D.C. Mayor Marion Barry Jr. has proposed legislation to authorize establishment of tax-exempt international banking facilities in the District.
At least one District bank plans to open an IBF here next month, even though the legislation that would grant it tax-exempt status is still only a proposal. D.C. National Bank, the District's seventh largest, has notified the Federal Reserve Board that it will open an IBF Dec. 3, in the bank's headquarters building.
Income the facility would produce from international deposits and lending activities will be subject to local taxes until Barry's proposal becomes law, although the taxes paid probably won't amount to very much, since the bill is expected to pass without much delay.
Barry said the bill, which has been sent to the city council, will "enhance the District as an international commercial and financial center" while "encouraging greater foreign deposits and investments."
Similar legislation to encourage the formation of IBFs has already been enacted by several states, including Maryland.
Several states have approved the concept, following the lead of New York in establishing the tax havens for banks. At least 182 banks, most of them in New York, plan to open IBFs beginning Dec. 3.
Many of those banks currently operate offshore bank offices in trade-free zones such as Nassau, where liberal banking laws exempt them from taxes and exclude them from reserve requirements established by the Fed.
Barry's proposal, as with the laws passed by several state legislatures, would allow banks to accept foreign deposits but would prohibit them from accepting deposits or making loans to domestic customers.
In Washington, American Security Bank, Riggs National Bank and National Bank of Washington operate offshore offices in Nassau, and Riggs has a full branch in London. It could not be determined yesterday whether those banks would curtail their foreign offices if Barry's proposal becomes law.