The TARP Capital Purchase Program Expands To Include Subchapter S U.S. Financial Institutions

The Treasury has published its TARP Capital Purchase Program ("CPP") Term Sheet ("Sub S Term Sheet") for U.S. banks, S&Ls, and financial, S&L, and bank holding companies ("QFIs") that have valid elections to be taxed under Subchapter S ("Sub S") of the Internal Revenue Code of 1986 (the "Internal Revenue Code"). Participation is voluntary, but applications to participate must be made by February 13, 2009.

The original CPP had to be modified for Sub S QFIs because, under the Internal Revenue Code, Sub S banks and companies can only have one class of stock, which must be held by 100 or fewer eligible shareholders, plus their family members. Entities, such as the Treasury or a Treasury-sponsored entity, would not be eligible Sub S shareholders.