The Rules of the Game

Baseball is my favorite sport to watch. It is a team sport with lots of strategy and statistics and important contributions by different types of players. It is also a game with very complex rules that have evolved over the years. Every so often, those rules still surprise the announcers, coaches, players and fans. Some of the more confusing rules relate to interference, balks and how many bases to award runners if a fielder’s throw goes out of play.

In the past, runners would try to take out the shortstop or second baseman to break up the double play. Similarly, runners coming home would try to cause the catcher to drop the ball or not catch it. These dangerous but legal strategies caused new rules to be created for the safety of the players.

The infield fly rule was created to take away the strategy of purposely not catching a fly ball to get a double play instead. Players, teams and coaches are admired for creatively using the rules to their advantage for various situations.

Baseball is a much more entertaining topic (in my opinion) than tax law changes. Most people don’t enjoy reading through 184 pages of proposed regulations on a new tax deduction. I can’t say that I enjoy it either, but I am extremely focused on how it affects various clients and will dig deep to understand the new rules of the “game.” And I will do my part to get a favorable rule clarification or interpretation.

Here is an overview of the impact of the new rules for S-corporation banks:

The Tax Cuts and Jobs Act created a brand-new tax deduction under Section 199A. In simple terms, Section 199A provides a 20% tax deduction for individuals, certain trusts and estates on qualified business income (QBI), including pass-through income from an S corporation.

. . . in general terms, banking is a qualified trade or business and does qualify for the 199A tax deduction. However, many banks provide wealth management or retirement planning services, which could be a problem if the gross revenue from these services exceeds the de minimis threshold.

If your bank could be affected by these rules, read more.