A bill that would bring tax relief for community banks and attempt to level the playing field between small banks and credit unions that failed last year is being reworked and should be reintroduced by mid-February.

The bill, called the Qualified Community Lender Bill, will be reintroduced by Rep. Tom Campbell, R-Calif., and will give community banks tax credits on a scale depending on their size. Because credit unions are tax exempt, legislation last year easing restrictions on their membership was seen as a danger to community banks.

Last year’s version of the bill, also introduced by Campbell, originally called for qualifying banks to pay no taxes on the first $250,000 of profit and 15% on the next $750,000–a break from the standard 34% corporate rate they ordinarily would have paid. The bank would pay the prevailing rate on any profits over $1 million.

Patrick Kennedy, partner at law firm Kennedy, Barris & Lundy, who is helping write the altered version of the bill, said the decision to make the savings come as a tax credit is common sense.

"In order to reduce the rates you have to go into the primary-rate schedules in the Internal Revenue Code. It’s more simple and focused to accomplish this through a tax credit. It won’t create a special tax rate for an industry," he said. He added that the savings for banks should work out to be the same as under the original bill.

To qualify, banks must have under $1 billion in assets and at least 60% of lending to the community, and have shareholders in the home state or a contiguous state.

Charles DeWitt, legislative director for Campbell, said the bill is in the final stages of preparation for introduction, including getting scored, or having the amount of money the Treasury will lose estimated to get a sense of the effect on the national revenue. Although Campbell feels strongly about the legislation, which has been pushed by several state banking associations, he will need to find some other piece of legislation to offset the loss from giving bankers tax credits. DeWitt said the bill would probably be referred to the House Ways and Means Committee, with perhaps some time in the Joint Tax Committee, which is the tax version of the Congressional Budget Office.