July 10, 2025 • 21 mins
Following the enactment of the One Big Beautiful Bill Act, hear from ABA experts on how key ABA-supported provisions on tax policy, rural real estate and health savings accounts in the budget reconciliation law will affect banks. Experts also discuss what to expect next in terms of implementation.
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Ed Elfmann (00:02):
We've never had anything like this before.
I've worked on this for the 13 years I'vebeen at ABA in some way, shape, or form.
We've been talking about this for30 plus years, so even at 25%, it's
still a massive win for the industry.
And I believe from a bankingstandpoint, you will see the
difference in interest rates.
(00:22):
You will feel the difference in yourtax burden at the end of the year, and
frankly, you'll be able to really helpyour rural customers benefit from ACRE.
Evan Sparks (00:32):
From the American Bankers Association, this is the
A BA Banking Journal podcast.
Welcome back.
I'm Evan Sparks, and I'm here with twoA BA colleagues and one A BA partner
and collaborator to talk about thenews in Washington over the last week
or so, the the final passage in anenactment of the one big beautiful
bill act that the budget reconciliationbill that includes a whole lot of ABA
(00:54):
supported tax and other provisions.
And so we're going to.
Talk about those and make sure that weeducate our members about everything
that was in this massive package.
And I think there are still,I mean, I, I'm honestly.
I'm looking at this bill, and thereI am looking at the news and there's
still things that are coming out thatI didn't realize were in the bill.
So I feel like we're gonna, this isgonna be a process of discovery for
(01:15):
us over the next next few months aswe figure out exactly what was in it.
But to help us understand this a littlemore, I'll introduce my colleagues here.
Joey Connor is VP for tax policy here ata BA and is our guru on all things tax.
So the last several monthshave kept him very busy.
Ed Elfmann is senior vice presidentfor AG and rural banking and has been
(01:35):
busy with advocating for the accessto credit for our rural economy act.
The a BA supported bill that would.
Increase the avail availabilityof credit in the rural in, in
rural, for rural real estate.
And that is something that we saw alimited version of that in the bill.
So I wanna talk more about that.
And then finally we'll have Roy Ramthun.
Roy is an a partner of the and aconsultant with the ABA HSA Council and
(02:00):
is someone who worked on implementinghealth savings accounts back at the
Treasury Department when they were firstcreated back, you know, 20 years ago.
So, roy has forgotten more aboutHSAs than I know about HSA, so it's
good to have him on the show as well.
Thanks to all of you.
Joey, let's go to you first.
If you, you know, there was a lot, therewere a lot of tax provisions in this bill.
Can you walk through what wasin it, what it would per what?
(02:23):
Where did a BA have equities on themeasures that were being included
and what do bankers need to know?
Joey Connor (02:29):
Absolutely.
It's a great question, Evan.
And so I think it's useful to kind oflay the land on why this came about.
And I know we had a podcast a fewmonths ago discussing kind of why
we're talking about tax reform in 2025.
And the big driver here was the expirationof all the individual tax cuts that
were set to expire at the end of thiscalendar year, at the end of 2025.
Those are very expensive.
So the big question here was howmuch of this package do you pay
(02:51):
for and how do you pay for it?
So I think some of the biggest winsthat a BA received in this package
are actually omissions from the bill.
And so things that were not includedin the legislation, I shouldn't say
Bill, now it's law things that werenot included in the legislation include
no increase to the corporate taxrate, which matters a lot for, for C
corporation banks also no cap on thededuction for state and local taxes.
(03:12):
For corporations, also known as C-SALT.
Neither of those things were includedin the bill, so the corporate is largely
staying the same as it is currently.
Also, no tax on bank assets, which issomething that we've been explaining is
negative for consumers, a negative for theeconomy, obviously a negative for banks,
and really negative for small business.
So the fact that all of those thingswere not included is very favorable
and, and beneficial for a BA membersand really for consumers writ large
(03:36):
things that were included in thebill that we care a lot about.
Number one, you already noted it, andI'll defer to Ed here, is it's ACRE.
So it's a, it's an ag provisionthat we've been lobbying on
extensively for several years.
I'll defer to Ed on that.
Things that are really tax specificthat we care a lot about, so that we,
we heard about the benefits to the Ccorporations and the corporate staying
where it is and no cap on C-SALT.
Our s-corp banks are, they reallydeeply care about what's called the
(03:59):
section 199A pass through deduction.
And this is, again, largely designedto keep pass through businesses
like S Corps, partnerships, LLCs.
Equal with C corporationsin their tax treatment.
So there's a 20% deduction called the 199Apass through deduction that was supposed
to expire at the end of this year too.
That's been made permanentin this legislation.
(04:19):
That's very beneficial.
Similarly, the estate tax exemption,there was an increased estate tax
exemption, also known as the deathtax that was set to essentially get
much lower at the end of this year.
What this one big, beautifulbill does is it, it.
Extends and makes permanent andincreased estate tax exemption.
So that's important to AG bankers.
