Mitchell S.D. (September 23, 2016) - Today the Independent Community Bankers of South Dakota (ICBSD) applaud the bipartisan leadership of U.S. Sen. John Thune (R-S.D.), and U.S. Sen. Ben Cardin (D-Md.) on the Finance Committee’s approval of an amendment to the Retirement Enhancement and Savings Act of 2016. The Amendment provides for important updates to the laws governing S corporations and provides for a streamlined process to help community banks become S Corporations.
Thirty-six community banks in South Dakota and 2,038 community banks in the United States have chosen to organize under Subchapter S of the Internal Revenue Code, simplifying their taxation so that they may better serve their customers. However, the tax code is outdated and unnecessarily restrictive in several respects. For example, it prohibits individual retirement accounts (IRAs) from holding shares in an S corporation. Many S corporation bank owners would like to be able to tap their IRAs to inject capital into their banks. This amendment provides an important provision allowing shareholders to continue ownership in the S corporation bank without reducing the value of their IRA should the bank decides to make an S election.
“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.”
“The ICBSD is very encouraged that companion legislation has been introduced in the House of Representatives by U.S. Reps. Dave Reichert (R-Wash.) and Ron Kind (D-Wis.),” said McCurry.