WASHINGTON - It's not quite the fresh start the thrift industry wanted. Still, the Thrift Charter Conversion Tax Act of 1995, unveiled last week by Chairman Bill Archer of the House Ways and Means Committee, would free thrifts from paying back taxes on most, if not all, of the bad-debt reserves they have accumulated over the past 42 years.

The proposal, scheduled to be the subject of a Ways and Means Committee hearing on Thursday, assumes that Congress' broader plan to rescue the undercapitalized Savings Association Insurance Fund will force federal savings banks and savings and loans to convert to commercial bank charters.

At present, thrifts that become banks are forced to "recapture" their bad-debt reserves into earnings and pay taxes on them over six years.

Since 1953, thrifts have been able to take a standardized tax deduction for bad debt. The bad-debt reserve is the difference between the deductions taken and thrifts' actual loan losses.

Rep. Archer's proposal would, in the case of a forced conversion to a bank charter, exempt from taxes any bad-debt reserves amassed before 1987.

That was the year when thrifts' standardized bad-debt tax deduction was cut from 40% to 8%. So the reserves accumulated since then are much smaller than the pre-1987 reserves.

America's Community Bankers estimates that the thrift industry's potential tax liability on pre-1987 bad-debt reserves is about $4 billion. The tax bill on reserves accumulated since 1987 would be about $1 billion, according to the trade group.

What's more, the Archer plan would allow former thrifts to avoid paying taxes on post-1987 bad-debt reserves as long as they keep acting like thrifts and concentrate on mortgage lending.

"The nice thing is, if you stay in the thrift business, it looks like you're able to postpone the recapture indefinitely," said John Ziegelbauer, a senior manager in the Washington federal tax services office of the accounting firm Grant Thornton.

Under the plan introduced last week, converted thrifts would no longer be able to take a standardized tax deduction for bad debt. If they have assets of more than $500 million, they would only be able to write off actual loan losses. If smaller than $500 million, they would instead be allowed - as small banks are now - to deduct the average of their loan losses for the previous six years.

Meanwhile, the bad-debt reserves accumulated from 1987 through 1995 would remain on converted thrifts' books. But an institution would have to pay taxes on its reserves only in years when the dollar amount of its residential loans dropped below its average for the previous six years.

This has raised some concerns at America's Community Bankers, because low interest rates spurred a boom in mortgage refinancings in 1993 that may make the six-year average standard hard for some institutions to meet.

But over the long run, Mr. Ziegelbauer said, inflation may help converted thrifts avoid a big tax burden. Rising housing costs - and thus bigger mortgage loans - would make it easier for them to surpass their six- year averages. Their bad-debt tax liability, meanwhile, would remain stuck in 1995 dollars and become less significant as time goes by.

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