SDBA eNews

December 28, 2017

Trump Signs Historic Tax Bill

President Trump last Friday signed Congress’ historic tax reform package--the most comprehensive rewrite of the tax code in three decades and a top ABA priority.

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

"We want to thank President Trump for signing into law the first major tax reform in more than three decades. Today's action will make America more competitive and open the door to greater economic growth and job creation," said ABA President and CEO Rob Nichols.

"We also want to thank members of the President’s economic team including Treasury Secretary Mnuchin and NEC Director Cohn for their tireless efforts on behalf of tax reform and for their outreach to the business community,” Nichols added. "By working closely with Speaker Ryan, Leader McConnell, Chairman Brady, Chairman Hatch, and other lawmakers, the administration and Congress have achieved a lasting legacy that will benefit the country for years to come."

Nichols also noted that since Congress cleared tax reform for the President’s signature earlier this week, several U.S. banks have announced plans to pass along the savings they will see from the corporate tax cut to employees, customers and communities in the form of wage increases, technology investments and charitable contributions. ABA is collecting news of these announcements in order to amplify the message externally. Banks are asked to send press releases or other announcements to ABACommunic[email protected].

ABA reminds banks that the President’s signature is the enactment event that triggers certain accounting and other adjustments. Under GAAP, because the tax law was signed before Jan. 1, immediate reevaluation of deferred tax assets and liabilities is required, with the difference recorded through net income. ABA has prepared a summary of these required changes and a PowerPoint to help bankers explain them.

SEC Issues Guidance on Accounting for Tax Reform

Last Friday, the SEC issued a staff bulletin and related guidance regarding accounting for tax reform. Addressing several key financial reporting issues expressed to the commission by ABA and other organizations, the guidance recognizes the challenges associated with the timing and complexity of the calculations required by the enactment of tax reform. It recognizes that estimates are required and that there may be a need for adjustments when information becomes available. 

The guidance generally provides a one-year period for making refinements to estimates, but notes that if actual or reasonable estimations of tax reform effects are available, they should be reported in the year of enactment, which is 2017. It also includes guidance on Regulation 8K disclosure requirements. 

ABA believes that the SEC guidance also effectively sets the framework for expectations by the banking agencies in examining non-SEC registrants. 

CFPB Will Not Assess Penalties for 2018 HMDA Data Submissions

In a major win for the industry, the Consumer Financial Protection Bureau announced last week that it will not assess penalties with respect to errors in Home Mortgage Disclosure Act data collected in 2018 and reported in 2019, and will not require banks to resubmit data for that period unless errors are found to be material. Banks must begin submitting HMDA data collected in 2017 and beyond using the CFPB’s new online platform on Jan. 1.

“The bureau recognizes the significant systems and operational challenges needed to meet the impending requirements under the rule,” the CFPB said, noting that its decision to not assess penalties on 2018 data will “provide financial institutions an opportunity to focus on identifying any gaps in their implementation of the additional requirements and making improvements in their HMDA compliance management systems for future years.” CFPB added that it “expects that any supervisory examinations of 2018 HMDA data will be diagnostic, to help institutions identify compliance weaknesses, and will credit good-faith compliance efforts.”

The bureau also announced that it is opening a rulemaking to consider various aspects of the 2015 HMDA Rule, including the institutional and transactional coverage tests and the rule’s discretionary data points. ABA has long called on the CFPB to make modifications to the HMDA rules, and welcomed the announcement by the bureau. The OCC and the FDIC also made similar statements regarding their treatment of HMDA data. Read the CFPB's statement. For more information, contact ABA's Rod Alba

CFPB to Delay Prepaid Rule Effective Date

The CFPB is expecting to issue a final rule amending its prepaid rule “soon after the new year,” the bureau announced last week. The final rule is expected to also extend the current April 1, 2018, effective date. ABA in August had expressed general support for the Bureau's proposed amendments but also urged an extended compliance date to allow banks more time for implementation. For more information, contact ABA's Nessa Feddis

Treasury, FHFA Greenlight $3B Capital Buffer for GSEs

Fannie Mae and Freddie Mac will each be allowed to maintain a capital buffer of $3 billion under a new agreement between the Treasury Department and the Federal Housing Finance Agency announced last week. The GSEs’ current capital buffer--put in place under the terms of the Senior Preferred Stock Purchase Agreements--had been set to run down to zero on Jan. 1.

