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Trump Signs Historic Tax Bill

Posted on 12/22/2017

President Trump this morning signed Congress' historic tax reform package -- the most comprehensive rewrite of the tax code in three decades.

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

With the bills signing, there are immediate accounting and capital implications for banks, particularly those with deferred tax assets and liabilities. Under generally accepted accounting principles, with the tax law signed before Jan. 1, it will require the immediate reevaluation of DTAs and DTLs, with the difference recorded through net income. This could impact banks' current quarterly earnings statements and regulatory capital levels. ABA has prepared a summary of these required changes to help bankers work with their boards, management teams, auditors and others to determine how it will affect them.

Read highlights of the tax bill.

Read a summary of required accounting and capital adjustments.

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