FOR IMMEDIATE RELEASE
President Signs ICBA-Crafted Tax Relief into Law
Washington, D.C. (May 29, 2007)—The Independent Community Bankers of America (ICBA) applauded Congress for passing and the White House for quickly signing a new ICBA-endorsed law that provides $4.84 billion in tax relief for thousands of small businesses and community banks. President Bush signed the relief into law on May 25, 2007, as part of the larger "U.S. Troop Readiness and Iraq Appropriations Act" (H.R. 2206).
"Community banks are the backbone of our local economies and this new law helps free up resources to better support the communities we serve," said James P. Ghiglieri, ICBA chairman and president of Alpha Community Bank, Toluca, Ill. "We are absolutely delighted that Congress and the White House worked together to enact legislation that benefits community banks, and the small businesses and people in our communities."
ICBA appreciates the strong support provided, including favorable S Corporation reforms by Senate Finance Committee Chairman Max Baucus (D-Mont.), Ranking Minority Member Charles Grassley (R-Iowa), Sens. Orrin Hatch (R-Utah), Blanche Lincoln (D-Ark.), and Gordon Smith (R-Ore.) and House Ways and Means Chairman Charles Rangel (D-N.Y.), and Ranking Minority Member Jim McCrery (R-LA).
The new law provides more than $750 million in ICBA-backed small business tax relief, including improved Sec.179 small business expensing and beneficial Subchapter S tax provisions. Several provisions were part of the ICBA-advanced "Communities First Act" (S. 1405 and H.R. 1869).
The ICBA-backed Subchapter S reforms enacted into law will:
- Exclude capital gains from passive investment income for Subchapter S businesses. The law eliminates the gain on the sale of stocks and securities from the passive income definition;
- Ease the treatment of Subchapter S bank directors' shares retroactive back to 1997;
- Improve the tax treatment of bank bad debt reserves;
- Improve the treatment of the sale of interest on a qualified Subchapter S subsidiary; and
- Ease the interest expense of an electing small business trust to acquire S corporation stock.
These tax relief measures will help existing Subchapter S community banks and will allow additional banks to more easily elect the tax-saving S Corporation status. S Corporations avoid punitive double taxation by paying tax on the banks' income once at the individual shareholder level. Many small businesses in the U.S., including one-third of all U.S. banks or about 2,400 community financial institutions, have elected S Corporation status.