WASHINGTON — Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Minority Member Charles Grassley (R-Iowa) have introduced legislation to further reduce the tax burden on Subchapter S companies, including banks.
The bill would help existing Sub S banks while permitting more companies into the Sub S fold, according to the Independent Community Bankers of America. "The Small Business and Work Opportunity Act of 2007 contains reasonable relief measures to help ease the punitive double tax burden faced by thousands of small businesses and community banks," ICBA President/CEO Camden R. Fine said. "Electing subchapter S status is a proven means to prevent double taxation and improve the viability of small businesses such as community banks, which are financial lifelines for many businesses and local economies. Today there are more than 2,400 subchapter S community banks–approaching one-third of all banks nationwide."
Key subchapter S reforms in the Baucus-Grassley bill include:
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oExcluding capital gains from passive investment income.
oImproving the treatment of bank director shares.
oAllowing recapture of bad debt reserves.
oReforming the treatment of sale of interest in a qualified subchapter S subsidiary.
oEliminating all earnings and profits attributable to pre-1983 years.
oExpanding eligible beneficiaries of an electing small business trust.
When the banking lobby has attacked the credit union tax-exemption in recent years, credit unions have fired back by pointing to the Sub S subsidies those banks receive.
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