Bank Taxation

Banks deploy significant capital to serve their customers and communities and, accordingly, generate book and taxable income that is subject to tax provisions in each of the jurisdictions where they operate. According to a 2019 EY study, the banking industry has a higher average effective tax rate (ETR) than most other industries in the U.S. 

ABA believes lenders offering similar services should be treated equally under the tax code. This means eliminating tax preferences for credit unions and the Farm Credit System.

ABA is also strongly opposed to bank-specific taxes. No industry should be singled out and treated unfairly through tax policy. In recent years, Congress and various foreign jurisdictions have considered direct taxation on financial institutions. Bank taxes are bad policies that hurt consumers, disincentivize lending, and hinder economic growth.

Financial institutions are also the primary investors in a plethora of important community-based projects that are made possible through tax credits. This includes Low-Income Housing Credits, New Markets Tax Credits, many “Green” credits, in addition to heavily investing in municipal bonds to help finance capital projects like building schools, highways and sewer systems. By leveraging these tax credits, banks support programs that help consumers, underserved communities, and the economy at large.