Just in time for the holidays, Congress gifted America with tax reform.
The bill is great news for business. But here are the Grinchy parts some Philadelphians hope won't be in the final version of the proposed tax bill, which was still in conference committee as of Friday afternoon. Hat tip to Ron Wiener, special consultant at Drucker & Scacetti tax specialists in Center City, for the Grinch list:
Repealing deductions for most casualty and theft losses. "It's my nominee for the Grinchiest provision affecting individual taxpayers," Wiener said. Congress repeals the deduction for personal-casualty losses, except in presidentially declared disaster areas (although, in the House bill, only for victims of Hurricanes Harvey, Irma, and Maria). Most who suffer casualty losses are never fully reimbursed by insurance, legal claims, or by government assistance.
Repeal of the deduction for state and local taxes (or "SALT"). Congress' final compromise reportedly allows individuals to deduct up to $10,000 of state and local income taxes, or real and personal property taxes, or sales taxes, depending on your preference. "Millions of middle-class taxpayers of all political persuasions will be hurt by this. They made decisions about where to live and what kind of home to buy on the reasonable assumption that the current rules of the game wouldn't change so drastically," Wiener added.
Repeal of deduction for tax-return preparation. For most people, this covers the cost of preparing their annual income-tax returns (federal, state, and local), as well as money spent fighting to get refund claims paid, to contest audits of tax returns, and to fight notices claiming additional taxes are due. Shouldn't Congress make it easier for individuals to fight the IRS by allowing these to be deductible?
Repeal of alimony deductions. The House bill repeals the deduction for alimony payments and makes alimony tax-free to the recipient spouse. Under current law, the payer spouse gets a full tax deduction and the receiving spouse reports alimony (but not child support) in income. "This new bill reduces the net alimony payments to the needier spouse, because total taxes paid by spouses are normally minimized by the current law. The higher-income spouse paying alimony saves more in taxes than the receiving spouse pays. If this changes, alimony payments will likely be reduced," Wiener estimates.
Congress's medical expense deduction disproportionately affects seniors and the sick, as we wrote last week. FYI, Pa. Sen. Pat Toomey is on the final bill's reconciliation committee, so let him know if you like the bill or don't like it. His number in Washington is 202-224-4254.
Philly-area bank merger. Bryn Mawr Bank Corp.'s merger with Royal Bancshares of Pennsylvania closed Friday, according to president and CEO Frank Leto. Kevin Tylus, former president of Royal Bancshares, will be joining as a director.
"Once systems conversion is completed in February 2018, the combined institutions will operate under a common brand and all of our clients will enjoy access to 37 full-service branches located throughout the tri-state area," Leto said in a statement Friday. The transaction is Bryn Mawr Bank's 10th acquisition since 2008, increases its assets to over $4.3 billion, and initially adds 12 full-service branches, expanding in Montgomery, Chester, Berks, and Philadelphia Counties in Pennsylvania as well as Camden County in New Jersey.
Ted Peters, a former board member at Bryn Mawr, said he still owns the bank's stock personally, although not in his fund, Bluestone Capital, which specializes in community banks.
"Locally, we own or have owned Prudential Bank, Customers Bank, First Bank, Sun National Bank, and Peapack-Gladstone," all community banks in the Greater Philadelphia area. "Community banks are a dying breed and under tremendous pressure to sell because of excessive government regulation and nonbank competition. This might not be good for communities because they are giving up local control and access to banking decision makers," he added.
About 95 percent of community banks are being sold, he said, due to onerous regulation. However, Bryn Mawr "won't sell. It's a gem," he said. Many small banks are takeover targets because of the capital requirements and compliance. "Since those shares are targets for takeovers, that's an opportunity and the focus of our fund," Peters added.