That's also important to ag businessesthat those ag banks support.
(04:42):
On the credit side, some thingsthat we really care about that
we're happy to see in the bill,low income housing tax credits.
There were positive tweaks to thelow income housing tax credit.
The new markets tax credit that wasmade permanent, that was also set
to expire at the end of this year.
And then some real taxprovisions we've been lobbying
on heavily for a number of years.
Being able to immediately expense yourr and e, your research and development
or research and experimental costs,that's something that matters a lot to
(05:05):
businesses and matters a lot to banks.
Bonus depreciation.
So again.
Equipment, machinery, vehicles,that 100% bonus depreciation
is included in the bill.
And similarly, a really kind of nuancedtweak to how interest expenses calculated.
All three of those things have beencalled kind of the big three business
extenders that folks have beenworking on for a number of years.
All three of those positive changes wereincluded in the bill and made permanent.
(05:28):
So we were happy to see a lotthat wasn't in the bill and
a lot that was in the bill.
Evan Sparks (05:32):
Yeah.
And then, then of course wehad a modified version of ACRE
that was included in the bill.
Ed, can you walk through whatthat looks like and how that's
gonna make a difference on the, inthe, on the rural banking front?
Ed Elfmann (05:43):
Yeah.
Glad to do that.
So everybody probably remembers.
ACRE that we were really advocating forwas a hundred percent tax benefit combine,
and really in three different areas.
It was going to be in farmland, whichincludes Timberland, ranch, land.
I think anything that couldbecome agriculture, basically
even hunting properties wouldqualify under that if they could
(06:04):
be used for ag purposes, et cetera.
Rural housing was also includedoriginally, and so was aquaculture.
But in a large bill piece of law,like, like the tax bill, you're
going to have negotiations andyou're gonna have things change.
So ACRE was modified.
We, we call it a, a narrower versionor a modified version, or I think
(06:28):
Evan, you call it the quarterACRE because of how it's changed.
But essentially what wehave is a 25% tax benefit.
So when you get your income from inter.
Farm real estate loans or aquacultureloans, essentially you're getting
taxed on 75% of that income ratherthan the full a hundred percent
(06:49):
like you would've been in the past.
So that's where the 25% benefit comes in.
The things that are qualifiedthat are, are in the legislation.
Farmland and like I said before,includes Timberland, includes ranch,
land, a whole variety of things.
If you look into USDA definitions ispretty broad onto what farmland is.
(07:11):
We will need some implementation languagefrom treasury and some other folks to
make sure that we have that all correct.
IRS other folks like that.
But then aquaculture's included and what'sreally interesting on the aquaculture side
is that it is everything from vessels so.
Boats, literally that can go out anddo fishing to on land processors,
(07:34):
hatcheries, all those things.
So if you're a banker who it, it'sinteresting from a rural banker
standpoint, we always west, right?
Large tracks of farms,all those types of things.
If you're a northwest or northeasternbank, or even like the deep south, like
folks in Louisiana, Mississippi, etcetera, that do lending to aquaculture.
(07:54):
This is gonna open up a whole new avenuefor you that's going to have this tax
benefit that didn't exist before it.
It's interesting, I've talked to someof the seafood lobby 'cause there
there is a seafood lobby, there'sa lobby for everything in DC and
they are very, very excited 'causethey've never had anything like this.
So at the end of the day, we've reallyopened up who's gonna qualify under
(08:17):
ACRE through this, this legislation.
The last thing I'll say,who qualifies as a lender?
Insurance companies, banks, obviouslyanybody who's FDIC insured, which is
basically every bank in the UnitedStates and Farmer Mac is qualified.
So if you are a Farmer Mac seller,so you sell to Farmer Mac, you'll be
(08:37):
able to carry that tax deduction them.
So when you're doing your long-termsecuring a farm real estate and you're
moving it on to a farmer Mac, for example,the benefit's gonna carry for the length
of the loan, so you can basically make a30 year loan that's gonna have this tax
benefit attached to it, which is massive.
For rural America, I know wewanted a hundred percent, we
(09:00):
pushed for a hundred percent.
25% is still a massivewin across the board.
We've never had anything like this before.
I've worked on this for the 13 years I'vebeen at ABA in some way, shape, or form.
We've been talking about this for30 plus years, so even at 25%, it's
still a massive win for the industry.
(09:21):
And I believe from a bankingstandpoint, you will see the
difference in interest rates.
You will feel the difference in yourtax burden at the end of the year, and
frankly, you'll be able to really helpyour rural customers benefit from ACRE.
Evan Sparks (09:35):
Great.
And then and then the other thing thatwe've had in the in the legislation
are changes affecting the the affectinghealth savings accounts, which, you
know, as I, anyone who we've talkedabout HSAs on this podcast before,
I'm, we use them at a BA, I'm a fan.
But Roy, I'd love it ifyou could walk through.
My understanding is that this bill hasincreased the eligibility of America, the,
(09:57):
the access that Americans have to HSAs.
