A hurricane tax-relief bill the Senate passed before adjourning for its Christmas vacation contained a bank industry-supported provision to amend a year-old law on subchapter S corporations.
The American Jobs Creation Act that President Bush signed in October 2004 raised the threshold on the number of shareholders a company could have to qualify as a subchapter S corporation from 75 to 100. It also redefined shareholder in a way that members of one family could qualify as one shareholder.
The aim of the legislation was to relax eligibility requirements on becoming S corporations so that more companies - including community banks - could take advantage of the favorable tax treatment.
But banking trade groups said that many banks have not been able to become S corporations because of language in the law regarding individual retirement accounts.
The law said that IRAs could hold stock in banks, but not bank holding companies, and bank stock is generally issued at the holding company level. The provision passed by the Senate Friday, included in the technical corrections section of a hurricane-relief bill, would broaden eligibility requirement to include bank holding companies.
The House is expected to take up the issue when Congress reconvenes in the new year.
