Clarification of TARP Funds

The Troubled Asset Relief Program (TARP) is an essential component of the Emergency Economic Stabilization Act (EESA), which became law on October 3, 2008. Its chief purpose is to inject more liquidity into the credit market so that financial institutions can resume lending to consumers at levels that existed prior to the economic downturn.

In providing financial assistance to banks and lending institutions, the program must comply with Section 597 of the Internal Revenue Code. Any funding that goes to banks and lending institutions under TARP cannot be treated as “financial assistance” until the Department of the Treasury and the Internal Revenue Service (IRS) specify the terms and conditions of the funding.