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Bill

SB 18

repeal income modifications for the bank franchise tax pertaining to bad debts.

2026 Regular Session

The bill repeals bank franchise tax income modifications tied to bad debts, eliminating tax adjustments for banks’ bad debt deductions.

Signed by the Governor on 2026-02-17 S.J. 266
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WeVote Research Nonpartisan
Bill Summary · SB 18

Summary of SB 18 (South Dakota) — 2026 Session

Overall purpose

SB 18 repeals income modifications related to the bank franchise tax that are currently tied to bad debts. In short, the bill removes certain tax adjustments or modifications for banks’ income attributable to bad debt write-offs under the bank franchise tax structure.

Key provisions and changes

  • Repeal of income modifications: The bill eliminates existing income modification provisions that affect the bank franchise tax, specifically those linked to bad debts. This means banks would no longer receive certain tax adjustments or exemptions related to bad debt deductions or timing that previously reduced taxable income under the bank franchise tax.
  • Effective scope: The repeal applies to the bank franchise tax framework as it currently allows or implements bad debt modifications. The exact mechanics (e.g., how bad debts are treated for tax purposes post-repeal) would be governed by how the bank franchise tax is defined in statute outside of this modification.

Who/what is affected

  • Primary affected entities: Banks and other financial institutions subject to South Dakota’s bank franchise tax.
  • Tax administration: South Dakota Department of Revenue and the state tax code implementing the bank franchise tax will administer the changes.

Procedural and timeline aspects

  • Legislative history:
    • The bill progressed through committees and chambers in 2026, with action in the Senate and House noted in the legislative history.
    • In January 2026, the Senate approved the bill (Do Pass, 5–0 in Taxation committee, S.J. 1; subsequently moved through the Senate and House with strong bipartisan support).
  • Final status:
    • The bill appears to have moved through readings, committee action, and was signed by the Governor on February 17, 2026 (S.J. 266). This indicates the repeal became law on or around that date.
  • Notable procedural milestones:
    • Scheduled hearings and committee votes occurred in early February 2026.
    • The House and Senate versions passed their respective tax committees with unanimous or near-unanimous support before final passage.
    • The Governor’s signature completes enactment.

Potential impact and considerations

  • Tax liability: Banks subject to the bank franchise tax would see changes to taxable income calculations, eliminating certain bad debt-related income modifications. Depending on the design of the prior modification, this could increase or standardize taxable income for banks.
  • Administrative impact: Tax practitioners and banks will need to adjust to the absence of these modifications in their tax calculations and reporting.
  • Revenue implications: The repeal could affect state bank franchise tax receipts by altering the amount of income recognized for tax purposes, though the net effect would depend on the prior structure of the bad-debt modification and other compensating provisions in the tax code.

If you’d like, I can provide a side-by-side comparison of the bank franchise tax as it existed with the bad-debt modification versus post-repeal, using the exact statutory language.

Compiled from official sources — confirm details with the bill’s official record.

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