Savings and loan associations -- Their first year under the Revenue Act of 1962;

              Savings and Loan Associations—Their First Year under the Revenue Act of 1962
by ROBERT R. WOODSON Senior Accountant, Atlanta Office
Presented before the Society of Savings and Loan Con­trollers,
Atlanta-Decatur Chapter, Atlanta—November 1963
SINCE enactment of the Revenue Act of 1962, income taxes have be­come
one of the most discussed topics in the savings and loan industry. Although subject to income taxes since 1962, very few asso­ciations
had ever paid taxes because of the formula that was allowed by the statutes for computing the addition to the Reserve for Bad Debts. The addition under the old formula was measured by the difference between 12 per cent of the savings accounts at the end of the year and the surplus, reserves, and undivided profits at the begin­ning
of the year. Therefore, with the tremendous growth experienced by the savings and loan industry during the past few years, very few Associations have had to pay income taxes. The Revenue Act of 1962 has brought about a new era for Savings and Loan Associations—an era in which the "tax effect" of transactions becomes an important factor in managerial decisions.
With the first year of operations under the Revenue Act of 1962 nearing an end, I should like to review briefly some things that will concern you between now and the time your 1963 Federal income tax return is filed.
COMPUTATION OF TAXABLE INCOME
A problem that practically all Associations will encounter before the books are closed for the year and financial statements are pub­lished
will be the computation of the estimated tax liability. The computation will entail certain adjustments common to most asso­ciations
that must be made in order to arrive at the taxable income figure. The two illustrations on pages 350 and 351 will show what some of these adjustments are and how they will ultimately be shown in the tax return.
The starting point in determining taxable income is, of course, to arrive at the income shown by the books. The first adjustment shown in Illustration 1 is to eliminate the deduction for insurance premiums on the lives of officers and employees where the Association is the beneficiary of the policy. This adjustment is required of all
348