ICBA and other banking groups called on the IRS to reconsider its approach to implementing the Tax Cuts and Jobs Act’s 20 percent tax deduction for pass-through businesses. In a joint comment letter, ICBA said the agency should allow all permissible banking activities to be eligible for the deduction.
Citing Section 199A of the tax law, the IRS’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 possibly 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 addition to narrowing the services ineligible for the deduction, ICBA called on the IRS to issue additional guidance raising the de minimis thresholds to a flat 25 percent and clarifying the treatment of loan sales, trades and businesses, and ancillary consulting services.
ICBA continues calling on community bankers to use its Be Heard grassroots action center to contact the IRS and Congress on the proposed regulation. Meanwhile, ICBA will continue working with policymakers to advocate a broad interpretation that ensures all Sub S community bank activities are eligible for the tax deduction.