9-28-17 eNews

SDBA eNews

September 28, 2017

White House, Congressional Leaders Release Tax Reform Framework

The Trump administration and congressional leaders on Wednesday released a joint framework for tax reform. The fruit of extensive negotiations, the framework will provide guidance to the tax committees of Congress as they prepare legislation intended to advance the tax reform agenda. The framework provided limited details, relying more on high-level guidance to the committees--with exhaustive negotiations expected to continue.

ABA President and CEO Rob Nichols applauded Congress and the administration for their step forward. “We are encouraged by their commitment to this critically important issue by lowering rates and broadening the tax base and look forward to seeing a more detailed plan as the legislative process begins,” he said. “ABA and the nation’s $17 trillion banking industry support comprehensive tax reform and will work with Congress to enact a final plan that grows the economy, creates jobs and reflects our core principles.”

For businesses, the framework lowers the corporate rate to 20 percent, with a 25 percent rate for pass-through businesses. It allows expensing of depreciable assets other than structures for at least five years, a partial limitation--with no detail provided--on the deductibility of net interest expense for C corporations, protection of the R&D and low-income housing tax credits and a move to a territorial international taxation system, including a one-time deemed repatriation of previously untaxed earnings.

For individual taxpayers, the number of brackets is reduced from seven to three (12 percent, 25 percent, 35 percent), with a possible additional top rate. The framework doubles the standard deduction, eliminates exemptions, expands child credits, repeals alternative minimum tax, eliminates most deductions except for mortgage interest and charitable gifts and repeals the estate tax.

ABA is reviewing the framework closely and stands ready to assist congressional staff in drafting legislation that is in line with our core principles for tax reform. The association is engaging in a wide variety of public efforts to ensure tax reform reflects its principles, including sponsorship of a symposium on tax reform in The Hill this week.

Read the framework.
Read the one-page summary.
Read ABA's core principles on tax reform.
View ABA's ad in The Hill.
For more information, contact ABA's John Kinsella or Curtis Dubay.

Agencies Issue Regulatory Capital Simplification Proposal

The federal banking agencies on Wednesday issued a proposed rule that would simplify the complex Basel III regulatory capital calculations for all but the very largest banks. The proposal would simplify the treatment of assets subject to common equity tier 1 capital threshold deductions and limitations on minority interest and replace the definition of high-volatility commercial real estate exposures with a more straightforward measure.

ABA President and CEO Rob Nichols described the proposal as a “step in the right direction that acknowledges what our members already know.” While aspects of the proposal are limited to banks not using the Basel advanced approaches, ABA will continue advocating for these and other simplification efforts to apply to all banks. “We look forward to working with the regulators on this proposal and other sensible reforms, including recommendations from [the Treasury Department’s] June report that would allow banks to continue playing their important role in accelerating economic growth.”

Consistent with ABA’s advocacy, the proposal would loosen the treatment of CET1 capital threshold deductions for mortgage servicing assets; temporary difference deferred tax assets not eligible for carryback; and investments in the capital of unconsolidated financial institutions. It would replace a combined deduction limit of 15 percent of CET1 for MSAs and DTAs with a 25 percent limit that applies to each category of asset. Capital investments in unconsolidated financial institutions would also receive a 25 percent deduction limit, regardless of the significance of the investment.

The proposed rule would replace the complex definition of HVCRE exposures--which has caused numerous headaches for bankers in recent years--with a definition for high-volatility acquisition, development or construction loans, or HVADC, that would apply to credit facilities that primarily finance or refinance ADC activities and that would receive a 130 percent risk weight, unlike the 150 percent risk weight for HVCRE. “The proposed provisions affecting commercial real estate will require careful evaluation to ensure they achieve the goal of encouraging business lending--especially to small businesses,” Nichols said.

Finally, the proposal would eliminate the current complex calculation for minority interest that can be included in regulatory capital. Includable minority interest would be able to account for up to 10 percent of the parent banking organization’s CET1, tier 1 and total capital elements. The FDIC also issued a community bank summary and an Excel-based tool that banks can use to estimate how their regulatory capital would change under the proposal. Comments on the proposal are due 60 days after it is published in the Federal Register.

Read the agencies' summary for community banks.
Download the Excel estimator tool.
Read ABA's most recent comment letter on this topic.
For more information, or to join ABA's working group on this proposal, contact ABA's Hugh Carney.

ABA Offers Suggestions for Potential New Overtime Rule

In the wake of a federal judge invalidating the Obama administration’s overtime rule, ABA offered comments on overtime issues to the Department of Labor, which is seeking feedback as part of a Trump administration effort to reduce regulatory burdens on businesses. ABA also joined a letter sent by the Partership to Protect Workplace Opportunity, a broad national coalition of trade groups.

Should DoL revisit the overtime issue, ABA specifically urged the department to retain a historic focus on the “duties test” for exempting executive, administrative and professional as well as highly-compensated employees from Fair Labor Standards Act overtime requirements. The Obama-era rule relied more heavily on a salary test that would have captured many managerial employees, especially in lower-cost parts of the country.

