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| July 11th, 2008 |
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Media Contact(s): Mark Eddington or Lindsey Stimpson, (202) 224-5251 |
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HATCH BILL PROVIDES TAX RELIEF FOR STATE-CHARTERED BANKS
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WASHINGTON - Sen. Orrin Hatch (R-Utah) today will introduce legislation that would allow state-chartered banks, operating as limited liability companies (LLCs), to be subject to just one level of federal income tax, rather than the double taxation corporations face under the current law.
“It is time that we modernize our tax system to correlate with our federal banking laws,” Hatch said. “It is unreasonable not to allow small banks to be taxed like other closely held businesses. We need to make sure that our community banks can provide the most capital to Utahns without an onerous second layer of tax.”
Utah and a growing number of other states allow financial institutions to be organized as limited liability companies. State laws governing LLCs permit businesses to be taxed as a partnership while maintaining the limited liability protection of a corporation.
In 2003, the Federal Deposit Insurance Corporation (FDIC) issued regulations allowing state-chartered banks operating as limited liability companies to receive deposit insurance. However, the tax law continues to require banks organized as limited liability companies to be taxed as corporations, which is obsolete and inconsistent with FDIC regulations.
“Changing this tax law will enable Utah banks to avoid double taxation and to attract more capital to better serve Utahns,” Hatch said. “Our tax system is too complicated and often interferes with the operation of our businesses. It is time we update our tax rules to create more jobs and improve our economy.”
Hatch’s bill has been endorsed by the Utah Bankers Association and the American Bankers Association.
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