Tax Considerations for Participants in U.S. Treasury’s Capital Purchase Program

Recent financial reports suggest that as many as 40% of the institutions in the banking and thrift industry will eventually participate in the U.S. Treasury Department’s $250 billion Capital Purchase Program (CPP). Although the level of interest may ultimately prove to be lower than this projection, it is conceivable that several thousand banks and thrifts may choose to participate. They may be joined by finance companies and other financial institutions that purchase, form, or convert into banks in order to be eligible for participation. It is also possible that, depending on the outcome of negotiations between Treasury and Congressional leaders concerning the potential expansion of CPP beyond the banking industry, the pool of participants may ultimately include various nonbank entities.

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