Treasury finalizes Section 597 regulations

The Treasury Department finalized regulations (T.D. 9825) under Section 597, largely adopting the proposed regulations (REG-140991-09), which were issued in May, 2015.

The final regulations provide guidance on the federal income tax treatment to banks, domestic building-and-loan associations, and related parties that receive federal financial assistance (FFA) from agencies such as the Federal Depositors Insurance Corporation (FDIC).

FFA generally arises in transactions where the FDIC or another agency provides assistance to facilitate the acquisition of troubled financial institutions. The regulations address the inclusion of FFA as ordinary income, preventing taxpayers from obtaining the tax benefit of losses which are compensated for with FFA, and the timing of inclusion of FFA. The regulations also address valuation issues with regard to how to measure FFA. The final regulations are effective as of Oct. 19, 2017.

Contact: Andy Cordonnier
Partner, Washington National Tax Office
T +1 202 521 1502

Jeff Borghino
Partner, Washington National Tax Office
T +1 202 521 1532

Greg Fairbanks
Managing Director, Washington National Tax Office
T +1 202 521 1503

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.