January 2, 2025 | JacobiJournal.com — The 2024 Bank Tax Institute took place in Orlando during election week. Tax professionals, financial institutions, and experts gathered to discuss the future of tax policy. This year, the discussions focused on the election results, ongoing tax issues, and strategies for managing tax liabilities. This article covers the key takeaways, including the election’s impact, tax planning, and upcoming regulatory challenges.
The Election’s Impact on Bank Tax Planning
Much of the conference focused on the 2024 election results and the implications of the 2017 Tax Cuts and Jobs Act (TCJA). The quick election outcome shifted attention to the TCJA’s expiring provisions and their potential impact on tax planning for financial institutions. 2024 Bank Tax Institute
If the TCJA is not extended, banks can expect several key changes:
- Increase in Individual Tax Rates: If individual tax rates return to pre-2018 levels, S corporation bank shareholders will face an immediate rise in tax liabilities.
- Elimination of Section 199A QBI Deduction: Losing the 20% Qualified Business Income (QBI) deduction would increase tax burdens, pushing the maximum effective rate from 29.6% to 39.6%.
- Phase-Out of Bonus Depreciation: The complete phase-out of bonus depreciation will affect banks involved in new branch construction or remodeling.
- Expiration of New Markets Tax Credits: These credits will expire by 2025, potentially affecting banks that invest or lend in such deals.
Though financial services transactions are not yet subject to tariffs, lobbyists continue to push against unfair targeting of banks. Many institutions argue that their already high effective tax rates make additional burdens difficult to bear.
Tax Planning Strategies for Banks
Tax-saving strategies were a major focus at the conference. Energy credits emerged as a key area where banks can take advantage of growing opportunities. As more energy producers come online, smaller banks gain access to tax-saving benefits.
Another major topic was Bank-Owned Life Insurance. Section 1035 tax-free policy exchanges offer banks a chance to replace policies acquired under less-than-ideal market conditions.
Politics, Pending Legislation, and Regulatory Changes
With a business-focused administration in power, many attendees hope for reduced regulatory burdens. The current regulatory environment causes delays in mergers and acquisitions. These delays lead to higher administrative costs and the loss of valuable resources.
IRS Tax Enforcement and State-Level Scrutiny
A session featured Holly Paz, Deputy Commissioner of the IRS’s Large Corporation division. She discussed the agency’s enhanced enforcement efforts, fueled by additional funds from Congress. These measures will likely lead to more audits for banks in the near future.
At the state and local levels, more states are ramping up their examination of banks. This growing scrutiny is adding to the tax burden for both financial institutions and individual shareholders.contributing to a higher tax burden for both financial institutions and individual shareholders.
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Stay tuned as we continue to monitor these changes and provide you with timely updates on tax policies that affect the banking sector.
FAQs: Bank Tax Institute 2024
What were the main topics at the Bank Tax Institute 2024?
The Bank Tax Institute 2024 focused on the election’s impact, TCJA expiring provisions, tax planning strategies, and regulatory changes.
How does the Bank Tax Institute 2024 address tax policy shifts?
Speakers discussed how the expiration of TCJA provisions, such as Section 199A and bonus depreciation, could reshape bank tax planning.
Why are energy credits important in the Bank Tax Institute 2024 discussions?
Energy credits were highlighted as new opportunities for banks to reduce tax burdens, especially for smaller institutions.
What role does the IRS play in the Bank Tax Institute 2024 updates?
The IRS, represented by Holly Paz, emphasized increased audits and enforcement actions that will directly impact banks.
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