November 25, 2008

House Bill Seeks to Prospectively Reverse IRS’ Controversial Section 382 Notice

Last week, as noted in this memo, Representative Lloyd Doggett (D-Tex.) introduced a bill which would prospectively reverse controversial Internal Revenue Service Notice 2008-83. As noted in this blog, Notice 2008-83 provides that losses for loans or bad debt deductions recognized by U.S. banks and thrifts after an “ownership change” are not subject to the limitations in Section 382 of the Internal Revenue Code.

The Bill affirms that taxpayers may continue to rely on the notice for transactions completed (i) on or after the date of the issuance of the notice (i.e., September 30th) – but prior to the effective date of the Bill or (ii) pursuant to a binding written contract entered into during that same period.