The Independent Community Bankers of America (ICBA) applauded a group of Republican senators for urging the Treasury Department to revisit a rule implementing a 20 percent tax deduction for certain banks.
In a letter to Treasury Secretary Steven Mnuchin, 11 senators said the proposed rule unreasonably limits the deduction established by the Tax Cuts and Jobs Act. It should be revisited to include all Subchapter S banks.
“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.”
The rule, proposed by the Internal Revenue Service (IRS), 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. Further, 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. Also, businesses with more than $25 million in gross receipts that earn less than 5 percent from those services would be eligible as well.
ICBA, among other banking groups, believe that all Subchapter S community bank activities should be eligible for the tax deduction. They 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.