Tax Reform Legislation

The U.S. Senate passed its tax relief bill early Saturday morning after continued negotiations. The House and Senate will continue discussions to come to agreement on a final tax reform bill to send to the President’s desk before year-end. Below are provisions of the Senate bill that are of particular interest to community banks:

  • Lowers the corporate tax rate to 20 percent from 35 percent;
    (Senate – reduction begins in 2018, House – reduction beings in 2019)
  • Provides for a 23 percent deduction on pass-through business income;
    (House – provides a 25 percent rate on business income with some limitations)
  • Top individual rate is set at 38.5 percent;
    (House top individual rate is 39.6 percent)
  • Preserves the mortgage interest deduction at the current $1 million;
    (House – caps the deduction at $500,000 on new home purchases but grandfathers current mortgages)
  • Allows a $10,000 deduction for property taxes but otherwise eliminates the deduction for state and local taxes;
    (House – contains the same provision)
  • Both bills preserve the current tax treatment of non-qualified deferred compensation;
  • Standard deduction nearly doubles;
    (House – contains the same provision) and
  • The estate tax exemption is increased to $11 million per person.
    (House – repeals this new threshold in 2025)

Thank you to all who contacted your members of Congress in recent weeks regarding the tax reform bill. IBAT will continue to communicate with both the House and Senate as the legislation proceeds to a conference committee to ensure the best results for community banks. We will, of course, update you on any new developments.