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WASHINGTON-As Senators were getting set to leave their Washington, D.C. offices in favor of the campaign trail last week, the Senate overwhelmingly passed the conference report for the American Jobs Creation Act (H.R. 4520), a bill important to how much taxes some banks pay. The Senate approved the measure by a vote of 69-17 on Columbus Day, Oct. 11, after it passed the House Oct. 7 with a vote of 280-141. It included provisions to expand Subchapter S corporation eligibility, which many banks take advantage of to lower their taxes. Some key provisions that made it into the bill in which the bankers were interested include: * Increasing the number of Sub S corporation shareholders from 75 to 100; * Counting three generation of family members as one shareholder; and * Permitting Sub S corporation shares to be held in Individual Retirement Accounts. An America’s Community Bankers spokesperson commented, “We’re pleased. It will help, especially in the increase in shareholders.” The spokesperson added that the provisions permitting a broader definition of family and allowing shares to be held in IRAs were also extremely helpful. “This bill gives more than three million small businesses the option of becoming Subchapter S corporations, allowing them to avoid unnecessarily punitive and onerous tax rules and regulations,” Independent Community Bankers of America President and CEO Camden Fine said. “This measure will empower small businesses to go on fueling the nation’s economy and job growth.” According to ICBA, 2,300 banks have already opted for the Sub S charter and an additional 1,400 are considering it. House Ways and Means Committee Chairman Bill Thomas (R-Calif.), who has raised the notion of holding hearings to determine whether various non-profits, specifically mentioning credit unions, can still justify their tax exemption, was the chief sponsor of the bill. “ABA has been working on Subchapter S reform for our community bank members for many years,” American Bankers Association Executive Vice President Edward L. Yingling said. “And, we’re very pleased that this legislation contains language that would enact tax reform measures many community banks need to compete in the financial services marketplace.” The credit union community has not opposed the bill but has been keeping an eye on it. “Again, we don’t have any particular problems with the substance of it,” CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary Kohn explained. “We’d just like to point out the incredible hypocrisy of the bankers for asking Congress to give them tax breaks while at the same time, asking them to tax 85 or 86 million Americans who belong to credit unions. “But, frankly, the more tax breaks they get, the more difficult for them to argue against the credit unions’ tax-exempt status.” NAFCU President and CEO Fred Becker echoed, “We haven’t stood in the way in the past of the bankers on Sub S or any other provisions that would help them serve their customers better.” He optimistically added that they should adopt Comptroller of the Currency John Hawke’s position, referring to remarks the comptroller made at an ABA conference in which he said banks should look to improve their own situation rather than trying to damage credit unions. H.R. 4520 awaits President George W. Bush’s signature. After passing the conference report, the Senate recessed but both chambers of Congress may return one more day before elections to consider the 9-11 legislation, which includes matricula restrictions for federal agencies. In other federal legislative news, the House and Senate are expected to return for a lame duck session in mid-November. Some said it may last a week or two while others are predicting they may get out just in time for Christmas, according to Kohn. [email protected]

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