26 U.S.C. § 7507

Exemption of insolvent banks from tax

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(a) Assets in general

Whenever and after any bank or trust company, a substantial portion of the business of which consists of receiving deposits and making loans and discounts, has ceased to do business by reason of insolvency or bankruptcy, no tax shall be assessed or collected, or paid into the Treasury of the United States, on account of such bank or trust company, which shall diminish the assets thereof necessary for the full payment of all its depositors; and such tax shall be abated from such national banks as are found by the Comptroller of the Currency to be insolvent; and the Secretary, when the facts shall appear to him, is authorized to remit so much of the said tax against any such insolvent banks and trust companies organized under State law as shall be found to affect the claims of their depositors.

(b) Segregated assets; earnings

Whenever any bank or trust company, a substantial portion of the business of which consists of receiving deposits and making loans and discounts, has been released or discharged from its liability to its depositors for any part of their claims against it, and such depositors have accepted, in lieu thereof, a lien upon subsequent earnings of such bank or trust company, or claims against assets segregated by such bank or trust company or against assets transferred from it to an individual or corporate trustee or agent, no tax shall be assessed or collected, or paid into the Treasury of the United States, on account of such bank or trust company, such individual or corporate trustee or such agent, which shall diminish the assets thereof which are available for the payment of such depositor claims and which are necessary for the full payment thereof. The term “agent”, as used in this subsection, shall be deemed to include a corporation acting as a liquidating agent.

(c) Refund; reassessment; statutes of limitation(1) Any such tax collected shall be deemed to be erroneously collected, and shall be refunded subject to all provisions and limitations of law, so far as applicable, relating to the refunding of taxes.(2) Any tax, the assessment, collection, or payment of which is barred under subsection (a), or any such tax which has been abated or remitted shall be assessed or reassessed whenever it shall appear that payment of the tax will not diminish the assets as aforesaid.(3) Any tax, the assessment, collection, or payment of which is barred under subsection (b), or any such tax which has been refunded shall be assessed or reassessed after full payment of such claims of depositors to the extent of the remaining assets segregated or transferred as described in subsection (b).(4) The running of the statute of limitations on the making of assessment and collection shall be suspended during, and for 90 days beyond, the period for which, pursuant to this section, assessment or collection may not be made, and a tax may be reassessed as provided in paragraphs (2) and (3) of this subsection and collected, during the time within which, had there been no abatement, collection might have been made.(d) Exception of employment taxes

This section shall not apply to any tax imposed by chapter 21 or chapter 23.

(Aug. 16, 1954, ch. 736, 68A Stat. 897; Pub. L. 94–455, title XIX, § 1906(a)(50), (b)(13)(A), Oct. 4, 1976, 90 Stat. 1831, 1834.)Editorial NotesAmendments

1976—Subsec. (a). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (c). Pub. L. 94–455, § 1906(a)(50), struck out “after May 28, 1938” in par. (2) after “or remitted” and in par. (3) after “been refunded”.

Statutory Notes and Related SubsidiariesEffective Date of 1976 Amendment

Amendment by Pub. L. 94–455 effective on first day of first month which begins more than 90 days after Oct. 4, 1976, see section 1906(d)(1) of Pub. L. 94–455, set out as a note under section 6013 of this title.

Notes of Decisions

Cited in 5 cases, 1959–1974 · leading case: Otte v. United States, 419 U.S. 43 (1974).

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Otte v. United States, 419 U.S. 43 (1974). “§§ 7507, 108 (b), 371, and 372 of the Internal Revenue Code, 26 U. S. C. §§ 7507 , 108 (b), 371, and 372.”

Bank of Leipsic Co. v. United States, 288 F.2d 467 (6th Cir. 1961). “” 26 U.S.C. § 7507 (b). The income tax for 1955 was not assessed or collected until the bank filed, its income tax return and made the first, payment of the tax on March 15, 1956.”

United States v. Bank of Leipsic Co., 272 F.2d 341 (6th Cir. 1959). “§ 3798 (b), and Section 7507(b) of the Internal Revenue Code of 1954, 26 U.S.C.A. § 7507 (b). The Superintendent of Banks of Ohio closed the bank on January 13, 1932 and took custody and control of its property and business, subject to the jurisdiction of the Court of Common…”

The Exch. & Sav. Bank of Berlin v. United States, 368 F.2d 334 (4th Cir. 1966). ““26 U.S.C. § 7507 (1964) : Exemption of insolvent banks from tax.”

Exch. & Sav. Bank of Berlin v. United States, 242 F. Supp. 838 (D. Maryland 1965). “26 U.S.C. § 7507 (1958); Exemption of solvent banks from tax.”

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