Latest News

Proposed Valuation Rules Under Section 2704

Sep 26, 2016

Proposed regulations under section 2704 of the Internal Revenue Code, released on August 2, 2016 and published to the Federal Register on August 4, 2016, would make sweeping and very significant changes to the valuation of interests in many family-controlled entities for estate, gift, and generation-skipping transfer tax purposes. Code section 2704 provides special gift, estate and generation-skipping transfer tax valuation rules for valuing transfers of interests in corporations and partnerships subject to lapsing voting or liquidation rights and restrictions on liquidation. The proposed regualtions would significantly increase the burden of the death tax. Specifically, the rule will hinder the ability of businesses to apply proper valuation discounts for estate, gift, and generation skipping taxes. Legilsations has been introduced in both the House & Senate to block the Treasury from finalizing the proposed rules. Sponsored by Congressman Davidson (R-OH), HR 6100,  and Congressman Rubio's (R-FL) S 3436, the legislation objects to the underlying premise of the proposed rules and prohibits Treasury from taking action to make them final. These bills go a step farther than HR 6042 which was introduced by Congressman Sensenbrenner (R-WI) that would nullify the proposed regulations. We strongly incourage everyone to get involved. The official comment perios is open until November 2nd. The more the Treasury hears from the community banking community on this issues, the less likely they will be able to finalize these harmful rules as proposed.   Read more

Amendment to Help Community Banks Become S Corps Passes Committee

Sep 22, 2016

 U.S. Sen. John Thune (R-S.D.), a member of the tax-writing Senate Finance Committee,  applauded the Finance Committee’s approval of his provision that would make it easier for community banks to become S corporations by allowing S corporation bank shares to be held in individual retirement accounts (IRAs). In 2004, legislation was enacted making it easier for existing community banks to utilize the option of converting to an S corporation. Thune’s amendment, which was included in the bipartisan Retirement Enhancement and Savings Act of 2016 markup, would provide additional community banks the option to convert to an S corporation and would grant S corporation bank shareholders the ability to use IRA funds to purchase additional shares.    “S corporations are one of the most popular forms of businesses in the United States and play an important role in South Dakota’s economy,” said Thune. “Similarly, community banks – many of which are organized as S corporations – provide an invaluable source of financing to small businesses throughout South Dakota and our nation. While the federal tax code is large and complicated, I’m always glad when we can find common-sense, bipartisan reforms like this one that would streamline the process, and in this case, help banks continue to serve their communities.” The Independent Community Bankers of South Dakota (ICBSD) and the Independent Community Bankers of America (ICBA) have expressed their support for the Thune amendment: “Access to capital is particularly important as community banks are facing regulator demands for higher capital levels under the Basel III Capital Accords and other regulations,” said Greg McCurry, president and CEO of ICBSD. “Community banks have limited means of raising capital. This amendment would allow funds held in IRAs to be used to help meet the challenges of the current capital regulatory environment. The ultimate beneficiary of these changes will be the South Dakota customers and the 35 different communities served by S corporation community banks.” “ICBA strongly supported this amendment as a stand-alone bill, the S Corporation Modernization Act of 2016 (S. 3181), and is very pleased that it was included in the chairman’s mark,” said Camden Fine, president and CEO of ICBA. In July, Thune and U.S. Sen. Ben Cardin (D-Md.) introduced the S Corporation Modernization Act of 2016 (S. 3181), legislation that would make several pro-growth reforms to help S corporations operate more easily, which would improve their ability to raise capital. The amendment adopted during the committee's markup is a key provision of S. 3181. As mentioned previously, this is the first time since 2009 that the S Corporation Modernization Act, of which Sen. Pat Roberts (R-Kan.) is also a cosponsor, has been introduced in the Senate. U.S. Reps. Dave Reichert (R-Wash.) and Ron Kind (D-Wis.) have introduced companion legislation in the House of Representatives.  Read more

S Corporation Modernization Act of 2016 Introduced

Jul 14, 2016

John Thune (R-S.D.) and Ben Cardin (D-Md.), members of the tax-writing Senate Finance Committee, introduced the S Corporation Modernization Act of 2016 (S. 3181), legislation that would make several pro-growth reforms to help S corporations operate more easily, which would improve their ability to raise capital. S corporations were created in 1958, must be domestically owned, and are limited to 100 shareholders. This type of business has grown in popularity, particularly among small businesses, because of its simplicity and flexibility. S corporations are the most common form of business structure in America, with more than 4 million in existence today. Despite their popularity, relatively few reforms have been made to S corporations since their creation, which is why the Thune-Cardin bill would help modernize this part of the tax code.    Read more

The Sub S Bank Report Volume 19, Issue 2

Jul 12, 2016

The Sub S Bank Report Volume 19, Issue 2 is now available to read. Learn more about: Shareholder Succession: Family Stock Distributions & Expanding the 100 Shareholder Limit; SR 15-15 Update; Subchapter S Bank Association Legislative Efforts; Preliminary Report of C Corp vs. S Corp Bank Contribution to the US Treasury; Federal Reserve Regulatory Service Bulletin 4-185.5-The 25 Year Limitation for Shareholder Agreements; New Market Tax Credit Opportunities; Legislative Round Up and the 19th Annual Subchapter S Bank Association Conference agenda.  To read it, log in with your membership information. If you need assistance resetting your log in information or did not receive the email copy to your inbox email Amy Trevino at atrevino@kslawllp.com.   Read more

ABA Supports Proposed Subchapter S, LLC Tax Bills

May 31, 2016

ABA last week submitted a statement for the record expressing support for two bills introduced by Rep. Kenny Marchant (R-Texas) that would provide banks more flexibility under the Internal Revenue Code. The Capital Access for Small Business Banks Act (H.R. 2798) would help facilitate the additional raising of bank capital by expanding both the number of potential shareholders and the types of stock that can be issued by banks currently operating under Subchapter S of the IRC. The Community Bank Flexibility Act (H.R. 3287) would allow an institution organized as limited liability companies to be treated as a bank under Section 581 of the IRC for tax purposes, allowing it to achieve tax efficiencies by having the income of the corporation taxed only once at the shareholder level. “Rep. Marchant’s legislation will provide additional important tax efficient alternatives for banks to raise capital,” ABA said. “The ABA supports these two changes to the IRC that will help promote strong banks, encourage growth and stronger, more economically vibrant communities.”  Read more