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WASHINGTON-The House Ways and Means Select Revenue Measures Subcommittee scheduled a hearing last week after deadline regarding Subchapter S Corporation reforms. The banking lobby has attempted for several years to broaden the criteria for institutions to be eligible for Subchapter S status, which eliminates taxation at the corporate level and instead passes it on to the shareholders at a lower rate. Banking groups have been looking to expand the definition of shareholder and increase the maximum number of shareholders for Sub S status, currently 75. Several bills have been introduced to address the issue including the Small Business and Financial Institutions Tax Relief Act of 2003 (H.R. 714), the Small Business Opportunity and Growth Act of 2003 (H.R. 1498), and the Subchapter S Modernization Act of 2003 (H.R. 1896). “As a supporter of the President’s plan to eliminate the double-taxation of corporate dividends, I believe it would be preferable if the U.S. Tax Code subjected corporate earnings to only one level of tax,” Subcommittee Chairman Jim McCrery (R-La.) stated. “Pass-through entities, including Subchapter S corporations, achieve that objective. However, the rules and restrictions on these entities may unnecessarily inhibit their growth.”

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