Can you walk through these changesand what, what and how bankers,
what bankers need to know abouthow to capitalize on that.
Roy Ramthun (10:05):
Yep.
You're absolutely right.
There are three provisions,not 10 provisions.
I've seen some articles quoting theoriginal 10 provisions that were in
the house version of the budget bill.
Only three survived in that process.
And the first one, as you, mentioned,really would expand eligibility for
health savings accounts very dramatically.
(10:27):
If you're familiar with how insuranceis being sold in this country there
are the state-based marketplacesunder the Affordable Care Act.
So any individual who's purchasing apolicy that's listed as a bronze or
catastrophic type of plan, you aregonna be automatically qualified to
(10:48):
contribute to an HSA starting January 1st.
Now, as of this year, there areseven and a half million people
who are signed up for those plans.
So overnight, an additional seven and ahalf million on top of the 60 plus million
people that are already eligible for HSAscould participate in HSA starting one one.
(11:09):
So this is a huge opportunity for banksto offer HSAs if they're not doing it.
To grow their businessif they already are.
Another area where the eligibility isbeing expanded deals with one of those
barriers that currently exists that'sgonna be going away as of January 1st.
(11:30):
And this has to do with a relationshipthat some people have with their
doctor, where rather than payingthem a fee, every time they see the
doctor, they pay them a monthly fee.
And can see the doctoras often as they want.
These types of arrangements are knownas direct primary care arrangements.
(11:52):
Today they are disqualifying January 1st.
Those disqualifications go away.
I. We think there's about ahalf a million people who are
covered by these arrangements.
But these are the fastest growingdoctor practices in this country.
Evan Sparks (12:08):
And this is what, this is what we call concierge medicine, right?
Roy Ramthun (12:11):
Well, I wanna distinguish between direct primary
care and concierge medicine.
Evan Sparks (12:17):
Okay.
Roy Ramthun (12:17):
Concierge medicine is like the difference between a
country club and joining a gym.
You know, there are reasonsto join a country club.
That have to social aspects to it.
And the same with concierge medicine.
You're essentially paying your doctorto take your phone calls, respond to
your emails, and perhaps, you know,talk to you in the middle of the night
(12:41):
if something you know happens to you.
These direct primary carearrangements are not that tier.
Of medical treatment, if you will.
It is just a, a different way ofpaying for your primary care doctor.
And honestly, I've had three doctorsretire on me in the last 20 years.
(13:02):
It's getting harder and harderto find a primary care doctor,
and increasingly I'm finding thatthe doctors that are available.
Are these doctors who are offeringthese direct primary care arrangements.
So it may not sound like thatbig of a deal, but I think it's
increasingly becoming a big deal.
Evan Sparks (13:21):
Absolutely.
Roy Ramthun (13:23):
And the third provision just very quickly, during COVID, if you
all remember we got used to being ableto see our doctor using telehealth.
Or telemedicine that kind of went awayat the end of the pandemic, and so as
of the end of 2024, our health insuranceplans cannot cover those services
(13:45):
without applying the deductible to them.
Congress has fixed that, they've doneit retroactive to January one of this
year, and they've made it permanent,so we never have to worry about that
being taken away from us ever again.
Evan Sparks (14:02):
That's great.
We actually have a conversationupcoming with on the podcast that
you'll be hearing in a, in a week orso with a a, a senior executive from
a bank that who's responsible for,among other things, its HSA business.
And he talks a lot about how hisbank has made that a big part of
their business and, and, and, andhow it fits into their strategy.
And so I know if you, if you, if, if youas a banker are curious about, you know.
(14:25):
The expanded accessibility of HSAs.
Please reach out to the ABA HSA councilto to learn a little bit more about
how you can, you can make that work.
Joey, I'd love to come back to you andjust talk a little bit more about the you
know, we, you know, I think obviously wespent a lot of time talking about the 199A
the equalization for the, for our s-corpbanks, but, can you walk me, talk me,
(14:45):
talk to me a little bit about the processthat a BA went through to engage on all
of this, these issues, you know, in termsof you, I know we got feedback from our
members that are engaging with membersof Congress and bankers and stakeholders.
What's, how did, how did a BA helpget these key provisions into the
bill and across the finish line?
Joey Connor (15:03):
Yeah, it's a great question.
So we had.
Along with our congressional team at a BA.We've been working on this reconciliation
bill for over two years now.
We started having meetings in2023 regarding what a potential
tax reform bill could look like.
And again, the reason we knewsomething was likely to happen this
year was because of the expirationof those individual income tax rates.
And again, idea being, Congresstypically would like to extend lower
(15:25):
tax cuts for, for individuals orlower tax rates for individuals.
And again, ed noted this earlier, butI really do think that kind of speaks
to how excited we are that ACRE wasincluded in this legislation because
really when you look at what wasincluded, the vast majority of it is
a continuation of current policy orreverting to previous policy that's
beneficial, like the R&D expensing, right?
(15:46):
Then the new things thatwere added are largely.
