The Tax Exemption to Subchapter S Banks: Who Gets the Benefit?

34 Pages Posted: 15 Jul 2016

See all articles by Chun-Hao Chang

Chun-Hao Chang

Florida International University (FIU)

Ajeet Jain

affiliation not provided to SSRN

Edward R. Lawrence

Florida International University (FIU) - Department of Finance

Arun J. Prakash

Florida International University (FIU) - Department of Finance; Florida International University

Date Written: August 2016

Abstract

The Small Business Job Protection Act of 1996 allows U.S. banks to adopt the Subchapter S status. We investigate if the Subchapter S banks use tax benefits for the intended purposes of “protecting jobs,” “creating opportunities” and “increasing take home pay of workers.” We find that the tax benefits: (a) are not used in expenses related to protection of jobs, (b) do not lead to greater employment opportunities within the Subchapter S banks, and (c) do not benefit the employees in the form of increased salaries and benefits. Our results indicate that bank owners are sole beneficiaries of the tax exemption benefits.

Keywords: Small Business Job Protection Act of 1996, Subchapter S banks, tax exemption, benefits from tax exemption

JEL Classification: G21, G28

Suggested Citation

Chang, Chun-Hao and Jain, Ajeet and Lawrence, Edward R. and Prakash, Arun Jai, The Tax Exemption to Subchapter S Banks: Who Gets the Benefit? (August 2016). Financial Review, Vol. 51, Issue 3, pp. 329-362, 2016. Available at SSRN: https://ssrn.com/abstract=2809969 or http://dx.doi.org/10.1111/fire.12107

Chun-Hao Chang

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Ajeet Jain

affiliation not provided to SSRN

Edward R. Lawrence (Contact Author)

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Arun Jai Prakash

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Florida International University ( email )

Miami, FL 33199
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
574
PlumX Metrics