On September 27, 2007, the Internal Revenue Service issued proposed Treasury Regulations (REG-143326-05) to provide guidance on certain provisions in the IRC relating to S corporations. In particular, REG-143326-05 purports to clarify those provisions addressing family shareholder rules, the definitions of “powers of appointment” and “potential current beneficiaries” as they relate to electing small business trusts (ESBTs), allowances for suspended losses to spouses or former spouses of S corp. shareholders, and relief provisions for inadvertently terminated qualified Subchapter S subsidiaries (QSubs).

These proposed regulations appear to be geared more towards housekeeping matters rather than implementing any changes that would substantially impact Sub S banks or their shareholders. Nonetheless, the IRS is requesting public comments on these proposed regulations, which are due by December 27, 2007. A public hearing is scheduled for January 16, 2008. Comments can be sent by mail to: CC:PA:LPD:PR (REG-143326-05), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044, or electronically at http://www.regulations.gov.