659. Deputy Pádraig O'Sullivan asked the Tánaiste and Minister for Finance if he will outline the current status of section 396C of the Taxes Consolidation Act 1997 relating to relief from corporation tax for losses of participating institutions; the date on which and the enactment by which that section was amended or repealed; whether his Department has conducted any review of that decision since; and if he will make a statement on the matter. [60172/26]

Section 396C of the Taxes Consolidation Act (TCA) 1997 was introduced by section 240 and Schedule 3 of the National Asset Management Agency Act 2009 to place a limit of 50% on the amount of the trading income of a participating institution, and all other participating institutions within the same group, against which trading losses forward could be set off in any accounting period.

At the time of the introduction of the restriction the Government had limited direct participation in the banking system. However, by 2013, the State had acquired substantial holdings in the banking sector following the re-capitalisation of the banks and the restriction was considered to have outlasted its initial purpose to the point where it was deemed to be acting against the State’s interests.

Finance (No. 2) Act 2013 amended section 396C to provide that it would not apply for accounting periods commencing on or after 1 January 2014. Ceasing the application of section 396C reduced the State’s role as a ‘backstop’ provider of credit and shortened the time frame over which the bank losses were likely to be used. It therefore put the institutions in a stronger position when being assessed by regulators and investors and reduced the risk of a future requirement for State support. It also protected the value of the State’s equity and debt investments in the pillar banks.

Section 396C was repealed with effect from 1 August 2026 by the National Treasury Management Agency (Miscellaneous Provisions) Act 2026. Section 396C was repealed to update the Irish Statute Book following the dissolution of NAMA.

In 2018 Department of Finance officials produced a detailed www.gov.ie/en/department-of-finance/publications/technical-note-on-the-potential-consequences-of-changes-to-the-treatment-of-corporation-tax-loss-relief-in-respect-of-banks/ for the Committee on Finance, Public Expenditure and Reform, and Taoiseach on the subject of both bank losses and corporation tax losses more generally. The technical note considered in some detail the potential implications of restricting the use of losses carried forward, or the introduction of a specific time limit or “sunset clause” on loss relief, for Irish banks, for the wider banking sector, or for the corporate sector as a whole.