Two of the leading banking associations expressed their support for the final version of the tax reform plan that was agreed to by the House and Senate last week.
The plan, which is expected to be approved by Congress this week, would reduce the top corporate rate from 35 percent to 21 percent, double the estate tax exemption, provide alternative minimum tax relief, and lower the top individual rate from 39.6 to 37 percent.
“Among its pro-community bank provisions, the legislative agreement would carve out small-business borrowers from limits on the deduction for business interest expenses, preserve laws on non-qualified deferred compensation and mortgage-servicing assets, and largely maintain the mortgage interest deduction,” Camden Fine, president and CEO of Independent Community Bankers of America, said.
While declaring its overall support for the tax plan, Fine said ICBA is still concerned about what he called the inequities provided to the tax-exempt credit union industry and tax-advantaged Farm Credit System.
“ICBA particularly appreciates the improvements to provisions on Subchapter S community banks and other pass-through businesses, lowering the effective tax rate for these small businesses,” Fine added. “Subchapter S community bank shareholders will be allowed to deduct 20 percent of the business income, for a top effective rate of 29.6 percent. This deduction will also be available to shares held in estates and trusts.”
The American Bankers Association (ABA) also applauded the tax overhaul agreed to in Congress.
“ABA believes the significant reforms included in this legislation will help grow the economy and create jobs. We particularly applaud the provisions that significantly lower tax rates for all types of businesses beginning in 2018. Banks currently have one of the highest effective tax rates of any industry, and these important changes will allow our members to better serve their customers and the broader economy,” Rob Nichols, president and CEO of ABA, said.
However, he echoed the same concerns as ICBA about credit unions.
“While there is much to like in the bill, lawmakers missed an opportunity to reform the outdated, unfair and unreasonable tax advantages enjoyed by credit unions and the Farm Credit System,” Nichols added. “Congress should treat businesses providing the same services the same way, and that is not happening today. We will continue to argue for a level playing field until Congress ends this inequity.”