Sen. Orrin Hatch, R-Utah, wants to stop what he says is double taxation of some state-chartered banks.
He introduced a bill Friday to make state-chartered banks that operate as limited liability companies (LLCs) subject to just one level of federal income tax, and help them escape some extra corporation tax.
"Changing this tax law will enable Utah banks to avoid double taxation and to attract more capital to better serve Utahns," Hatch said.
Utah and several other states allow financial institutions to be organized as LLCs. State laws governing LLCs permit them to be taxed as a partnership, while maintaining the limited liability protection of a corporation.
While the Federal Deposit Insurance Corp. began in 2003 to allow state-chartered banks operating as LLCs to receive deposit insurance, tax law requires them to be taxed as corporations."It is unreasonable not to allow small banks to be taxed like other closely held businesses," Hatch said. "We need to make sure that our community banks can provide the most capital to Utahns without an onerous second layer of tax."