Utah is one of the leaders in the recent movement of small banks organizing themselves as limited liability companies. The move gives them ownership and capital flexibility. But under federal rules, they are still taxed as if they were corporations.

"We need to make sure that our community banks can provide the most capital to Utahns without an onerous second layer of tax," Hatch said in a statement.

As it stands now, these state-chartered institutions must pay taxes on profits at the corporate level and then again as the profits are doled out to shareholders. Hatch's bill would require taxes to be paid only once.

"Our tax system is too complicated and often interferes with the operation of our businesses. It is time we update our tax rules to create more jobs and improve our economy," Hatch said.

Utah Bankers Association President Howard Headlee, with Hatch's help, has pressed the Treasury Department to make the tax change by rule for more than a year, before deciding to go forward with this bill.

"It is really odd that banks that are formed as LLCs are not treated like every other LLC," Headlee said.

The bill would reduce the amount of taxes the federal government collects from these state-chartered banks, but Hatch's office has yet to receive a financial estimate.

mcanham@sltrib.com