The Business Associations’ Tax Coalition (BATC), comprised of 30 trade and professional associations including ABA, is at the negotiating table with the Administration and AEA to see if compromise language to can be reached. HB 350 was introduced to codify the Alabama Court of Civil Appeals interpretation of a 2001 corporate tax law (add-back statute) that continues to be the subject of litigation. A number of versions of the bill have been floated with some including language taxing REITs that would impact banks. The current version from which negotiations are taking place is the original version which
The original version of HB 350, which is supported by Governor Riley and AEA, generates $67 million is new revenue and would make virtually all fifty-something refund cases moot avoiding $100 plus million in potential revenue loss to the Education Trust Fund. The Alabama Supreme Court has agreed to hear the appeal of the Vanity Fair case from which this issue arose. Should they agree with the lower Court, the revenue and refund needs the bill satisfies are cured. Should they overturn the lower court, the impact of refunds becomes a very likely possibility.
The biggest issue for BATC is that the bill would change tax law for any corporate taxpayer with an open tax year (defined as a year for which the taxes have not been paid or are under appeal) making the bill retroactive.
— This bill, which passed the House Education Appropriations Committee this week, introduces a concept called "unitary combined reporting," which will tax not only companies doing business in Alabama but their affiliated companies doing business anywhere in the United States and in certain foreign countries. In 1998, the Legislature specifically prohibited the Revenue Department from employing this approach. If passed, this bill would raise a substantial amount of revenue.
—The House this week passed by Rep. John Knight (D-Montgomery) that would remove the state's 4 percent sales tax on groceries, end Alabama's state income tax deduction for federal income taxes paid and increase individual income tax standard deductions as well as personal and dependent exemptions.
The Legislative Fiscal Office estimates this constitutional amendment (would have to be approved by voters if passed by both houses) would reduce sales tax collections by $320 million annually and raise income tax collections by $345 million. About 20 percent of Alabama's families would pay more taxes under the proposal, the sponsors say.
by Rep. Mike Hill (R-Columbiana), the Banking Department’s Alabama Mortgage Act, which essentially provides for the licensing and registration of mortgage brokers, and also by Rep. Hill , which removes mortgage lending from the Consumer Credit Act and the Mini Code as well as alter the licensing provisions. Both bills will be voted on in the House Banking and Insurance Committee next Wednesday.
ABA attorney Hamp Boles has been working with the Department and provided his final comments. While banks are exempt from the bill, there is still some clarification and other language we would like included.
The Alabama Bankers Association has submitted three bills for passage this session:
- This bill restricts the use of lender information that is publicly available including loan numbers, amounts and trade names in solicitations for services or products without the consent of the lender.
- This bill codifies a Supreme Court decision that an assignee of a creditor may enforce a lost note just as the creditor could. Both bills are out of the banking committees in their house of origin.
- Currently, all property is subject to a one-year right of redemption to the owner. This bill removes that the redemption period for commercial property. The Senate Banking and Insurance Committee substituted a version of HB 338 by Rep. Ford (D-Gadsden) for Sen. Griffith’s bill this week. SB 267 now reduces the right of redemption on commercial and residential property to six months. We will now push the Griffith and Ford bills. ABA is working with Rep. Buskey and members of the Black Caucus to address their concerns.
—Rep. Dennis Moore (D-KS) introduced ABA-supported legislation (H.R. 5841) yesterday that would provide regulatory burden relief for financial institutions. The bill would provide exceptions to annual privacy notice requirements under the Gramm-Leach-Bliley-Act for financial institutions that do not share information with affiliates or that have not changed their privacy policies, and would authorize banks to offer interest bearing transaction accounts for all businesses.
The bill also would increase the ability of savings associations to invest in small business investment companies and commercial real estate loans, and would remove limits on small business and auto loans for savings associations. In addition, it would provide flexibility in business organization for national banks and savings associations and in capital stock ownership requirement for directors of Subchapter S national banks.
These are all provisions that have passed the House.
—House Financial Services Committee Chairman Barney Frank (D-MA) introduced a bill (H.R. 5830) yesterday that is a modified version of his proposal to utilize the Federal Housing Administration (FHA) as a mechanism for refinancing distressed mortgages at new, voluntarily written-down levels that borrowers could repay.
To be eligible for the program, a loan that is at-risk of default would need to be written down to no more than 90 percent of the property’s current appraised value, including FHA and other fees. The borrower would need a debt-to-income ratio of 35 percent as of March 1, 2008. The bill also provides for a range of options to address the rights of second-lien holders, in an effort to broaden the likely usage of the program.
The bill does not include the earlier proposal’s provision that would have allowed refinancing through an auction process for bulk purchases. Instead, the bill would require the Federal Reserve to study the issue and report to Congress within 60 days.
The bill does not include Chairman Frank’s proposal to provide federal funds to state housing authorities to enable the buying of foreclosed properties. That proposal is expected to be included in a second bill that will be considered as a package with H.R. 5830 in the coming weeks.
A Committee summary of the legislation is available here
—Conference negotiations on the 2008 Farm Bill (H.R. 2419) continue. ABA sources indicate that Senator Thad Cochran (R-MS) has been successful in adding language which will allow First South Farm Credit to make long-term loans. First South, which operates in Alabama, Mississippi, and Louisiana lost that authority in a deal cut with the Texas Land bank back in the 80s.
Treasury Blueprint Demonstrates Accurate Understanding of CU Industry Changes—Credit Union National Association President and CEO Dan Mica was off the mark when he argued in a April 9 letter to Treasury Secretary Henry Paulson that the Treasury -- in proposing its regulatory reform blueprint -- didn't understand the differences between banks and credit unions, ABA President and CEO Ed Yingling said yesterday.
"[T]o the contrary, the blueprint demonstrates a very accurate understanding of changes in the credit union industry," Yingling said in a letter to Paulson. Treasury's plan "correctly points out that a credit union with a profile indistinguishable from ... a bank should be subject to the same tax and regulatory structure as FDIC-insured institutions." He emphasized that taxpayers deserve to know that tax-exempt institutions are focusing on the mandate for which they received the tax-privileged status.
"The credit union tax exemption was provided to assure that credit unions served ... individuals who shared a common bond and have fewer options for financial services, i.e., people of small means," Yingling said. "There is nothing in Treasury's blueprint that would change the tax status of these institutions, and the banking industry agrees with this approach."
What Treasury clearly points out, he added, is that there is a new breed of credit unions that looks like a bank and bears little resemblance to the traditional credit union. "Treasury's blueprint states: 'Some credit unions have arguably moved away from their original mission of making credit available to people of small means, and in many cases they provide services which are difficult to distinguish from other depository institutions. While credit union size is not a perfect proxy for this trend, the increasing share of credit union assets held by larger credit unions indicates movement toward a broader focus,'" Yingling said.
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