WASHINGTON — Legislative language to expand the Subchapter S option for community banks passed the House last night as part of a separate measure to fund military operations.
Coupled with a federal minimum wage increase, the banker-backed small business and Subchapter S tax measures have been incorporated into a larger $4.8 billion small business tax package awaiting the president's signature.
The relevant portions of the bill (H.R. 2206) would:
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oExclude capital gains from passive investment income for Subchapter S businesses;
oEase the treatment of Subchapter S bank director shares;
oImprove the tax treatment of bank bad debt reserves; and
oExpand small business expensing limits estimated to save small businesses about $70 million.
These tax relief measures will help existing Subchapter S community banks while facilitating election of Sub S status by more banks. Sub S corporations have a "pass-through" tax structure, where income is taxed at the shareholder level rather than at the higher corporate level. About 2,400, or one-third, of banks in the U.S. have elected Sub S status.
Several of the tax relief provisions passed by the House were part of ICBA's Community Banks Serving Their Communities First Act (H.R.1869 and S.1405).
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