ABA Urges IRS to Apply Passthrough Deduction to Charitable Remainder Trusts, Common Trust Funds

In a comment letter today, the American Bankers Association called on the Internal Revenue Service to specifically address charitable remainder trusts and common trust funds as it prepares guidance on implementing Section 199A of the Tax Cuts and Jobs Act. That section of the bill enacted a 20 percent deduction for certain qualified businesses income received from passthrough entities such as partnerships or businesses operating under a Subchapter S election.

ABA urged the IRS to allow charitable remainder trusts to calculate the section 199A deduction at the trust level and treat the trust as a single taxpayer for the purposes of taxable income, wage and unadjusted basis immediately after acquisition (or UBIA) thresholds. The association also recommended that the IRS explicitly recognize common trust funds — which are often established by banks as a means of investing assets of their fiduciary accounts efficiently and collectively — as passthrough entities that can pass along the deduction to investors in the fund.