nonperforming loan percentage
(3) 4-year spread of adjustments (A) In general Except as provided in paragraph (4), in the case of any bank which for its last taxable year before the disqualification year maintained a reserve for bad debts— (i) the provisions of this subsection shall be treated as a change in the method of accounting of such bank for the disqualification year, (ii) such change shall be treated as having been made with the consent of the Secretary, and (iii) the net amount of adjustments required by section 481(a) to be taken into account by the taxpayer shall be taken into account in each of the 4 taxable years beginning with the disqualification year with— (I) the amount taken into account for the 1st of such taxable years being the greater of 10 percent of such net amount or such higher percentage of such net amount as the taxpayer may elect, and (II) the amount taken into account in each of the 3 succeeding taxable years being equal to the applicable fraction (determined in accordance with the following table for the taxable year involved) of the portion of such net amount not taken into account under subclause (I). The applicable If the case of the— fraction is— 1st succeeding year 2 ⁄ 9 2nd succeeding year ⅓ 3rd succeeding year 4 ⁄ 9 . (B) Suspension of recapture for taxable year for which bank is financially troubled (i) In general In the case of a bank which is a financially troubled bank for any taxable year— (I) no adjustment shall be taken into account under subparagraph (A) for such taxable year, and (II) such taxable year shall be disregarded in determining whether any other taxable year is a taxable year for which an adjustment is required to be taken into account under subparagraph (A) or the amount of such adjustment. (ii) Exception for elective recapture for 1st year Clause (i) shall not apply to the 1st taxable year referred to in subparagraph (A)(iii)(I) if the taxpayer elects a higher percentage in accordance with such subparagraph. (iii) Financially troubled bank For purposes of clause (i), the term “financially troubled bank” means any bank if, for the taxable year, the nonperforming loan percentage of such bank exceeds 75 percent. (iv) Nonperforming loan percentage For purposes of clause (iii), the term “nonperforming loan percentage” means the percentage determined by dividing— (I) the sum of the outstanding balances of nonperforming loans of the bank as of the close of each quarter of the taxable year, by (II) the sum of the amounts of equity of the bank as of the close of each such quarter. In the case of a bank which is a member of a parent-subsidiary controlled group for the taxable year, the preceding sentence shall be applied with respect to such group. (v) Other definitions For purposes of this subparagraph— (I) Nonperforming loans The term “nonperforming loan” means any loan which is considered to be nonperforming by the primary Federal regulatory agency with respect to the bank. (II) Equity The term “equity” means the equity of the bank as determined for Federal regulatory purposes. (C) Coordination with estimated tax payments For purposes of applying section 6655(e)(2)(A)(i) with respect to any installment, the determination under subparagraph (B) of whether an adjustment is required to be taken into account under subparagraph (A) shall be made as of the last day prescribed for payment of such installment.