Capital Access for Small Business Banks Act

Capital Access for Small Business Banks Act

This bill amends the Internal Revenue Code to allow a bank or a depository institution holding company which is an S corporation to: (1) have 500 shareholders (the current limit is 100 shareholders), and (2) issue qualified preferred bank stock. The bill makes a distribution of qualified preferred bank stock to a shareholder includible in the gross income of the shareholder and allows the bank or holding company to deduct the amount of such distribution.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2339 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 2339

  To amend the Internal Revenue Code of 1986 to modify S corporation 
      shareholder and preferred stock rules with respect to banks.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 3, 2017

 Mr. Marchant introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to modify S corporation 
      shareholder and preferred stock rules with respect to banks.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Capital Access for Small Business 
Banks Act''.

SEC. 2. S CORPORATION BANKS PERMITTED TO HAVE 500 SHAREHOLDERS.

    (a) In General.--Section 1361(c) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(7) Bank shareholder limit.--In the case of a bank (as 
        defined in section 581) or a depository institution holding 
        company (as defined in section 3(w)(1) of the Federal Deposit 
        Insurance Act (12 U.S.C. 1813(w)(1))), subsection (b)(1)(A) 
        shall be applied by substituting `500 shareholders' for `100 
        shareholders'.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 3. BANK ISSUANCE OF PREFERRED STOCK PERMITTED.

    (a) In General.--Section 1361 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(h) Treatment of Qualified Preferred Bank Stock.--
            ``(1) In general.--Qualified preferred bank stock shall not 
        be taken into account as outstanding stock of the S corporation 
        for purposes of this subchapter (other than subsection 
        (b)(1)(A) and section 1368(g)).
            ``(2) Qualified preferred bank stock.--For purposes of this 
        subsection, the term `qualified preferred bank stock' means 
        stock which--
                    ``(A) is issued by a bank (as defined in section 
                581) or a depository institution holding company (as 
                defined in section 3(w)(1) of the Federal Deposit 
                Insurance Act (12 U.S.C. 1813(w)(1))),
                    ``(B) is not held by a person ineligible under 
                subsection (b)(1) to be a shareholder of a small 
                business corporation, and
                    ``(C) meets the requirements of subparagraphs (A), 
                (B), and (C) of section 1504(a)(4).''.
    (b) Distributions Includible in Shareholder Gross Income and 
Deductible by S Corporation.--Section 1368 of such Code is amended by 
adding at the end the following new subsection:
    ``(g) Qualified Preferred Bank Stock.--If a shareholder receives a 
distribution (not in part or full payment in exchange for stock) from 
an S corporation with respect to any qualified preferred bank stock (as 
defined in section 1361(h))--
            ``(1) the amount of such distribution shall be includible 
        in gross income of the shareholder, and
            ``(2) there shall be allowed as a deduction by the 
        corporation for the taxable year of such corporation in which 
        or with which ends the taxable year in which such amount is 
        included in the gross income of the shareholder an amount equal 
        to the amount which bears the same ratio to the amount of such 
        distribution as--
                    ``(A) the highest rate of tax in effect for the 
                taxable year with respect to individuals for qualified 
                dividend income (as defined in section 1(h)(11)), over
                    ``(B) the highest rate of tax in effect for the 
                taxable year with respect to individuals under 
                subsections (a), (b), (c), and (d) of section 1 (after 
                the application of subsection (i) thereof).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
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