Independent Banker - March 2019 - 50

PORTFOLIO
the House would have provided little to no tax
relief, while the Senate's fi rst proposed passthrough
deduction was set at 15 percent and
excluded Sub S shares held in estates or trusts.
ICBA engaged Congress directly and through
successful grassroots campaigns with the support
of thousands of community bankers. The
fi nal version of the Tax Cuts and Jobs Act's section
199A raised the deduction to 20 percent,
and provides that it is available to shares held by
estates and trusts, as well as individuals.
Advocacy on all fronts
Checks & Balances By Alan Keller, ICBA
Subchapter S
showdown
The Treasury Department has made needed,
ICBA-advocated reforms to tax deduction.
ubchapter S bank shareholders will have
signifi cantly expanded access to the 20 percent
tax deduction for pass-through businesses
under a Treasury Department fi nal rule that
includes ICBA-advocated reforms.
The recently issued fi nal rule expands the availability
of the Tax Cuts and Jobs Act's deduction
on qualifi ed business income to include income
from the origination and sale of mortgages and
other loans. Advocated in community banker
grassroots letters and ICBA meetings with Treasury
offi cials, this is a signifi cant change that will
benefi t hundreds of community banks.
Since Congress began to consider tax reform,
ICBA has consistently advocated for greater tax
parity between S and C corp community banks.
The initial versions of tax reform introduced in
50 Q ICBA Independent Banker Q March 2019
S
Alan Keller (alan.
keller@icba.
org) is ICBA first
vice president of
legislative policy
Since the law was enacted in December 2017,
ICBA has lobbied the Treasury, the White House
and the Offi ce of Management and Budget to
implement it in a way that refl ects Congress'
intent to provide tax relief for the many ways
Subchapter S banks serve their communities.
The proposed rule from August clarifi ed that
community bank-qualifi ed business income
included income from the traditional banking
services of deposit-taking and lending. It also
provided that income from insurance brokerage
qualifi es. However, it would have excluded critical
community bank services such as origination
and the sale of mortgages and other loans.
ICBA responded with an intensive advocacy
campaign that included president and
CEO Rebeca Romero Rainey's meeting with
deputy Treasury secretary Justin Muzinich, a
Senate sign-on letter to Treasury secretary Steven
Mnuchin, many meetings with the Treasury's
Offi ce of Tax Policy and a grassroots campaign
supported by thousands of community bankers.
As a result, the fi nal rule issued in January provides
that income from the origination and sale
of loans, including mortgage loans, is qualifi ed
business income and, therefore, eligible for the
deduction under section 199A. This is a signifi -
cant, positive change that recognizes loan sales as
a core feature of the community banking business
model. ICBA thanks the thousands of community
bankers who joined in these advocacy campaigns.
While the fi nal rule does not appear to rectify
other banking activities ineligible for the deduction,
such as wealth management and retirement
planning, ICBA will continue working with policymakers
to maximize Sub S community bank
eligibility for the tax deduction.
Independent Banker - March 2019

Table of Contents for the Digital Edition of Independent Banker - March 2019
