an area referred to in section 11(e)(3)(B)--
                            ``(i) subparagraph (A)(i) shall be applied 
                        by substituting `50 percent' for `20 percent', 
                        and
                            ``(ii) subparagraph (A)(ii) shall be 
                        applied by substituting `$2,500,000' for 
                        `$1,250,000'.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of enactment of this 
Act.

SEC. 402. QUALIFYING INVESTMENTS IN SMALL BANK ISSUERS.

    (a) Generally.--The principles of Internal Revenue Service Notice 
2010-2 shall apply to any qualifying investment by any person in a 
small bank issuer in the same manner as if such investment had been 
made by the Treasury Department pursuant to any of the Programs (as 
defined in Notice 2010-2).
    (b) Definitions.--For purposes of this section:
            (1) The term ``qualifying investment'' means any investment 
        in the equity of a small bank issuer that otherwise would have 
        constituted an ownership change under section 382(g) of the 
        Internal Revenue Code of 1986 (relating to limitations on net 
        operating loss carry forward and certain built-in losses 
        following an ownership change).
            (2) The term ``small bank issuer'' means any insured 
        depository institution as defined in section 3(c)(2) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2)) which--
                    (A) was required under a Prompt Corrective Action 
                order issued pursuant to section 38 of the Federal 
                Deposit Insurance Act (12 U.S.C. 1831o), or a formal or 
                informal enforcement order, to raise capital as a 
                result of an examination that took place during 
                calendar years 2008 through 2012 by the Board of 
                Governors of the Federal Reserve System, the Office of 
                the Comptroller of the Currency, the Office of Thrift 
                Supervision, or the Federal Deposit Insurance 
                Corporation, and
                    (B) at the time of the order referred to in 
                subparagraph (A), had total consolidated assets of 
                $10,000,000,000 or less.

SEC. 403. 5-YEAR NOL CARRYBACK FOR CERTAIN BANKS.

    (a) In General.--Subparagraph (H) of section 172(b)(1) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                    ``(H) Carryback for 2010 and 2011 net operating 
                losses of certain banks.--
                            ``(i) In general.--In the case of an 
                        applicable 2010 or 2011 net operating loss of a 
                        specified bank with respect to which the 
                        taxpayer has elected the application of this 
                        subparagraph--
                                    ``(I) subparagraph (A)(i) shall be 
                                applied by substituting any whole 
                                number elected by the taxpayer which is 
                                more than 2 and less than 6 for `2',
                                    ``(II) subparagraph (E)(ii) shall 
                                be applied by substituting the whole 
                                number which is one less than the whole 
                                number substituted under subclause (I) 
                                for `2', and
                                    ``(III) subparagraph (F) shall not 
                                apply.
                            ``(ii) Applicable 2010 or 2011 net 
                        operating loss.--For purposes of this 
                        subparagraph, the term `applicable 2010 or 2011 
                        net operating loss' means--
                                    ``(I) the specified bank's net 
                                operating loss for any taxable year 
                                ending in 2010 or 2011, or
                                    ``(II) if the specified bank elects 
                                to have this subclause apply in lieu of 
                                subclause (I), the specified bank's net 
                                operating loss for any taxable year 
                                beginning in 2010 or 2011.
                            ``(iii) Specified bank.--For purposes of 
                        this subparagraph, the term `specified bank' 
                        means a community bank (as defined in section 
                        11(e)(4)) and any entity which would be a 
                        community bank (as so defined) if section 
                        11(e)(4) were applied by substituting 
                        `$15,000,000,000' for `$10,000,000,000'.
                            ``(iv) Election.--Any election under this 
                        subparagraph shall be made in such manner as 
                        may be prescribed by the Secretary, and shall 
                        be made by the due date (including extension of 
                        time) for filing the taxpayer's return for the 
                        taxable year of the net operating loss. Any 
                        such election, once made, shall be 
                        irrevocable.''.
    (b) Anti-Abuse Rules.--The Secretary of the Treasury, or the 
designee thereof, shall prescribe such rules as are necessary to 
prevent the abuse of the purposes of the amendments made by this 
section, including anti-stuffing rules, antichurning rules (including 
rules relating to sale-leasebacks), and rules similar to the rules 
under section 1091 of the Internal Revenue Code of 1986 relating to 
losses from wash sales.
    (c) Effective Date.--The amendments made by this section shall 
apply to net operating losses arising in taxable years ending after 
December 31, 2009.

              TITLE V--SMALL BUSINESS SUBCHAPTER S REFORMS

SEC. 501. INCREASING SHAREHOLDER LIMIT FOR SUBCHAPTER S TO 200.

    (a) In General.--Subparagraph (A) of section 1361(b)(1) of the 
Internal Revenue Code of 1986, is amended by striking ``100'' and 
inserting ``200''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2011.

SEC. 502. ISSUANCE OF PREFERRED STOCK PERMITTED FOR SUBCHAPTER S 
              CORPORATIONS.

    (a) In General.--Section 1361 (defining S corporation) is amended 
by adding at the end the following new subsection:
    ``(h) Treatment of Qualified Preferred Stock.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) qualified preferred stock shall not be 
                treated as a second class of stock, and
                    ``(B) no person shall be treated as a shareholder 
                of the corporation by reason of holding qualified 
                preferred stock.
            ``(2) Qualified preferred stock defined.--For purposes of 
        this subsection, the term `qualified preferred stock' means 
        stock which meets the requirements of subparagraphs (A), (B), 
        and (C) of section 1504(a)(4). Stock shall not fail to be 
        treated as qualified preferred stock merely because it is 
        convertible into other stock.
            ``(3) Distributions.--A distribution (not in part or full 
        payment in exchange for stock) made by the corporation with 
        respect to qualified preferred stock shall be includible as 
        ordinary income of the holder and deductible to the corporation 
        as an expense in computing taxable income under section 1363(b) 
        in the year such distribution is received.''.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 1361(b) is amended by 
        inserting ``, except as provided in subsection (f),'' before 
        ``which does not''.
            (2) Subsection (a) of section 1366 is amended by adding at 
        the end the following new paragraph:
            ``(3) Allocation with respect to qualified preferred 
        stock.--The holders of qualified preferred stock (as defined in 
        section 1361(h)) shall not, with respect to such stock, be 
        allocated any of the items described in paragraph (1).''.
            (3) So much of clause (ii) of section 354(a)(2)(C) as 
        precedes subclause (II) is amended to read as follows:
                            ``(ii) Recapitalization of family-owned 
                        corporations and s corporations.--
                                    ``(I) In general.--Clause (i) shall 
                                not apply in the case of a 
                                recapitalization under section 
                                368(a)(I)(E) of a family-owned 
                                corporation or an S corporation.''.
            (4) Subsection (a) of section 1373 is amended by striking 
        ``and'' at the end of paragraph (1), by striking the period at 
        the end of paragraph (2) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(3) no amount of an expense deductible under this 
        subchapter by reason of section 1361(h)(3) shall be apportioned 
        or allocated to the income referred to in such section.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2011.

SEC. 503. IRA SHAREHOLDERS.

    Clause (vi) of section 1361(c)(2)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``as of the date of enactment of this 
clause''.
                                 <all>