One reason California still has no state budget is a closed-door dispute over a tax proposal that could be a multimillion-dollar boon to banks that engage in subprime lending.

The proposal, according to legislative sources and industry lobbyists involved in the private budget talks, was brought to the table by the Schwarzenegger administration at the urging of lenders and other corporate interests. The proponents argued that it would help offset costs to businesses that could result from other tax changes under consideration.

The plan would allow many large financial companies that are currently enduring record losses to eventually receive tax breaks millions of dollars greater than are currently available to them. Subprime lenders would be among the largest beneficiaries because they experienced a large boom followed by a bust.

It stems from a Democratic proposal to close the budget gap by suspending loss write-offs for three years, saving the state $1.1 billion a year. The counter-proposal crafted by the business groups would put the more generous tax breaks in effect once the suspension ended.

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