What is the primary reason for Bank of America changing its accounting methods?

Bank of America is changing its accounting methods to better align the financial statement presentation with the economic impact of its tax-related affordable housing, wind renewable energy, and solar renewable energy equity investments.

Will these accounting changes significantly impact Bank of America's reported net income?

No, the company states that the primary impact is a reclassification between income statement line items, and the changes have an insignificant impact on net income on an annualized basis. The impact is expected to reverse over the remaining life of the investments.

How do these changes affect Bank of America's capital ratios and regulatory compliance?

Bank of America is not required to revise its previously filed regulatory capital ratios. However, the cumulative impact of these changes would have hypothetically resulted in a decrease of $2.1 billion in Common Equity Tier 1 (CET1) capital, leading to a 13 basis point reduction in the CET1 ratio as of September 30, 2025. This is primarily due to a reduction in retained earnings and deferred tax effects.

What is the specific change in accounting for solar renewable energy investments?

For solar renewable energy equity investments, Bank of America will now recognize the investment tax credits (ITCs) and applicable equity investment expense over the productive life of the underlying facilities. Previously, these were recognized when the facilities were placed in service. The ITCs will also be reported in noninterest income – other income, offsetting the related equity investment expense.

BANK OF AMERICA CORP /DE/ 8-K: Regulation FD

Summary

Bank of America Corporation (BAC) has announced a change in its accounting methods for certain tax-related equity investments, specifically those in affordable housing, eligible wind renewable energy, and solar renewable energy projects. The company is shifting from the equity method to the proportional amortization method (PAM) for its affordable housing and wind energy investments, and changing its recognition of investment tax credits (ITCs) for solar energy investments. These changes are intended to better align financial statement presentation with the economic impact of these investments, primarily resulting in reclassifications between income statement line items rather than a material impact on net income on an annualized basis. While the core net income is largely unaffected, these accounting adjustments have led to a retrospective decrease in retained earnings by $1.7 billion as of September 30, 2025. Importantly, the company notes that it is not required to revise previously filed regulatory capital ratios. However, the cumulative impact would have hypothetically decreased Common Equity Tier 1 (CET1) capital by an estimated $2.1 billion, reducing the CET1 ratio by 13 basis points as of the same date. The effective tax rate for Q3 2025 would also have been higher under the new method.

Key Highlights

1Bank of America is changing accounting methods for affordable housing, wind, and solar renewable energy equity investments.
2The change involves moving to the proportional amortization method (PAM) for affordable housing and wind energy investments.
3Investment tax credits (ITCs) for solar energy investments will now be recognized over the productive life of the facilities, not when placed in service.
4These accounting changes primarily result in reclassifications between income statement line items, with an insignificant impact on annualized net income.
5Retained earnings as of September 30, 2025, decreased by $1.7 billion due to the cumulative impact of these accounting changes.
6Regulatory capital ratios are not required to be revised; however, the hypothetical impact would have been a 13 basis point reduction in the Common Equity Tier 1 (CET1) ratio.
7The effective tax rate for Q3 2025 would have been higher (20.0%) compared to the previously reported rate (10.4%) under the new accounting.

BANK OF AMERICA CORP /DE/ 8-K Report, Regulation FD Disclosure (Jan 6, 2026)

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Key Highlights

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