WASHINGTON — The banking lobby was able to push small businesstax relief through as part of the U.S. Troop Readiness and IraqAppropriations Act (H.R. 2206), providing $4.84 billion in taxrelief for thousands of small businesses and community banks.

The president signed the bill into law May 25. The new lawprovides more than $750 million in ICBA-backed small business taxrelief, including improved small business expensing and beneficialSubchapter S tax provisions. Several provisions were part of theICBA-advanced Communities First Act (S. 1405 and H.R. 1869). Theywould:

?? 1/2 Exclude capital gains from passive investment income forSubchapter S businesses;

?? 1/2 Ease the treatment of Subchapter S bank directorshares;

?? 1/2 Improve the tax treatment of bank bad debt reserves;

?? 1/2 Modify the treatment of the sale of interest on aqualified Subchapter S subsidiary; and

?? 1/2 Ease the interest expense of an electing small businesstrust to acquire S corporation stock.

Independent Community Bankers of America Chairman James P.Ghiglieri, president of Alpha Community Bank, Toluca, Ill., stated,“Community banks are the backbone of our local economies and thisnew law helps free up resources to better support the communitieswe serve.”

The credit union trade groups noted the banks' hypocrisy inpushing their own tax relief while trying to tax credit unions.