What banks should watch in the 'big, beautiful' tax bill

May 15, 2025 4:07 PM

WASHINGTON — As congressional Republicans try to pull together what President Donald Trump calls his "big, beautiful bill," House committees scrambled to put together their own version of the tax legislation this week.

The bill that passed out of the House Ways and Means Committee after an overnight markup is the first comprehensive insight into what Republican lawmakers — who will be the deciding votes on whatever final bill emerges from the House Budget Committee — are thinking on broader tax measures that could also affect banks.

The tax portion of the bill passed out of the House Ways and Means Committee is separate from a spending section passed earlier this month by the House Financial Services Committee, which promised to slash the Consumer Financial Protection Bureau spending by roughly 70% among other measures. Financial regulators have typically been exempt from these big budget contests since their agencies tend to be self-funded, but Republican ire over the CFPB, a tough budget backdrop and the Trump administration's determination to downsize agencies is making this fight more relevant to the industry.

And this is an opening salvo, rather than a final product. The bill is still too pricey to please many of the toughest GOP budget hawks, and it's likely that many measures will be tweaked or changed entirely in the coming weeks.

Here are the top measures for bankers to watch for.

Representative Zach Nunn, a Republican from Iowa

Valerie Plesch/Bloomberg

Agriculture lending

Rural community banks scored a win in the Ways and Means version of the tax bill, which included the ACRE Act, exempting taxation interest on loans secured by farmland and residential mortgages under $750,000 in small towns.

ACRE helps farm banks compete with the Farm Credit System, a government-sponsored enterprise that can access capital markets at a much lower cost.

It's an issue that has been championed in the House by Rep. Zach Nunn, R-Iowa, who won one of the toughest House races for Republicans in the last election. Nunn also received some of the most vocal support from the banking industry, with the American Bankers Association giving to his campaign, and with an endorsement from the Super PAC called Friends of Traditional Banking, who cited his support of the bill.

Jim Lo Scalzo/Bloomberg

MAGA accounts

One of the more unusual parts of the tax bill might be a boon for bankers, depending on how it's rolled out.

House Republicans included a measure called Money Accounts for Growth and Advancement, or MAGA accounts, for children born roughly within Trump's term. The government would seed these accounts with $1,000, and although balances would grow tax free, there would be taxes and penalties, less favorable than traditional savings and education expense investment plans, for withdrawing the money, especially if the child does so before age 30.

Brokers and banks who hold these accounts might benefit from the added business. That said, it could very well be that the bulk of the new business goes to brokerages, given industry trends, or fintechs as the middlemen.

Credit union exemption

In probably the biggest loss for the banking industry, the bill kept the credit union's tax exempt status intact.

Republican lawmakers floated eliminating the tax exemption earlier in the year as a potential pay-for to extend the 2017 tax cuts. That in and of itself was a big change, and it's possible that the idea will be revived as Republicans look for ways to pay for some of the tax bill's larger cuts. That's even more likely since banking groups revised their initial bid of eliminating the exemption entirely down to only including the largest credit unions.

S Corps

Another big win for the banking industry: The bill passed by Ways and Means included language to make permanent the Section 199(a) pass-through deduction to 23%.

This is because many banks, especially community banks with fewer than 75 shareholders, are Subchapter S, a pass-through business. The Section 199(a) provisions currently allow owners of pass-through entities to deduct up to 20% of their taxable income from those entities.

Bank groups say this keeps community banks' tax rate in line with the corporate tax rate.

"It keeps things equal," Joey Connor, vice president of tax policy at the American Bankers Association, told American Banker earlier this year. "These banks would be able to expand, to invest more in their businesses, to create new technology and invest in new projects."

Payment platform reporting rule

Some of banks' biggest competitors on the payments front could also benefit from the tax process.

The bill would abolish a rule that would have required payment platforms to send 1099-K tax forms to anyone receiving more than $600 on their platforms. The Internal Revenue Service has already delayed the rule after pushback from those payments platforms, including PayPal and Venmo.