Subchapter S corporation banks finally have guidance for tax reform enacted more than a year ago.
The Treasury Department released its final rule tied to the Tax Cuts and Jobs Act that lets shareholders in S Corps, including banks, take a 20% deduction on qualified business income. The rule is an improvement from a proposed rule released in August that did not clarify whether income from traditional products and services would qualify for the deduction.
Bankers, and their trade organizations, had long advocated for an expanded definition of qualified business income. The Independent Community Bankers of America, in particular, wanted greater parity between how C Corp and S Corp banks are taxed.
“If they had only given us one thing, that’s what we would have asked for,” said Alan Keller, the ICBA's first vice president of legislative policy. The latest guidance is "going to help hundreds of banks.”
The Treasury determined that qualified business income should include income from the origination and sale of loans, including mortgages.
Read more in American Banker.