Provisions that weresupported by President Trump.
So no tax on tips, no tax on overtime,the auto loan deduction, bonus deduction
for seniors, really one of, if not theonly major tax provision outside of a
continuation of current policy and outsideof President Trump's proposals is ACRE.
(16:06):
So it's, it's a big, big winfor ABA to have ACRE in there.
And.
You know, it's a credit to ourcongressional team to Ed and the entirety
of the, of the crew at a BA. So that'sa major reason that I, that I think
Aker was included in this legislation.
The process of us actuallyengaging with Congress has been
over two years, as I noted.
We've had over 150 hillmeetings on tax reform.
We work with our councils at a BA, soour tax committee, all of the committees
(16:29):
we've previously mentioned to, to.
Determine what are our top prioritiesand how do we actually go about this?
And again, a lot of it was defense.
And that's on, you know, whenyou're looking to pay for this
bill, what do you look at?
And so us explaining that notall pay fors are made equally.
And that again, the financialservices sector is an important
sector and we pay a lot of tax.
That's really the large takeaway,so you shouldn't look at us.
We're good stewards of the economy.
(16:50):
We pay a lot of tax and because wepay so much tax, we invest in things
that matter to your community, toevery district in the entire country.
Those are the things like lowincome housing, tax credits, new
markets, tax credits, and the like.
So what we did is we really focusedon education and then we were
explaining why exactly it mattersto folks in each district, in
each state, and how the financialservices industry really impacts.
(17:10):
Those.
So it's a team effort.
It's with our members.
And then it's really, again, continualand constant engagement on Capitol Hill to
explain why ABA, why banks, and you know,why they matter so much to not really just
the economy, but to the everyday consumer.
And so connecting all of thosedots, I think was the key.
Evan Sparks (17:27):
And I know on ACRE, I mean, we've, I've been writing about ACRE
and its predecessor ECORA in Newsbytesfor, you know, most of my time at a BA.
And I remember back when we werefirst talking about it, it had,
you know, one hill sponsor Right.
You know, two, two sponsors.
Right.
You know, and, and we're, and every,every Congress, it's been reintroduced
and it's gotten more support, more.
(17:50):
Bipartisan sponsors more new sponsorsnumerically, and it just seems
like kind of the basic blockingand tackling that of, of years
of advocacy to get to this point.
So, ed, any, any for any more thoughts.
Ed Elfmann (18:02):
I, I think what's really great about ACRE, when you look at it overall,
I mean obviously being included in thebill in the legislation is massive, right?
It's anytime you have brandnew policy included in a piece
of legislation that is a.
Huge win for any industryto have that happen.
But ACRE to me is a perfect exampleof for all the bankers who are
(18:23):
listening to this, this podcast.
Eventually, when we ask for you tocontact your members of Congress
and invo, be involved in ourgrassroots process and come to DC
and meet with members and staff.
Aker is a perfect example of we bangthe drum for a long time on why this
was important and how it's going tohelp rural communities and really.
(18:45):
Made sure we are constantly talkingabout the need to get this over the
finish line, and then really the, thetax law became the perfect opportunity to
push it forward, but you can't show up.
As Joey mentioned, they've been workingon this for two years in some way, shape
or form in anticipation of this coming.
(19:06):
With legislation, it'snever a quick thing, right?
It is not like you come up withan idea last week and then it gets
passed into law the next week.
It takes time, it takeseffort, it takes evolved on and
advocating for your industry.
And what's really exciting for me iswith ACRE, I think we as an industry
really learned how we can movethe needle on things if we're all.
(19:29):
I'm gonna use a University ofMinnesota football thing for any
of my Minnesota fans out there.
If we're all rowing the boattogether in the same direction,
we can truly get things done.
And that's what's reallyexciting to me about ACREs.
It showed us really a framework anda pathway to make sure that we can
do things for the industry that thatare, is gonna affect all of us and
(19:50):
our customers at the end of the day.
So to me it's really exciting to havesomething like that in there because
of the work that went into it, but.
It doesn't just happenbecause of the DC folks.
It doesn't just happen because of whoever.
It's you all as bankers beinginvolved in this process that
really helped drive this forward.
Yeah.
Evan Sparks (20:09):
Well, it's great to see, great to see the, the, all
of the, the success of, of, ofhard work across the industry and
across across, across the country.
So thank you all for your time toexplain what was in the bill and I'm
sure we'll be back with you to talkabout any additional surprises that
are found in the found, found in it.
Now that we've passed it, we getto find out what was in it, right.
(20:30):
Thanks to the hard work of Joey Edand our, and Roy and the other people
at, ABA, we already knew all thekey things that a, b, a members were
gonna be interested in this bill.
So no surprises there, right.
The but there is a staff analysis ofthe tax related provisions of the bill
that's on aba.com that Joey and hi Joeyand his colleagues have put together.
So you can go check that out.
(20:51):
And thanks so much for listening.
Thanks Joey Roy, ed for being on the show.
Ed Elfmann (20:57):
Thanks, Evan.
