Banking industry officials have vowed to renew their push for tax relief with the new Congress, which convened last week.

Headlining their agenda are lower tax rates for community banks, simpler rules for financial institutions converting to so-called S corporations, and faster reductions of estate taxes.

They acknowledge they are reaching for blue sky, because this wish list would cost the government hundreds of millions-if not billions-of tax dollars. But they add that lawmakers seem amenable to adopting at least some of these benefits as part of a broad tax-cut package. New House Speaker Dennis J. Hastert and other congressional leaders have identified tax relief as a priority.

"It would be an uphill fight to see tax relief bills passed, but it's a fight worth making," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "It's not impossible."

Ronald K. Ence, director of legislative affairs for the Independent Bankers Association of America, agreed. "We are going to be ready with a pro-bank agenda," he said. "If and when they get a bill done, I feel good about our chances for getting a piece of it."

Some lawmakers are already taking action.

Rep. Marge Roukema, R-N.J., introduced legislation last week to help more community banks adopt S corporation form to avoid taxation. (S corporations pay no corporate taxes; profits pass directly to shareholders, who are individually taxed.)

The Roukema bill would let a company qualify for S corporation status if it had no more than 150 shareholders. The current limit is 75. It would also permit investors to hold S corporation stock in individual retirement accounts, exempt investments that banks maintain for supervisory or liquidity purposes from limits on S corporations' passive income, and clarify the treatment of stock that bank directors are required to hold by regulators.

"We got within a hairbreadth of it last year," Rep. Roukema said in an interview. "I think we can get it this year, possibly along with some other things."

Of the items on the industry's agenda, reform of S corporations has the best chance of success, because Republicans fear the political fallout of handing direct tax cuts to rich banks, sources said.

But community banks will continue to argue that they need tax relief to compete with tax-exempt credit unions.

"We need to make some changes, or community banks are going to go away," said Steve Scurlock, executive vice president of the Independent Bankers Association of Texas.

An aide to Rep. Tom Campbell said the California Republican, who sits on the Banking Committee, will re-introduce a proposal developed by the Independent Bankers of Texas that would cut taxes for small banks that have a strong record of investing in their communities. Qualifying banks would have to have less than $1 billion of assets and make 60% of their outstanding loans in their local community.

In return, these lenders would pay no taxes on their first $250,000 of profits, 15% on the next $750,000, and the prevailing rate on earnings exceeding $1 million. Under the plan, the tax bill for a typical bank that earns $1 million annually would plummet by one-third, to $227,500, Mr. Scurlock said.

Meanwhile, bankers want lawmakers to speed up planned reductions in estate taxes. The exemption from death taxes was raised to $650,000 this year, on its way to $1 million in 2006. But Mr. Ence said family-owned banks would like Congress to raise the exemption to $1 million immediately and abolish estate taxes in the long term.

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