01—Abstract
Summary
Summary of the 8-K filed January 6, 2026. Cited figures are marked; the original filing is the authoritative source.
On January 6, 2026, Bank of America (BAC) furnished an 8-K under Item 7.01 (Regulation FD) announcing a change in accounting methods for its tax-related equity investments in affordable housing, eligible wind renewable energy, and solar renewable energy.
Affordable housing and wind investments move from the equity method to the proportional amortization method (PAM), with costs now recorded in income tax expense rather than noninterest income. Solar investment tax credits are now recognized over the productive life of the facilities rather than when placed in service, and are reported in noninterest income against the related equity investment expense. The changes are retrospective, and the filing includes revised supplemental financial information (Exhibit 99.1) for 2023, 2024 and the 2025 quarters.
The change is primarily a reclassification between income statement lines. Total noninterest income is restated higher by $3.97 billiona for full-year 2024 (from $45.8 billion to $49.8 billion) and by $4.19 billion for 2023, while income tax expense rises by $4.13 billion for 2024 (from $2.12 billion to $6.25 billion) and by $4.40 billion for 2023. Net income is essentially unchanged on an annualized basis.
Retained earnings as of September 30, 2025 fall by $1.7 billionb as a cumulative timing adjustment, which is expected to reverse over the remaining life of the investments. The effective tax rate for Q3 2025 would have been about 20.0% versus 10.4% previously reported. Revised numbers show a meaningfully higher reported effective tax rate and higher total revenue for the affected periods.
For regulatory capital, the change is not required to be applied to previously filed ratios, so BAC will not restate them. Had it been applied, the cumulative impact would have reduced Common Equity Tier 1 capital by an estimated $2.1 billionc, lowering the CET1 ratio by about 13 basis points as of September 30, 2025.
Investors should note that the headline revenue increase is accounting presentation, not new economic earnings, but the higher tax expense and lower CET1 are relevant for capital and tax-rate comparisons. The information is preliminary.
02—Key points
Key Highlights
- Change in accounting for tax-credit equity investments: affordable housing and wind investments move from the equity method to PAM, and solar ITCs are recognized over the productive life of facilities.
- Restated full-year 2024 noninterest income rises $3.97 billion to $49.8 billion, with the offset recorded in income tax expense, which rises $4.13 billion to $6.25 billion.
- Net income impact is described as insignificant on an annualized basis; the change is primarily a reclassification between income statement lines.
- Retained earnings as of September 30, 2025 decrease by $1.7 billion from the cumulative timing effect, expected to reverse over the investments' remaining lives.
- Q3 2025 effective tax rate would have been about 20.0% versus 10.4% previously reported.
- Regulatory capital ratios will not be revised; had the change been applied, CET1 would have fallen by an estimated $2.1 billion, or 13 basis points, to the September 30, 2025 level.
- Revised supplemental information (Exhibit 99.1) covers 2023, 2024 and 2025 quarterly periods, and the information is preliminary.
03—Questions
Frequently Asked Questions
Does this change affect Bank of America's reported net income?
Not materially. The company states the accounting changes have an insignificant impact on net income on an annualized basis. The primary effect is a reclassification between income statement lines, with higher noninterest income offset by higher income tax expense, plus a timing difference that reduced retained earnings by $1.7 billion as of September 30, 2025.
Why is Bank of America making this change?
The company determined the new accounting methods are preferable because they better align the financial statement presentation with the economic impact of these equity investments.
How does the change affect the effective tax rate and capital ratios?
The effective tax rate for Q3 2025 would have been about 20.0% instead of 10.4%. Previously filed regulatory capital ratios will not be revised. Had the change been applied, CET1 capital would have decreased by about $2.1 billion, lowering the CET1 ratio by about 13 basis points as of September 30, 2025.
Will the timing difference reverse?
Yes, according to the filing. The retained earnings reduction of $1.7 billion reflects a timing difference in expense recognition under the new methods, which is expected to reverse over the remaining life of the investments.
04—Continue