The House today voted 227 to 205 to pass H.R. 1, the landmark tax reform bill that would be the first major overhaul of the tax code in more than three decades. American Bankers Association President and CEO Rob Nichols welcomed the development, noting that ABA is “encouraged by the bill passed today and the progress Congress has made.”
Key provisions in the bill include a corporate income tax rate for C-corporations of 20 percent; an income tax rate of 25 percent for passive income from “pass-through” entities, including Subchapter S banks, but with restrictions on the ability of active shareholders to claim the lower corporate rate; new limitations on net interest deductibility; and retained homeownership provisions but subject to new caps going forward.
Nichols emphasized that opportunities remain to improve the House bill, as well as the separate bill currently being considered by the Senate Finance Committee. In particular, “we appreciate that House members continue to listen to our concerns about the legislation’s treatment of pass-through businesses,” he said. “The current bill prevents a large number of community banks that operate as Subchapter S businesses from benefiting from a lower tax rate — something we believe lawmakers never intended.”
Nichols also urged Congress to use this opportunity to correct the distortionary tax code advantages of credit unions and Farm Credit System lenders that compete with taxpaying banks.