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ICBA Supports Senate Letter Urging Broad Access to Tax Deduction

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.

 

 

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