WASHINGTON -- Despite the lingering threat of an election-year veto, the Senate plans to resume work today on a tax bill that includes some key breaks for the banking industry.

Chief on the industry's list is a provision in the Senate package that would permit banks to depreciate intangible assets, including core deposits acquired in some mergers and in deals with the Resolution Trust Corp.

In addition, the bill passed by the Senate Finance Committee provides favorable tax treatment for trust accounts converted to mutual funds and expands eligibility for Individual Retirement Accounts.

However, many observers think election-year politics are likely to doom the package. In addition to the threat of a presidential veto, the bill bogged down in the Senate before the August break and it is not clear whether that logjam can be broken in the remaining weeks of this Congress.

"I wish I could be more optimistic," said Henry Ruempler, the tax lobbyist for the American Bankers Association.

No New Tax Likely Soon

"Up until now, I had been focusing on the conference [between House and Senate negotiators] and whether the President would sign the bill," he said. "Now I think there is a question of whether it can get through the Senate."

The political stakes went up dramatically when President Bush denounced Arkansas Gov. Bill Clinton for signing 128 tax hikes, a list that includes a number of minor revenue items.

As a result, it is widely assumed that President Bush is unlikely to sign any bill that could be construed as containing a tax increase, and the package reported out by the Senate Finance Committee includes a number of revenue raisers.

A more narrow package, along the lines of the bill passed by the House, is more likely to pass muster at the White House, though even that is in doubt, according to some observers.

For banks, the most important issue is amortization of intangible assets, a category that includes the core deposits that are obtained in mergers and acquisitions.

At Issue with the IRS

"Banks get into disputes with the IRS over what share of the purchase should be allocated to core deposits and what share should be allocated to goodwill," said Mr. Ruempler.

Goodwill generally is not deductible. But the Senate bill would permit banks to depreciate both goodwill and core deposits over 16 years, while the House would permit amortization over 14 years.

One provision in the bill banks oppose is a Bush administration proposal to to require taxation, on a mark-to-market basis, of securities portfolios of both commercial and investment banks.

Bankers say that the measure, which is in both the House and Senate bills, would require them to pay taxes on unrealized income.

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