ABA also urged DoL to use its 2004 methodology for setting salary thresholds rather than inflation and for updating salary thresholds only through notice-and-comment rulemaking. Finally, ABA urged DoL to consider the effects on employees of being switched from exempt to non-exempt solely based on a salary level. “For previously exempt employees, their morale suffered when they became nonexempt, as did their flexibility in the workplace,” ABA said. “Despite the fact that the status changes had nothing to do with their performance, employees viewed becoming non-exempt as a demotion, even after the communication efforts of their bank employers.”

Read the ABA letter.
Read the PPWO letter.
For more information, contact ABA's Cris Naser.

ABA Salutes Women on 'Most Powerful,' 'Women to Watch' Lists

ABA on Monday congratulated the women named to American Banker Magazine’s “25 Most Powerful Women in Banking” and “25 Women to Watch in Banking” lists for 2017. All 50 women on the two lists are associated with ABA member banks, and many of them are current and former members of ABA's board, councils and committees.

ABA Chairman Dorothy Savarese--chairman, president and CEO of Cape Cod Five Cents Savings Bank, Orleans, Mass.--ranked number 10 on the “most powerful” list. Incoming ABA board member Andrea Smith, chief administrative officer at Bank of America, Charlotte, N.C., ranked 13, and current ABA board member Patti Husic, who is president and CEO of Centric Financial, Harrisburg, Pa., ranked 17.

Spotlighted on the “women to watch” list were incoming ABA Vice Chairman Laurie Stewart, president and CEO of Sound Community Bank in Seattle; current ABA board member Julieann Thurlow, president and CEO of Reading Cooperative Bank, Reading, Mass.; and incoming ABA board member Jill Castilla, president and CEO at Citizens Bank of Edmond, Edmond, Okla. The rankings, selected by the publication’s editors, highlight the professional achievements and business acumen of the industry’s leading women. They also spotlight institutions that successfully promote gender diversity in their leadership ranks. View the "most powerful" list. View the "women to watch" list.

SBA Hiring Staff to Help with Disaster Response

The U.S. Small Business Administration is hiring temporary employees to assist with the agency’s disaster recovery efforts at several locations across the country. Hurricanes Harvey and Irma have caused massive devastation, and the SBA is staffing up to respond to the increased flow of disaster loan applications from homeowners, renters and businesses of all sizes.

The temporary positions include:

Damage Verifiers/Construction Analysts
Lawyers, Paralegals and Legal Assistants
Loan Specialists
Customer Service Representatives and Public Information Officers
IT Specialists
Administrative Support Assistants

Most of the jobs are located at one of SBA’s disaster field operations centers in Sacramento, Dallas, Atlanta, Buffalo or in the areas affected by the recent hurricanes. Bilingual language skills are a plus. Visit www.sba.gov/disaster and click on the “view jobs” tab for details on the job descriptions, salaries, and how to apply.

SBS Institute to Offer Onsite Certified Banking Security Manager Training

SBS Institute's Onsite Certified Banking Security Manager training Oct. 18-19 in Sioux Falls will provide the opportunity to work closely with a security expert and network with peers.

Attendees will learn about U.S. information security laws and regulations, information security program components, security awareness programs, IT audit, social engineering, preparing for your IT examinations, and running effective IT and audit committees. Attendees will develop an entire information security program framework to take back to their institutions and understand how to successfully implement and manage each component of the information security program.

The training is being offered in conjunction with the SDBA and ICBSD. Learn more and register.

Ag Tax Seminars To Be Offered in Brookings

The South Dakota Department of Revenue (DOR) will hold two Ag Tax Seminars in Brookings on Tuesday, Oct. 17. The seminars are designed for those looking for a specific understanding of ag-related tax issues—farmers, ranchers, implement dealers and bookkeepers. DOR will have representatives available from its audit, business tax and motor vehicles divisions.

The Department will provide detailed information for specific situations that you are likely to encounter, whether you are new to the industry or have years invested in it. Topics will include sales, use and contractors’ excise taxes; exemptions and exempt entities; filing and paying returns; motor fuel tax and contacts for various topics. DOR recommends sending specific questions and scenarios in advance so the Department can address issues more in-depth.

The seminars will be held at the Brookings Innovation Center's Conference Room Suite 153 at 2301 Research Park Way. The morning session will be held 9 a.m. to noon, and the afternoon session will be held 1-4 p.m. The seminars are free of charge and will be streamlined live on Facebook. Learn more and register.

Question of the Week

Question: Which loans will the new HMDA 2018 data point requirements apply?

Answer: The HMDA amendments for 2018 require reporting of most of the new and revised data points for loans closing in 2018, including those loans applied for in 2017. The exception, however, is for data on race, ethnicity, and sex. The CFPB clarified in guidance that banks will not need to provide the newly-revised data points for these three categories for applications from 2017 that close in 2018--compliance with the regulations on data points from 2017 will still suffice. However, any applications applied for on or after Jan. 1, 2018, will require use of the amended guidelines on gathering this data.

The CFPB has a chart on the data points, including those which were modified and added, at: http://files.consumerfinance.gov/f/201510_cfpb_hmda-summary-of-reportable-data.pdf

Regarding loans closed in 2017 and reported on in 2018, the 2017 rules apply.

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