Yep.
Thank you for having me.
Evan Sparks (21:01):
All right.
We will be back with you again very soon.
Thanks so much for listening.
We've never had anything like this before.
I've worked on this for the 13 years I'vebeen at ABA in some way, shape, or form.
We've been talking about this for30 plus years, so even at 25%, it's
still a massive win for the industry.
And I believe from a bankingstandpoint, you will see the
difference in interest rates.
(00:22):
You will feel the difference in yourtax burden at the end of the year, and
frankly, you'll be able to really helpyour rural customers benefit from ACRE.
Evan Sparks (00:32):
From the American Bankers Association, this is the
A BA Banking Journal podcast.
Welcome back.
I'm Evan Sparks, and I'm here with twoA BA colleagues and one A BA partner
and collaborator to talk about thenews in Washington over the last week
or so, the the final passage in anenactment of the one big beautiful
bill act that the budget reconciliationbill that includes a whole lot of ABA
(00:54):
supported tax and other provisions.
And so we're going to.
Talk about those and make sure that weeducate our members about everything
that was in this massive package.
And I think there are still,I mean, I, I'm honestly.
I'm looking at this bill, and thereI am looking at the news and there's
still things that are coming out thatI didn't realize were in the bill.
So I feel like we're gonna, this isgonna be a process of discovery for
(01:15):
us over the next next few months aswe figure out exactly what was in it.
But to help us understand this a littlemore, I'll introduce my colleagues here.
Joey Connor is VP for tax policy here ata BA and is our guru on all things tax.
So the last several monthshave kept him very busy.
Ed Elfmann is senior vice presidentfor AG and rural banking and has been
(01:35):
busy with advocating for the accessto credit for our rural economy act.
The a BA supported bill that would.
Increase the avail availabilityof credit in the rural in, in
rural, for rural real estate.
And that is something that we saw alimited version of that in the bill.
So I wanna talk more about that.
And then finally we'll have Roy Ramthun.
Roy is an a partner of the and aconsultant with the ABA HSA Council and
(02:00):
is someone who worked on implementinghealth savings accounts back at the
Treasury Department when they were firstcreated back, you know, 20 years ago.
So, roy has forgotten more aboutHSAs than I know about HSA, so it's
good to have him on the show as well.
Thanks to all of you.
Joey, let's go to you first.
If you, you know, there was a lot, therewere a lot of tax provisions in this bill.
Can you walk through what wasin it, what it would per what?
(02:23):
Where did a BA have equities on themeasures that were being included
and what do bankers need to know?
Joey Connor (02:29):
Absolutely.
It's a great question, Evan.
And so I think it's useful to kind oflay the land on why this came about.
And I know we had a podcast a fewmonths ago discussing kind of why
we're talking about tax reform in 2025.
And the big driver here was the expirationof all the individual tax cuts that
were set to expire at the end of thiscalendar year, at the end of 2025.
Those are very expensive.
So the big question here was howmuch of this package do you pay
(02:51):
for and how do you pay for it?
So I think some of the biggest winsthat a BA received in this package
are actually omissions from the bill.
And so things that were not includedin the legislation, I shouldn't say
Bill, now it's law things that werenot included in the legislation include
no increase to the corporate taxrate, which matters a lot for, for C
corporation banks also no cap on thededuction for state and local taxes.
(03:12):
For corporations, also known as C-SALT.
Neither of those things were includedin the bill, so the corporate is largely
staying the same as it is currently.
Also, no tax on bank assets, which issomething that we've been explaining is
negative for consumers, a negative for theeconomy, obviously a negative for banks,
and really negative for small business.
So the fact that all of those thingswere not included is very favorable
and, and beneficial for a BA membersand really for consumers writ large
(03:36):
things that were included in thebill that we care a lot about.
Number one, you already noted it, andI'll defer to Ed here, is it's ACRE.
So it's a, it's an ag provisionthat we've been lobbying on
extensively for several years.
I'll defer to Ed on that.
Things that are really tax specificthat we care a lot about, so that we,
we heard about the benefits to the Ccorporations and the corporate staying
where it is and no cap on C-SALT.
Our s-corp banks are, they reallydeeply care about what's called the
(03:59):
section 199A pass through deduction.
And this is, again, largely designedto keep pass through businesses
like S Corps, partnerships, LLCs.
Equal with C corporationsin their tax treatment.
So there's a 20% deduction called the 199Apass through deduction that was supposed
to expire at the end of this year too.
That's been made permanentin this legislation.
(04:19):
That's very beneficial.
Similarly, the estate tax exemption,there was an increased estate tax
exemption, also known as the deathtax that was set to essentially get
much lower at the end of this year.
What this one big, beautifulbill does is it, it.
Extends and makes permanent andincreased estate tax exemption.
So that's important to AG bankers.
That's also important to ag businessesthat those ag banks support.
(04:42):
On the credit side, some thingsthat we really care about that
we're happy to see in the bill,low income housing tax credits.
