The Sub S Bank Report – January 2018 (Volume 21, Issue 1)

This Special Report on the Tax Cuts and Jobs Act, H.R.1 was prepared and authored by Patrick J. Kennedy, Jr. and William “Dub” Sutherland, VI, partners in the law firm of Kennedy Sutherland LLP. The firm represents community banks throughout the United States and in particular advises their owners, directors and officers on corporate, tax, business strategies and regulatory matters. As the substantive leaders of the Subchapter S Bank Association, Mr. Kennedy and Mr. Sutherland participated in the legislative
process which resulted in the final bill and were leading advocates for Sub S Banks and other pass-through business organizations.

What follows is an initial critical analysis of the S v. C decision that both S corp and C corp banks should undertake as a result of the opportunities presented by the new tax regime. In addition, we provide some of the detail of how the bills developed and the legislative process unfolded. Finally, we highlight some other provisions in the law of which Sub S Banks and their owners should be aware.

These smaller, often rural, community banks rely on this S election to remain competitive in this climate of consolidation in the industry. With the major change to the tax code banks should take this opportunity to re-evaluate their tax liability and positioning. To aid in this review we have highlighted key changes to the tax code essential to determine whether to make or keep the S election.