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Rob Nichols
                           President and CEO
                           American Bankers Association
                           nichols@aba.com





                                                           Washington Update




          Textbook Advocacy                                        •   Removed provisions that would have eliminated the
                                                                      benefits of deferred compensation plans.
          Washington  is  anything  but  textbook  these  days,  which   •   Corrected an issue relating to income recognition for
          can make the advocacy work of state and national trade      mortgage servicing rights and other transactions.
          associations a challenge. But the recent tax reform effort
          proves that certain staples of effective advocacy—functions   •   Steered clear of imposing a new bank tax as a means
          at which ABA and the state associations happen to excel—    of paying for tax cuts.
          have enduring value.                                     •   Maintained a variety of tax credits, particularly the

          All were on display as Congress and the administration      low-income  housing and  new markets  tax  credits
          worked together on a comprehensive package of tax           that are so important to our communities.
          reforms that we believe will help grow the economy and   The  result  is  a  final  package  that  is  largely  aligned  with
          create jobs. They also will help banks, which previously   ABA’s core principles for tax reform, with one notable
          had one of the highest effective tax rates of any business,   exception: It misses the chance to level the playing field
          better serve their customers and the broader economy.   with credit unions and the Farm Credit System. While this
          Those  staples  of  effective  advocacy  include  building   is hugely disappointing, it’s not for lack of effort. Bankers
          respectful relationships and coalitions, speaking with   have made their views plainly clear to lawmakers for years.
          a  unified  voice,  offering  expert  analysis  and  showing   We articulated a sound rationale for including these tax-
          discretion on when and how to offer public criticism.   privileged competitors in reform and even offered public
                                                                 opinion  research  that  showed  Americans  back  the  idea.
          We were engaged in the tax reform debate from the very   In the end, lawmakers viewed this as too controversial to
          start, offering advice and insight on the potential effects   tackle in this bill, but we’ll keep up the fight.
          of various provisions—such as the impact of limiting net
          interest  deductibility—and  coordinating  closely  with  our   Credit  for  much  of  what  we  did  achieve  goes  to  the
          state association allies. We also worked closely with other   bankers—from  institutions  of  all  sizes  and  from  states
          groups in the financial services industry, hosting daily calls   across  the  country—who  volunteered  their  time  and
          to ensure our advocacy was united and effective.       expertise  to  the  cause.  (If  you  ever  doubted  whether
                                                                 association service was meaningful, I can put you in touch
          At every turn in  the  legislative  process,  we  worked   with the women and men on ABA’s tax committee who
          respectfully with lawmakers to improve the bill. Recognizing   helped comb through each 500-page iteration of the tax
          the  tightrope  lawmakers  were  walking  to  create  a   bill to identify the potential effects on banks.)
          comprehensive bill that would have sufficient support, we
          as an industry were careful to offer pragmatic, constructive   Our policy experts and lobbying staff also made a tangible
          feedback, not public condemnations or threats that could   difference.  Together,  this  banker-staff  tax  reform  team
          have derailed the effort.                              artfully balanced the politics and policy behind a highly
                                                                 complex and highly charged legislative process, and they
          This approach made a difference. Lawmakers, for example:  did so in a manner that kept the door open to congressional
           •   Adopted a careful approach to limiting net interest   leaders and literally earned us a place at the table.
               deductibility,  protecting  banks’  small  business,   That gave us just a voice, of course, not the final say—and
               agriculture and real estate customers, whom we    that’s as it should be. Good public policy must consider
               said would be harmed by more substantial limits.   the views of many. It just so happens the banking industry
           •   Heeded  concerns  about  the  treatment  of  pass-  represents  many—from  our  2  million  employees  to  the
               through entities like Subchapter S banks and      countless communities and customers we serve. That
               brought the rate closer in line to the “promised” rate.   makes effective advocacy a must. I’m proud ABA and the
                                                                 entire industry delivered. n






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