President Trump today signed Congress’ historic tax reform package — the most comprehensive rewrite of the tax code in three decades and a top ABA priority.
The new law sets the tax rate for C corporations at 21 percent, effective in 2018, and provides a 20 percent deduction for Subchapter S banks and other pass-through entities. Other key provisions of the law include:
- A top individual tax rate of 37 percent
- Elimination of the corporate alternative minimum tax
- Capping the mortgage interest deduction for new mortgages of $750,000 or more
- Retention of the low-income housing and new markets tax credits
- Deductibility of net interest expense limited to 30 percent of adjusted gross income for businesses with more than $25 million in annual gross receipts
- Elimination of net operating loss carrybacks with a limitation on carryforwards
“We want to thank President Trump for signing into law the first major tax reform in more than three decades. This action will make America more competitive and open the door to greater economic growth and job creation,” said ABA President and CEO Rob Nichols.
“We also want to thank members of the President’s economic team including Treasury Secretary Mnuchin and NEC Director Cohn for their tireless efforts on behalf of tax reform and for their outreach to the business community,” Nichols added. “By working closely with Speaker Ryan, Leader McConnell, Chairman Brady, Chairman Hatch, and other lawmakers, the administration and Congress have achieved a lasting legacy that will benefit the country for years to come.”
Nichols also noted that since Congress cleared tax reform for the president’s signature earlier this week, several U.S. banks have announced plans to pass along the savings they will see from the corporate tax cut to employees, customers and communities in the form of wage increases, technology investments and charitable contributions. ABA is collecting news of these announcements in order to amplify the message externally. Banks are asked to send press releases or other announcements to ABACommunications@aba.com.
ABA reminds banks that the president’s signature is the enactment event that triggers certain accounting and other adjustments. Under GAAP, because the tax law was signed before January 1, immediate reevaluation of deferred tax assets and liabilities is required, with the difference recorded through net income. ABA has prepared a summary of these required changes and a PowerPoint to help bankers explain them.