WASHINGTON-Congressman Clay Shaw (R-Fla.) introduced legislation April 30 to update the Internal Revenue Code to ease the tax burden on Subchapter S entities, including banks. As banks continue to lobby in support of their own tax relief, CUNA Vice President of Communications and Media Outreach Pat Keefe said the push should be advantageous to credit unions. Last year CUNA Economist Mike Schenk wrote a report that in seven years, if current growth continues, the banks' tax savings would surpass the credit unions' tax exemption. CUNA's data did not take into account if a bill to expand Subchapter S would be successful. CUNA is "watching with great anticipation," Keefe said, and takes the point of view that this emphasizes the hypocrisy of bankers' requests to tax credit unions while unburdening themselves. NAFCU Director of Legislative and Political Affairs Brad Thaler agreed. "NAFCU believes the banks look worse in the eyes of legislators when they pursue credit unions' tax exemption in talking out of one side of their mouth while talking to members of Congress out the other side in seeking their own tax exemptions," he said. "Financial Services Subcommittee Chairman Spencer Bachus seemed to recognize this ploy when he said during hearings that the bankers would be better off using their energy helping their constituents opposed to attacking credit unions as it related to the regulatory relief bill." Thaler was referring to the Alabama Republican's admonishment of the banker trade groups for attacking the credit union provisions in the regulatory relief legislation rather than supporting their own during a hearing before his subcommittee last year. The Subchapter S Modernization Act of 2003 (H.R. 1896) is aimed at eliminating the double taxation on closely held banks and other Subchapter S businesses-Sub S companies do not pay corporate income taxes-and at the same time doubling the number of shareholders in those institutions from 75 to 150. The bill also expands the definition of shareholders to include Individual Retirement Accounts and non-resident aliens, as well as counting all family members as one shareholder. Representatives Stephanie Tubbs Jones (D-Ohio), Robert Matsui (D-Calif.), and Scott McInnis (R-Colo.) are cosponsors to the bill. [email protected]

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