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    Scrapping the state’s liquor license law makes economic sense

    Scrapping the state’s liquor license law makes economic sense

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    Newton Grandmother Scammed out of $20,000, Used Bitcoing ATMs to Send Money

    Which is better – a real or a fake Christmas tree?

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      • Our Insights
        • All
        • Business Challenges
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        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Oh, Christmas tree: The economics of the US holiday tree industry

        Oh, Christmas tree: The economics of the US holiday tree industry

        How AI Chat Search Could Disrupt Online Advertising

        Spotify CEO cites “expensive” capital as factor in layoffs. What does that mean?

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        Can Important Unions Collapse and Disappear?

        Can Important Unions Collapse and Disappear?

        The Right Amount of Cards, Cash and ID to Carry in Your Wallet

        Why Is Everyone So Unhappy at Work Right Now?

        Scrapping the state’s liquor license law makes economic sense

        Scrapping the state’s liquor license law makes economic sense

        Airlines are frustrating travelers by changing frequent flyer program rules – here’s why they keep doing it

        Airlines are frustrating travelers by changing frequent flyer program rules – here’s why they keep doing it

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        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        Questrom $50K Case Competition: In the Trenches of Sustainability with Casella

        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        The Optimistic Pessimist

        Shein & Forever 21 Strike a Deal

        Shein & Forever 21 Strike a Deal

        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        Questrom and BU Means Innovation and Entreprenuership

        A new travel nightmare: New passport delays lasting 13 weeks

        A new travel nightmare: New passport delays lasting 13 weeks

        Leadership Communications

        Leadership Communications

        Demotivating Effects of Relative Performance Feedback on Middle-Ranked Workers’ Performance

        Demotivating Effects of Relative Performance Feedback on Middle-Ranked Workers’ Performance

        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        AI: What is it and how will it impact business?

        Is Creativity in Advertising Dead in the age of AI?

        Is Creativity in Advertising Dead in the age of AI?

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        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Newton Grandmother Scammed out of $20,000, Used Bitcoing ATMs to Send Money

        Which is better – a real or a fake Christmas tree?

        How AI Chat Search Could Disrupt Online Advertising

        Spotify CEO cites “expensive” capital as factor in layoffs. What does that mean?

        The Danger of Racial Colorblindness 

        The Danger of Racial Colorblindness 

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        Can we count on carbon capture to abate climate change?

        Can we count on carbon capture to abate climate change?

        The Cybertruck Must Be Huge—or It Will Dig Tesla’s Grave

        The Cybertruck Must Be Huge—or It Will Dig Tesla’s Grave

        Can Important Unions Collapse and Disappear?

        Can Important Unions Collapse and Disappear?

        The Right Amount of Cards, Cash and ID to Carry in Your Wallet

        Why Is Everyone So Unhappy at Work Right Now?

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          How GenAI Could Accelerate Employee Learning and Development

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          AI Adoption in U.S. Health Care Won’t Be Easy 

          AI Adoption in U.S. Health Care Won’t Be Easy 

          Where Should Your Company Start with GenAI? 

          Where Should Your Company Start with GenAI? 

          How Retailers Can Capitalize on the “Refund Effect”

          How Retailers Can Capitalize on the “Refund Effect”

          Should Companies Refrain From Making Political Statements?

          Should Companies Refrain From Making Political Statements?

          Make It Safe for Employees to Speak Up – Especially in Risky Times

          Make It Safe for Employees to Speak Up – Especially in Risky Times

          Will Generative AI Create a New Era of Search Competition?

          Will Generative AI Create a New Era of Search Competition?

          A Better Approach to Customer-Centric Messaging and Engagement

          A Better Approach to Customer-Centric Messaging and Engagement

          How Coworking Spaces Impact Employee Well-Being

          How Coworking Spaces Impact Employee Well-Being

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          Insights@Questrom
          Home Our Insights Business Functions Finance & Accounting

          Your Bank’s Tax Structure May Be Costing You Money

          Adriane AylingbyAdriane Ayling
          May 13, 2019
          in Finance & Accounting
          16
          0
          Your Bank’s Tax Structure May Be Costing You Money
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          You probably don’t know if your bank files its taxes as an S corporation or a C corporation, but your wallet might. As local competition heats up, banks are strategically converting to organizational structures that lower their overall tax burdens — and benefit their customers.

          New research by Questrom’s Petro Lisowsky, the University of Illinois – Urbana-Champaign’s Michael Donohoe, and University of Florida’s Michael Mayberry suggests that banks moving from the double-layered taxation of C-corporations to the single-layer of S corporation taxes pour those savings into marketing budgets and customer benefits. “When you’re doing your personal banking at a C-corporation bank, you’re [likely] paying higher interest rates on your mortgage and receiving lower interest rates on your deposits,” says Lisowsky. “Banks are passing those costs on to you.”

          While all banks were required to file as C-corporations for decades, relaxed regulations starting in 1996 allowed banks to move to the tax-advantaged S-corporation form. To learn how different tax structures affected competition, the trio analyzed 14 years of data from more than 4,400 private commercial banks across the United States.

          While there are a variety of different advantages to C-corporations linked to ownership and opportunities to raise capital, the group’s research suggested that lower tax burdens were a significant draw for banks. They found that as S-corporation banks got more competitive in any given metropolitan area, rival C-corporation banks were increasingly likely to convert to S-corporation status.

          For banks that made the switch, the aggregate savings from the first year of these tax reductions was more than $372 million. In the years that followed, those banks bumped up deposit interest rates by an average of 1.2 percent for core deposits and 1.4 percent for large deposits. Banks also increased the amount they spent on advertising and marketing by about 11 percent.

          For Lisowsky, the larger lesson isn’t just about bank tax structures, but about the complexity of the country’s tax system itself. “Companies will always find ways to take advantage of tax structures, assembling and reassembling themselves like crossword puzzles,” he says. “It’s time to pare down all of these complex business structures. It’s time to simplify all the forms that businesses take so we can level the playing field.”

          Read the entire paper on SSRN.

          Tags: Pete Lisowsky
          Adriane Ayling

          Adriane Ayling

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