Our Position

Tax Policy


  • Tax laws should promote robust economic activity and a vibrant community banking sector and foster saving and investment.

  • The 2017 Tax Cuts and Jobs Act has provided significant tax relief for community banks and their customers. Community bank tax savings support community lending and investment in workforce, technology, and physical infrastructure. ICBA will advocate for no increase in the corporate rate and permanent extension of the individual provisions, including the deduction for pass-through income (Section 199A), a top individual rate of no more than 37 percent, preferential tax rates for capital gains, and an adequate estate tax exemption, before their scheduled expiration in 2026. Section 199A should not be capped or phased out, and the net investment income tax (NIIT) should not apply to the active income of Subchapter S shareholders.

  • ICBA opposes any new bank-specific fees, punitive new tax levies, transaction taxes, limitations on the deductibility of FDIC premiums, or other proposals specifically targeting the financial services sector. Additionally, ICBA will continue to oppose any legislation – tax or non-tax – that requires revenue offsets or “pay fors” that target the banking industry, in particular account reporting to the IRS. (See “IRS Account Reporting” resolution.)

  • Public policy should support community banks’ ability to raise capital including allowing S corporation banks to issue preferred stock, increasing their shareholder limits, and allowing new IRA shareholder investments.

  • ICBA supports the creation of tax incentives for community bank retained earnings and community bank lending to low-to-middle income people, small businesses, and small farms.

  • The tax code should create parity among all providers of financial services. Credit unions, Farm Credit System lenders, and community banks offer similar products and services and should be taxed equivalently.

  • Banks in compliance with the Bank Secrecy Act are performing a governmental function and should receive a tax credit equal to the cost of compliance. See discussion under Bank Secrecy Act resolution.

  • ICBA opposes changes that would effectively increase the taxation of estates, including taxation of capital gains at death and eliminating or curbing stepped up basis in the valuation assets. Such changes would jeopardize the inter-generational transfer of many community banks. Government revenues should not be overly dependent on taxation of wealth, high incomes, or estates. Such policies carry unintended consequences for economic growth and wages.

  • ICBA opposes any new limitations on Section 1031 exchanges.


Tax Policy and Community Banks. ICBA continues to promote tax and budget policies that foster economic growth and support the community bank sector by providing direct tax relief and encouraging private savings and small business investment. A fair and unbiased tax code will enhance the viability of community banks and the vital role they serve in the U.S. economy as a source of lending for consumers, small businesses, and farms.

The Tax Cuts and Jobs Act. The Tax Cuts and Jobs Act, signed into law in December 2017, provides significant tax relief for both C corporation and S corporation community banks. C corporations are taxed at a rate of 21 percent. S corporation shareholders are generally eligible for a 20 percent deduction of their business income under Section 199A.

Among other significant changes, the law generally preserves the interest deduction for business borrowers, which had been targeted for elimination, reduces individual tax rates, increases the standard deduction, and increases exemption levels for the individual alternative minimum tax and the estate tax. ICBA views the 2017 law as a missed opportunity to eliminate or curb tax subsidies for credit unions and Farm Credit System lenders.

ICBA will press for extension of the individual provisions without modification, including the pass-through deduction, individual rate structure, lower tax rates for capital gains, and AMT and estate tax relief, well before they are scheduled to expire at year-end 2025. ICBA will oppose any effort to increase the corporate rate.

Tax Code Changes Proposed in 2021 Would Jeopardize Community Bank Viability and Independence. ICBA opposes certain tax provisions under consideration as part of the Build Back Better Act. These ill-advised tax increases come at the expense of community bank capital needed for local lending, business investment and expansion, and hiring.

As a package, the impact of these deeply troubling tax changes will be devastating to the continued independence of American small businesses. Objectionable provisions include: The imposition of a 3.8 percent net investment income tax (NIIT) on the income of active Subchapter S shareholders; an increase in the corporate tax rate; an increase in the tax rate on capital gains; an increase in individual ordinary income tax rates; proposals to cap or phaseout of the deduction under Tax Code Section 199A for shareholders in Subchapter S community banks and other pass-through small businesses; proposals to tax capital gains at death or modify the stepped up basis of assets in an estate; limitations on Section 1031 exchanges which are widely used not only in rural areas but in all parts of the country to limit capital gains taxation of farmland and other commercial land.

New Capital Options for Subchapter S Banks. Subchapter S banks need new options to satisfy higher demands for capital from their regulators. These include allowing S corporation banks to issue preferred stock, increasing their shareholder limits, and allowing new IRA shareholder investments.

Tax Incentives for Community Bank Retained Earnings and Targeted Lending. Carefully designed tax incentives for community bank lending would lower credit costs for targeted borrowers and help community banks diversify their loan portfolios and comply with the Community Reinvestment Act. ICBA believes tax incentives should support community bank lending to low-to-middle income individuals, small businesses, and small farms. Tax relief for community bank retained earnings would strengthen community banks and allow them to better serve their communities.

Parity in Taxation of Financial Services Providers. Many of today’s tax-exempt credit unions and Farm Credit System (FCS) lenders are multi-billion-dollar entities. New rules from the National Credit Union Administration (NCUA) will further blur the distinction between credit unions and community banks.

Many community banks that serve urban and suburban areas have already been squeezed out of consumer lending by tax-subsidized credit unions. Now, community bank commercial lending is also under threat. FCS lenders pose a similar threat to agricultural community banks. Credit unions and FCS lenders are becoming the equivalent of banks and should be taxed equivalently.

Estate Tax. The estate tax jeopardizes the succession of community banks from generation to generation. A family estate should never be forced to sell its interest in a community bank to pay a transfer tax. Forced sales of once family-owned community banks to other community banks or, frequently, to larger regional or national banks, coupled with a recent surge in regulatory burden, accelerate the current trend toward consolidation in the banking sector.

As noted above, the Tax Cuts and Jobs Act temporarily doubles the estate tax exemption through 2025. ICBA will advocate for permanence of the higher exemption level before it expires and will oppose changes, such as those noted above in the discussion of Build Back Better Act proposals, that would effectively increase the taxation of estates.

Bank-Specific Revenue Raisers. ICBA is strongly opposed to any bank or finance-specific revenue raisers whether they be taxes intended to reduce the trading of financial assets or offset the cost of tax cuts. Moreover, in recent years, Congress and the Administration have increasingly turned to the banking sector as a source of revenue, or “pay fors,” to offset the cost of new spending wholly unrelated to the sector.

These have taken the form of taxes, fees, revenue cuts, and tax compliance measures administered by banks. The banking sector must not serve as a revenue source for unrelated spending. ICBA will oppose such measures even when they exempt community banks. (See also, “IRS Account Reporting” resolution.)

Staff Contacts: Alan Keller and Steve Keen

Staff Contact

Alan Keller

Senior Vice President, Legislative Policy

Washington, DC


Stephen Keen

Vice President, Congressional Relations

Washington, DC


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