Treasury Approach to Subchapter S Banks Should Be Revisited
Washington, D.C (Oct. 17, 2018)—The Independent Community Bankers of America® (ICBA) today thanked Sen. Jerry Moran (R-Kan.) for leading a letter with 11 other senators calling on the Treasury Department to revisit its proposed rule implementing a 20 percent tax deduction for Subchapter S banks and other pass-through businesses.
Joining Sen. Moran were Sens. Roy Blunt (R-Mo.), John Kennedy (R-La.), Mike Rounds (R-S.D.), Joni Ernst (R-Iowa), Ron Johnson (R-Wis.), Roger Wicker (R-Mss.), Shelley Moore Capito (R-W.Va.), Cindy Hyde-Smith (R-Miss.), James Inhofe (R-Okla.), John Boozman (R-Ark.), and Deb Fischer (R-Neb.). In the letter to Secretary Steven Mnuchin, the lawmakers said the proposed rule unreasonably limits the deduction established by the Tax Cuts and Jobs Act.
“ICBA and the nation’s community bankers thank Sen. Jerry Moran and other lawmakers for calling on the Treasury Department to ensure the new Subchapter S tax deduction is workable for community banks,” ICBA President and CEO Rebeca Romero Rainey said. “Congress intended tax reform to promote growth in local communities across the nation, including those served by roughly 1,900 Subchapter S community banks. Treasury should maximize access to this pro-growth tax deduction as Congress intended.”
Citing Section 199A of the tax law, the Internal Revenue Service’s August proposed rule names various financial services that do not qualify for the 20 percent deduction, such as trust or fiduciary services, wealth management, retirement planning and income from loans sold to be securitized. Businesses that have $25 million or less in gross receipts and earn less than 10 percent of those receipts from these services would be eligible for the full deduction, as would businesses with more than $25 million in gross receipts that earn less than 5 percent from those services.
In a joint comment letter last month, ICBA and other groups called on the IRS to allow all permissible banking activities to be eligible for the deduction. The groups also called on the IRS to raise the de minimis thresholds to a flat 25 percent and allow income from loan sales and trust or fiduciary services to qualify for the 20 percent deduction.
ICBA looks forward to continuing to work with the Treasury Department, IRS and Congress to ensure the final rule implementing the tax law provides that all Subchapter S community bank activities are eligible for the tax deduction.
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 52,000 locations nationwide, community banks constitute 99 percent of all banks, employ more than 760,000 Americans and are the only physical banking presence in one in five U.S. counties. Holding more than $4.9 trillion in assets, $3.9 trillion in deposits, and $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.