In a letter Tuesday, Edward L. Yingling, executive director of the American Bankers Association, urged President Clinton to support legislation that would make it easier for banks to convert to tax-favored subchapter S companies.

"Nonbank competitors, such as farm credit system lending institutions and credit unions, continue to enjoy significant tax advantages that make it difficult for banks to compete," Mr. Yingling wrote. "Expansion of the subchapter S tax laws for banking institutions is greatly needed."

The House tax bill, which President Clinton has vowed to veto, would exclude bank investment securities from passive income limits placed on subchapter S companies. It would also clarify that qualifying bank director stock does not represent a second class of stock.

Separately, a new ABA committee will hold its inaugural meeting Aug. 23-24 in Kansas City, Mo., to discuss reforming the laws governing subchapter S companies, improving tax-advantaged savings products, and protecting the deductibility of loan origination costs, among other things.

Specific legislative and regulatory recommendations will be released in October, according to Earl D. McVicker, chairman, president, and chief executive officer of Central Bank and Trust Co. in Hutchinson, Kan., who will be chairman of the group. -- Barbara A. Rehm

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