SD Legislature OKs Bank Tax Bad-Debt Modification Repeal

This headline refers to South Dakota Senate Bill 18 (2026), which repeals special income “modifications” related to bad‑debt deductions under the state’s bank franchise tax.

What the bill does

• SB 18 is titled “An Act to repeal income modifications for the bank franchise tax pertaining to bad debts.”

• It removes specific adjustments banks could make to their taxable income for bad debts when calculating South Dakota bank franchise tax.

Status in the Legislature

• SB 18 was introduced on January 13, 2026, and referred to the Senate Taxation Committee.​

• The Senate Taxation Committee gave it a “Do Pass” recommendation 5‑0 on January 16, and the full Senate passed it 33‑0 on January 21, 2026.

• The measure then moved to the House Taxation Committee and is being considered in the second chamber; the Law360 headline notes that the Legislature has approved the repeal, indicating both chambers have now acted favorably.

Practical effect for banks

• Banks and similar financial institutions subject to South Dakota’s bank franchise tax will no longer be able to use the repealed bad‑debt income modifications to reduce their state tax base.

• In practice, this tends to narrow or eliminate a preferential state‑level treatment of bad debts compared to federal rules, potentially increasing taxable income under the bank franchise tax for institutions with significant charge‑offs.

If you tell me whether you’re a bank, credit union, or another business, I can outline more concretely how this change might affect your South Dakota tax position.