Senate Passes Jobs and Growth Package Including Sub S Enhancements

WASHINGTON-The Senate passed a $350 million tax cut package earlier this month that included the temporary elimination of the double taxation of corporate dividends, as well as enhancements to the Subchapter S tax status. The Senate bill would eliminate the corporate dividend taxation for three years, creating a pass through for taxation at the shareholder level. The overall bill actually includes new revenue builders totaling $90 billion to offset even greater cuts. The House version of the bill passed earlier this month and includes $550 billion in tax cuts over the next 10 years. According to CUNA Legislative Affairs Manager Leon Peace, the real deals are going to be made in the conference committee, which is the next step for the legislation. In its deliberations, the Senate approved an amendment to include Subchapter S Corp revisions to the president’s tax package. The amendment, sponsored by Senators Orrin Hatch (R-Utah), Blanche Lincoln (D-Ark.), John Breaux (D-La.), and Wayne Allard (R-Colo.), is similar to a stand alone bill introduced in April by Congressman Clay Shaw of Florida. It contains 14 Subchapter S reform provisions, including treating family members as one shareholder and provide relief from the passive income tax, but would increase the number of shareholders for Sub S eligible businesses from 75 to just 100. The Shaw bill would bump the number up to 150. Since the option became available to banks in 1997, more than 1,800 Federal Deposit Insurance Corp-insured institutions, over 20% of the banking industry according to the American Bankers Association, have converted to Subchapter S tax status. H.R. 2 is awaiting a conference committee between both chambers of Congress.