WASHINGTON – The U.S. House of Representatives has passed a bill that, among other things, would expand banks’ Subchapter S authorities. The American Jobs Creation Act of 2004 (H.R. 4520) passed the House by a vote of 251-178. The bill includes four key provisions for bankers that increase the shareholder ceiling for Sub S businesses from 75 to 100, count three generations of a family as one shareholder, and permit Sub S shares to be held in Individual Retirement Accounts, and ease passive income and bank director share rules. “Undoubtedly, the Subchapter S reforms included in this bill will help ease the punitive double tax burden faced by thousands of small businesses and community banks nationwide,” Independent Community Bankers of America President and CEO Camden R. Fine commented. CUNA, while not opposing the Subchapter S provisions, has written Congress more than once pointing out the bankers’ hypocrisy in trying to obtain their additional tax breaks for themselves while attempting to get credit unions taxed. The Senate passed its companion bill, the Jumpstart Our Business Strength (JOBS) Act (S. 1637) in May by a vote of 92-5. This legislation does not include the Sub S provisions and under Senate rules, funding for tax breaks must be made up elsewhere. The House did not include a way to pay for the Subchapter S provisions in its legislation, which would cost roughly $155 billion, according to NAFCU Director of Legislative and Political Affairs Brad Thaler. According to CUNA Legislative Affairs Manager Leon Peace, now that the House bill has been sent to the Senate, that body can strip out the language and replace it with their own to begin the conference negotiating. Whether the Sub S provisions survive, Peace said, “That’s going to be one of the major questions.” He gave them a 50-50 chance “at best.”
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