The Independent Community Bankers of America (ICBA) has voiced its support for the U.S. Treasury Department’s final rule expanding access to the 20 percent tax deduction for pass-through businesses.
A provision of the Tax Cuts and Jobs Act allows shareholders in Sub S banks and other pass-through businesses to take a 20 percent deduction on qualified business income. The Treasury’s August proposal would have excluded certain community banking services from this, but the final rule provides that income from loan origination and sales are eligible for the deduction. ICBA President and CEO Rebeca Romero Rainey said Treasury has correctly recognized these as core features of the community bank business model.
“Subchapter S community banks will have significantly expanded access to the 20 percent tax deduction for pass-through businesses under the Treasury Department’s final rule. ICBA and community bankers were key advocates for greater tax parity between S and C corporation community banks, so Treasury’s final rule capturing more services provided by Sub S banks is a significant improvement over its initial proposal,” Rainey said.
Rainey said ICBA still has some questions over the final rule’s treatment of other community banking services, such as wealth management and fiduciary services.
“ICBA looks forward to continuing our work with policymakers to maximize Sub S eligibility for the tax deduction,” Rainey said.