The GSEs’ quarterly dividend payments to Treasury will now be calculated using the $3 billion buffer as a baseline, though Treasury noted that the capital buffer may be terminated in the event that Fannie Mae or Freddie Mac fail to declare and pay a full quarterly dividend. In addition, Treasury’s liquidation preference for the preferred stock held in Fannie Mae and Freddie Mac will increase by $3 billion as of Dec. 31 to offset losses to taxpayers on the dividend payments.

FHFA Director Mel Watt called the buffer “sufficient to cover … fluctuations in income in the normal course of each enterprise’s business,” though he noted that Fannie and Freddie may need to draw on Treasury funding to cover changes resulting from the tax reform bill, including write-downs on deferred tax assets held on the GSEs’ balance sheets. ABA noted that this step by FHFA and Treasury is a prudent one to help ensure stability at the GSEs until Congress can act on housing finance reform legislation. Read more. For more information, contact ABA's Joe Pigg

Agencies Announce Shared National Credit Definition Change

The federal banking agencies last week announced an increase to the aggregate loan commitment threshold for inclusion in the Shared National Credit Program from $20 million to $100 million. The change--which is effective Jan. 1--is expected to reduce the regulatory reporting burden for 82 financial institutions while reducing the dollar amount of loans identified by SNCs by just 2 percent.

The agencies also announced that beginning in 2018, annual SNC results will be reported after the third quarter examination and reflect data as of June 30. Previously, annual results were reported after the first quarter examination, reflecting data as of Dec. 31. Read more. For more information, contact ABA's Barry Mills

Compliance AllianceQuestion of the Week

Question: On a business loan application, do we need to make a decision or send out a denial within 30 days to be in compliance with regulations?

Answer: In regards to the timeline on making a credit decision, it depends on the size of the business. If the business had less than 1m in gross revenues, then you would need to follow the time constraints in (a)(1)--30 days and 90 days. If over the gross revenues were over 1m, then you would only need to notify the applicant in a "reasonable" time.

Additionally for businesses with gross revenues of over 1m, the statement of reasons for adverse action is required only if the business applicant makes a written request within 60 days of notification of the creditor. This is also in contrast with the consumer applicant where a statement of reasons must be given with the notification of adverse action.

Finally, many banks have chosen to follow the consumer applicant guidelines for the sake of uniformity. This is absolutely acceptable. 

For reference, see 12 CFR § 1002.9(a)(3):


(i) With regard to a business that had gross revenues of $1 million or less in its preceding fiscal year (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit), a creditor shall comply with paragraphs (a)(1) and (2) of this section, except that:

(A) The statement of the action taken may be given orally or in writing, when adverse action is taken;

(B) Disclosure of an applicant's right to a statement of reasons may be given at the time of application, instead of when adverse action is taken, provided the disclosure contains the information required by paragraph (a)(2)(ii) of this section and the ECOA notice specified in paragraph (b)(1) of this section;

(C) For an application made entirely by telephone, a creditor satisfies the requirements of paragraph (a)(3)(i) of this section by an oral statement of the action taken and of the applicant's right to a statement of reasons for adverse action.

(ii) With regard to a business that had gross revenues in excess of $1 million in its preceding fiscal year or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit, a creditor shall:

(A)   Notify the applicant, within a reasonable time, orally or in writing, of the action taken;

(B)   Provide a written statement of the reasons for adverse action and the ECOA notice specified in paragraph (b)(1) of this section if the applicant makes a written request for the reasons within 60 days of the creditor’s notification.

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Contact Alisa DeMers, SDBA, at 800.726.7322 or via email.