U.S. Sen. John Thune (R-S.D.), a member of the tax-writing Senate Finance Committee, today 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 today in the chairman’s mark,” said Camden Fine, president and CEO of ICBA.
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.
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 today’s markup is a key provision of S. 3181.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.