I 
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 Representa-
tives 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: 
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‘‘(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 PER-
MITTED. 
(a) IN GENERAL.—Section 1361 of the Internal Rev-
enue 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 sub-
chapter (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— 
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‘‘(A) is issued by a bank (as defined in sec-
tion 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 subpara-
graphs 
(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 pay-
ment 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 corpora-
tion in which or with which ends the taxable year in 
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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 sec-
tion 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. 
Æ 
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