CONT'L ILLINOIS &lt;CIL> SEES IMPACT FROM TAX REFORM

  The Tax Reform Act of 1986 will have a
  substantial impact on Continental Illinois Corp, the company's
  annual report says.
      One provision repeals the reserve method of providing for
  bad debts for banks with over 500 mln dlrs in assets and
  requires that tax loan loss reserves taken in the past, be
  restored to current earnings status, it said.
      As a result, those amounts will be subject to federal
  taxes, it said. No amounts were disclosed.
      Continental said it decided to deal with this change "in
  its entirety" in 1987.
      Tax reform will also change foreign tax credit limitation
  rules, and although the impact will not be material in the
  short term, the Act will require, for the first time, that
  income from certain foreign subsidiaries be taxable, the report
  said.
      The new legislation also reduces existing tax credits by
  17.5 pct in 1987 and 35 pct in 1988 and later years, it said.
      Continental's investment tax credits carryforwards of 12.8
  mln dlrs at 1986 year end will be reduced to 10.6 mln dlrs in
  1987 and, if not used in 1987, to 8.3 mln dlrs in 1988, it
  said.
      Another provision of the Act could result in limiting the
  use of tax credits if a change in ownership of Continental
  takes place, the report said.
      This could happen if the Federal Deposit Insurance Corp
  sells enough shares of Continental's common stock over the next
  two years to cause a change in ownership, it noted.
      In December, the FDIC sold about one-third of its junior
  convertible preference stock in Continental to the public in
  the form of common stock.
  