There were positive tweaks to thelow income housing tax credit.
The new markets tax credit that wasmade permanent, that was also set
to expire at the end of this year.
And then some real taxprovisions we've been lobbying
on heavily for a number of years.
Being able to immediately expense yourr and e, your research and development
or research and experimental costs,that's something that matters a lot to
(05:05):
businesses and matters a lot to banks.
Bonus depreciation.
So again.
Equipment, machinery, vehicles,that 100% bonus depreciation
is included in the bill.
And similarly, a really kind of nuancedtweak to how interest expenses calculated.
All three of those things have beencalled kind of the big three business
extenders that folks have beenworking on for a number of years.
All three of those positive changes wereincluded in the bill and made permanent.
(05:28):
So we were happy to see a lotthat wasn't in the bill and
a lot that was in the bill.
Evan Sparks (05:32):
Yeah.
And then, then of course wehad a modified version of ACRE
that was included in the bill.
Ed, can you walk through whatthat looks like and how that's
gonna make a difference on the, inthe, on the rural banking front?
Ed Elfmann (05:43):
Yeah.
Glad to do that.
So everybody probably remembers.
ACRE that we were really advocating forwas a hundred percent tax benefit combine,
and really in three different areas.
It was going to be in farmland, whichincludes Timberland, ranch, land.
I think anything that couldbecome agriculture, basically
even hunting properties wouldqualify under that if they could
(06:04):
be used for ag purposes, et cetera.
Rural housing was also includedoriginally, and so was aquaculture.
But in a large bill piece of law,like, like the tax bill, you're
going to have negotiations andyou're gonna have things change.
So ACRE was modified.
We, we call it a, a narrower versionor a modified version, or I think
(06:28):
Evan, you call it the quarterACRE because of how it's changed.
But essentially what wehave is a 25% tax benefit.
So when you get your income from inter.
Farm real estate loans or aquacultureloans, essentially you're getting
taxed on 75% of that income ratherthan the full a hundred percent
(06:49):
like you would've been in the past.
So that's where the 25% benefit comes in.
The things that are qualifiedthat are, are in the legislation.
Farmland and like I said before,includes Timberland, includes ranch,
land, a whole variety of things.
If you look into USDA definitions ispretty broad onto what farmland is.
(07:11):
We will need some implementation languagefrom treasury and some other folks to
make sure that we have that all correct.
IRS other folks like that.
But then aquaculture's included and what'sreally interesting on the aquaculture side
is that it is everything from vessels so.
Boats, literally that can go out anddo fishing to on land processors,
(07:34):
hatcheries, all those things.
So if you're a banker who it, it'sinteresting from a rural banker
standpoint, we always west, right?
Large tracks of farms,all those types of things.
If you're a northwest or northeasternbank, or even like the deep south, like
folks in Louisiana, Mississippi, etcetera, that do lending to aquaculture.
(07:54):
This is gonna open up a whole new avenuefor you that's going to have this tax
benefit that didn't exist before it.
It's interesting, I've talked to someof the seafood lobby 'cause there
there is a seafood lobby, there'sa lobby for everything in DC and
they are very, very excited 'causethey've never had anything like this.
So at the end of the day, we've reallyopened up who's gonna qualify under
(08:17):
ACRE through this, this legislation.
The last thing I'll say,who qualifies as a lender?
Insurance companies, banks, obviouslyanybody who's FDIC insured, which is
basically every bank in the UnitedStates and Farmer Mac is qualified.
So if you are a Farmer Mac seller,so you sell to Farmer Mac, you'll be
(08:37):
able to carry that tax deduction them.
So when you're doing your long-termsecuring a farm real estate and you're
moving it on to a farmer Mac, for example,the benefit's gonna carry for the length
of the loan, so you can basically make a30 year loan that's gonna have this tax
benefit attached to it, which is massive.
For rural America, I know wewanted a hundred percent, we
(09:00):
pushed for a hundred percent.
25% is still a massivewin across the board.
We've never had anything like this before.
I've worked on this for the 13 years I'vebeen at ABA in some way, shape, or form.
We've been talking about this for30 plus years, so even at 25%, it's
still a massive win for the industry.
(09:21):
And I believe from a bankingstandpoint, you will see the
difference in interest rates.
You will feel the difference in yourtax burden at the end of the year, and
frankly, you'll be able to really helpyour rural customers benefit from ACRE.
Evan Sparks (09:35):
Great.
And then and then the other thing thatwe've had in the in the legislation
are changes affecting the the affectinghealth savings accounts, which, you
know, as I, anyone who we've talkedabout HSAs on this podcast before,
I'm, we use them at a BA, I'm a fan.
But Roy, I'd love it ifyou could walk through.
My understanding is that this bill hasincreased the eligibility of America, the,
(09:57):
the access that Americans have to HSAs.
Can you walk through these changesand what, what and how bankers,
what bankers need to know abouthow to capitalize on that.
Roy Ramthun (10:05):
Yep.
You're absolutely right.
