Tax Reform & Louisiana Banking
Tax legislation that can have a significant impact on your bank, employees and customers, both positive and negative, is moving through Congress. You have likely seen through media reports that tax reform is on the fast track, with the House passing their bill yesterday and the Senate Finance Committee, on which Sen. Bill Cassidy is a member, passing their version out of committee yesterday as well. The full Senate could tax up the bill the week after Thanksgiving. Both House and Senate bills have provisions that are concerning. Both House and Senate bills initially had very detrimental sections on non-qualified deferred compensation plans. Fortunately, the House removed that provision in committee last week. The Senate bill also initially had that provision, but it too was removed. Both Sen. Cassidy and Sen. John Kennedy and their staffs were actively engaged in helping achieve the positive result. We here at LBA will remain diligent on this issue as long as the tax reform bills are being considered. Bankers did a very good job of getting the attention of our delegation this week when we sent out an alert to contact Sen. Cassidy’s staff.
The LBA board met with Sen. Kennedy November 17 at LBA’s office and discussed tax concerns, such as the S corporation pass through tax rate, deferred compensation and credit unions not being taxed in the current bill. Also discussed was regulatory relief, which LBA Director of Government Relations Joe Gendron has written about in his article in this issue. Also discussed was flood insurance, that has not yet developed a consensus in Congress on a path forward for reauthorization. Other items were covered and we appreciate Sen. Kennedy’s positive and constructive approach.
Continuing on tax reform, reducing corporate tax rates is the core of tax reform. C corporations are given a 20% rate in both bills, which we strongly support. The challenge is with the pass-through corporate entities and assuring they have rates equal in effect. About half of Louisiana banks are organized as S corporations. Some proponents of the pass-through provisions contained in the House bill assert they are achieving a 25% rate that is about equal to the C corporation 20% rate. However, the information we are receiving from our banking association partners in D. C. indicates the provisions impacting S corporation banks in both bills, as they are now, fall significantly short of that goal. In fact, it could be that the motive of some is to incent S corporations to move to C corporations. LBA is strongly communicating our concerns on the S corporation provisions. Sen. Cassidy, who is on the committee, and his staff, are hearing from us and others. Additionally, we are asking Congressman Steve Scalise and his staff to assist, as is Sen. Kennedy and others of the Louisiana delegation. We have heard this issue of pass through corporations and the rate of tax they will pay is one of the major issues that must be resolved by congress as they move toward enactment of tax reform. When the House and Senate bills go to conference committee to reconcile the two bills, Congressman Scalise can be an advocate for changes if the bills are still short of getting to the 25% rate goal. LBA is very appreciative of the staff of the Louisiana congressional delegation. We have been able to get our concerns heard and acted upon as best they can. As this and other issues develop we will keep you updated.