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Student Loan Bill with Sub S Provision Blocked

Posted on 5/9/2012

Senate Republicans yesterday blocked with a 52-45 party-line vote consideration of a Democratic bill (S. 2343) that would freeze student loan interest rates for another year, but offset the cost by taxing certain Subchapter S corporations. Sixty votes were needed to begin debating the legislation.

The bill's Sub S provision would require the active shareholders of service-sector S corporations to pay payroll taxes on all their income from the business -- wage and business earnings alike -- if the S corporation is a partner in a professional service business, or if 75 percent or more of the corporation's gross income is attributable to the service of three or fewer shareholders.

Without congressional action, the interest rate for subsidized student loans will double to 6.8 percent on July 1. Senators have started negotiations to resolve the impasse, press reports said.

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