There are three provisions,not 10 provisions.
I've seen some articles quoting theoriginal 10 provisions that were in
the house version of the budget bill.
Only three survived in that process.
And the first one, as you, mentioned,really would expand eligibility for
health savings accounts very dramatically.
(10:27):
If you're familiar with how insuranceis being sold in this country there
are the state-based marketplacesunder the Affordable Care Act.
So any individual who's purchasing apolicy that's listed as a bronze or
catastrophic type of plan, you aregonna be automatically qualified to
(10:48):
contribute to an HSA starting January 1st.
Now, as of this year, there areseven and a half million people
who are signed up for those plans.
So overnight, an additional seven and ahalf million on top of the 60 plus million
people that are already eligible for HSAscould participate in HSA starting one one.
(11:09):
So this is a huge opportunity for banksto offer HSAs if they're not doing it.
To grow their businessif they already are.
Another area where the eligibility isbeing expanded deals with one of those
barriers that currently exists that'sgonna be going away as of January 1st.
(11:30):
And this has to do with a relationshipthat some people have with their
doctor, where rather than payingthem a fee, every time they see the
doctor, they pay them a monthly fee.
And can see the doctoras often as they want.
These types of arrangements are knownas direct primary care arrangements.
(11:52):
Today they are disqualifying January 1st.
Those disqualifications go away.
I. We think there's about ahalf a million people who are
covered by these arrangements.
But these are the fastest growingdoctor practices in this country.
Evan Sparks (12:08):
And this is what, this is what we call concierge medicine, right?
Roy Ramthun (12:11):
Well, I wanna distinguish between direct primary
care and concierge medicine.
Evan Sparks (12:17):
Okay.
Roy Ramthun (12:17):
Concierge medicine is like the difference between a
country club and joining a gym.
You know, there are reasonsto join a country club.
That have to social aspects to it.
And the same with concierge medicine.
You're essentially paying your doctorto take your phone calls, respond to
your emails, and perhaps, you know,talk to you in the middle of the night
(12:41):
if something you know happens to you.
These direct primary carearrangements are not that tier.
Of medical treatment, if you will.
It is just a, a different way ofpaying for your primary care doctor.
And honestly, I've had three doctorsretire on me in the last 20 years.
(13:02):
It's getting harder and harderto find a primary care doctor,
and increasingly I'm finding thatthe doctors that are available.
Are these doctors who are offeringthese direct primary care arrangements.
So it may not sound like thatbig of a deal, but I think it's
increasingly becoming a big deal.
Evan Sparks (13:21):
Absolutely.
Roy Ramthun (13:23):
And the third provision just very quickly, during COVID, if you
all remember we got used to being ableto see our doctor using telehealth.
Or telemedicine that kind of went awayat the end of the pandemic, and so as
of the end of 2024, our health insuranceplans cannot cover those services
(13:45):
without applying the deductible to them.
Congress has fixed that, they've doneit retroactive to January one of this
year, and they've made it permanent,so we never have to worry about that
being taken away from us ever again.
Evan Sparks (14:02):
That's great.
We actually have a conversationupcoming with on the podcast that
you'll be hearing in a, in a week orso with a a, a senior executive from
a bank that who's responsible for,among other things, its HSA business.
And he talks a lot about how hisbank has made that a big part of
their business and, and, and, andhow it fits into their strategy.
And so I know if you, if you, if, if youas a banker are curious about, you know.
(14:25):
The expanded accessibility of HSAs.
Please reach out to the ABA HSA councilto to learn a little bit more about
how you can, you can make that work.
Joey, I'd love to come back to you andjust talk a little bit more about the you
know, we, you know, I think obviously wespent a lot of time talking about the 199A
the equalization for the, for our s-corpbanks, but, can you walk me, talk me,
(14:45):
talk to me a little bit about the processthat a BA went through to engage on all
of this, these issues, you know, in termsof you, I know we got feedback from our
members that are engaging with membersof Congress and bankers and stakeholders.
What's, how did, how did a BA helpget these key provisions into the
bill and across the finish line?
Joey Connor (15:03):
Yeah, it's a great question.
So we had.
Along with our congressional team at a BA.We've been working on this reconciliation
bill for over two years now.
We started having meetings in2023 regarding what a potential
tax reform bill could look like.
And again, the reason we knewsomething was likely to happen this
year was because of the expirationof those individual income tax rates.
And again, idea being, Congresstypically would like to extend lower
(15:25):
tax cuts for, for individuals orlower tax rates for individuals.
And again, ed noted this earlier, butI really do think that kind of speaks
to how excited we are that ACRE wasincluded in this legislation because
really when you look at what wasincluded, the vast majority of it is
a continuation of current policy orreverting to previous policy that's
beneficial, like the R&D expensing, right?
(15:46):
Then the new things thatwere added are largely.
Provisions that weresupported by President Trump.
So no tax on tips, no tax on overtime,the auto loan deduction, bonus deduction
for seniors, really one of, if not theonly major tax provision outside of a
continuation of current policy and outsideof President Trump's proposals is ACRE.
