ABA urges relief from new tax on failed bank purchasers

A new tax created by the passage of the Inflation Reduction Act in 2022 could discourage mid-sized financial institutions from acquiring the assets of banks under receivership by the FDIC, the American Bankers Association said this week in a letter to the Treasury Department and IRS.

The corporate alternative minimum tax, or CAMT, imposes a 15% minimum tax on the adjusted financial statement income of large corporations. Taxable income currently includes federal financial assistance, such as that provided in FDIC-assisted transactions of banks under receivership. In a letter to the agencies, ABA urged the Treasury Department to issue guidance that excludes the initial income reported under generally accepted accounting principles upon the execution of FDIC-assisted transactions from the calculation of adjusted financial statement income for CAMT purposes.

“The relief requested only affects a very small number of financial institutions that acquire banks or bank assets from the FDIC in times of financial stress,” ABA said. “But the benefits of such an exclusion, including protecting needed capital for FDIC-assisted transactions and preserving the [Deposit Insurance Fund], will enable the FDIC to continue to perform such orderly resolutions in an efficient and equitable manner.”