(16:06):
So it's, it's a big, big winfor ABA to have ACRE in there.
And.
You know, it's a credit to ourcongressional team to Ed and the entirety
of the, of the crew at a BA. So that'sa major reason that I, that I think
Aker was included in this legislation.
The process of us actuallyengaging with Congress has been
over two years, as I noted.
We've had over 150 hillmeetings on tax reform.
We work with our councils at a BA, soour tax committee, all of the committees
(16:29):
we've previously mentioned to, to.
Determine what are our top prioritiesand how do we actually go about this?
And again, a lot of it was defense.
And that's on, you know, whenyou're looking to pay for this
bill, what do you look at?
And so us explaining that notall pay fors are made equally.
And that again, the financialservices sector is an important
sector and we pay a lot of tax.
That's really the large takeaway,so you shouldn't look at us.
We're good stewards of the economy.
(16:50):
We pay a lot of tax and because wepay so much tax, we invest in things
that matter to your community, toevery district in the entire country.
Those are the things like lowincome housing, tax credits, new
markets, tax credits, and the like.
So what we did is we really focusedon education and then we were
explaining why exactly it mattersto folks in each district, in
each state, and how the financialservices industry really impacts.
(17:10):
Those.
So it's a team effort.
It's with our members.
And then it's really, again, continualand constant engagement on Capitol Hill to
explain why ABA, why banks, and you know,why they matter so much to not really just
the economy, but to the everyday consumer.
And so connecting all of thosedots, I think was the key.
Evan Sparks (17:27):
And I know on ACRE, I mean, we've, I've been writing about ACRE
and its predecessor ECORA in Newsbytesfor, you know, most of my time at a BA.
And I remember back when we werefirst talking about it, it had,
you know, one hill sponsor Right.
You know, two, two sponsors.
Right.
You know, and, and we're, and every,every Congress, it's been reintroduced
and it's gotten more support, more.
(17:50):
Bipartisan sponsors more new sponsorsnumerically, and it just seems
like kind of the basic blockingand tackling that of, of years
of advocacy to get to this point.
So, ed, any, any for any more thoughts.
Ed Elfmann (18:02):
I, I think what's really great about ACRE, when you look at it overall,
I mean obviously being included in thebill in the legislation is massive, right?
It's anytime you have brandnew policy included in a piece
of legislation that is a.
Huge win for any industryto have that happen.
But ACRE to me is a perfect exampleof for all the bankers who are
(18:23):
listening to this, this podcast.
Eventually, when we ask for you tocontact your members of Congress
and invo, be involved in ourgrassroots process and come to DC
and meet with members and staff.
Aker is a perfect example of we bangthe drum for a long time on why this
was important and how it's going tohelp rural communities and really.
(18:45):
Made sure we are constantly talkingabout the need to get this over the
finish line, and then really the, thetax law became the perfect opportunity to
push it forward, but you can't show up.
As Joey mentioned, they've been workingon this for two years in some way, shape
or form in anticipation of this coming.
(19:06):
With legislation, it'snever a quick thing, right?
It is not like you come up withan idea last week and then it gets
passed into law the next week.
It takes time, it takeseffort, it takes evolved on and
advocating for your industry.
And what's really exciting for me iswith ACRE, I think we as an industry
really learned how we can movethe needle on things if we're all.
(19:29):
I'm gonna use a University ofMinnesota football thing for any
of my Minnesota fans out there.
If we're all rowing the boattogether in the same direction,
we can truly get things done.
And that's what's reallyexciting to me about ACREs.
It showed us really a framework anda pathway to make sure that we can
do things for the industry that thatare, is gonna affect all of us and
(19:50):
our customers at the end of the day.
So to me it's really exciting to havesomething like that in there because
of the work that went into it, but.
It doesn't just happenbecause of the DC folks.
It doesn't just happen because of whoever.
It's you all as bankers beinginvolved in this process that
really helped drive this forward.
Yeah.
Evan Sparks (20:09):
Well, it's great to see, great to see the, the, all
of the, the success of, of, ofhard work across the industry and
across across, across the country.
So thank you all for your time toexplain what was in the bill and I'm
sure we'll be back with you to talkabout any additional surprises that
are found in the found, found in it.
Now that we've passed it, we getto find out what was in it, right.
(20:30):
Thanks to the hard work of Joey Edand our, and Roy and the other people
at, ABA, we already knew all thekey things that a, b, a members were
gonna be interested in this bill.
So no surprises there, right.
The but there is a staff analysis ofthe tax related provisions of the bill
that's on aba.com that Joey and hi Joeyand his colleagues have put together.
So you can go check that out.
(20:51):
And thanks so much for listening.
Thanks Joey Roy, ed for being on the show.
Ed Elfmann (20:57):
Thanks, Evan.
Yep.
Thank you for having me.
Evan Sparks (21:01):
All right.
We will be back with you again very soon.
Thanks so much for listening.
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