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Annual Convention Just a Month Away!
We can't wait to see everyone in October, and we want to make sure all of our ducks are in a row so we can have the best convention ever! Thanks to everyone who sent us the Convention Attendance Verification form, it was a huge help in keeping track of everyone. If you have no idea what we're talking about, please click here and fax us the form today.
IMPORTANT: If you have not contacted the hotel regarding your accommodations, please do so ASAP. The Gideon Putnum is near full or at capacity, but the Hilton Garden Inn does have rooms available. Remember that if you are not staying at the Gideon Putnum, you must purchase meal tickets. They are not included in your room price at the Hilton Garden Inn.
Couldn't come to the August dates but available for October?? Have a look at the new convention brochure!
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Legislative Update
William Y. Crowell, III
IBANYS, together with Brian Flynn, its tax advisor, and several Chief Financial Officers met with the New York State Department of Taxation and Finance to discuss their Corporate Tax Reform Proposal (the "Proposal"). This Proposal merges the Bank Tax and the Corporate Franchise Tax. Our goal has been to advocate for an acceptable substitute deduction for the REIT which is eliminated in their Proposal. At the same time, IBANYS has focused on making any deduction available to all banks so that members who currently do not benefit from the REIT deduction would be able to take advantage of any new deduction.
IBANYS explained the community bank business model and its positive impacts on the New York State economy. The single factor apportionment formula used in the Proposal has negative impacts on the community bank business model. Changes to the Proposal are necessary to avoid negative consequences for community banks.
IBANYS advocated for elimination of the asset test in the qualified residential loan portfolio deduction, along with inclusion of not only residential but commercial loans. With respect to the small business loan subtraction, IBANYS urged that it be expanded to include
residential mortgages and also that the definition of a small business loan be increased from $1 million to $2 million.
The Department of Taxation and Finance staff advised that our suggestions would be given consideration. They expect that a determination on a final Proposal will be made in a six week period, and very soon thereafter the Governor will decide whether the Proposal should be included in the 2012-2013 State budget proposal.
CORPORATE TAX REFORM PROPOSAL TALKING POINTS
Policy Objectives
- Provide a substitute deduction to replace the current REIT deduction which is repealed by the proposal.
- Encourage local investment in New York communities consisting both of residential mortgages for homeowners and commercial loans for small businesses.
- Encourage community banks to continue to retain residential and commercial mortgage loans in their loan portfolios with dual benefit of employment created through servicing of the loan portfolio by a community bank versus sale of mortgages, and interest income earned on the portfolio represents a continuing taxable revenue stream for the State.
- The community bank business model creates investment in New York State as community banks rely solely on their market areas for investment versus regional and money center banks which are able to shift their funding within their large market areas. The community bank business model should be encouraged because it is New York centric.
The single factor apportionment formula under the corporate tax reform proposal creates a disincentive for community banks to retain residential or commercial mortgages in their portfolio because of tax consequences. This proposal encourages community banks to sell their mortgages. Community banks do not operate on this approach currently. The strength of community banks is based in part upon their due diligence in making mortgages because those mortgages are retained as investments in their portfolios.
The two options in the proposal:
1. Qualified residential loan portfolio deduction.
2. Small business loan subtraction.
Issues with Above Options
1. Qualified residential loan portfolio deduction:
- Balance sheet requirements with the 60% asset test as a qualification for the deduction should be replaced by simple requirement banks under $8 billion in assets - the distinctions between thrifts and community commercial banks are not relevant and the statute should be modernized.
- This proposal should be broadened to include commercial loans and not limited to residential loans only, particularly in view of need for economic development of small businesses.
- The 32% of ENI for charge-offs should be increased to provide an equivalent deduction to the REIT.
2. Small business loan subtraction:
- Residential loans should be included in this formula, particularly in view of economic situation and these loans are a critical part of community bank deposit model.
- Principal for small business loan should be increased from $1 million to $2 million to capture the majority of small business loans. This amount falls within SBA limits. It is also important to encourage development of small business by encouraging loans and an increase in amount will avoid loan splitting to achieve a deduction.
- The percentage applied to this deduction should insure a tax benefit equivalent to the REIT.
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Cuomo Getting Into Banking?
A New York Times article published Tuesday indicates former Governor Mario Cuomo may get into the banking industry. The father of our current Governor is apparently the lead investor in a group poised to acquire Madison National, a Long Island bank. According to the article, the consortium's plan is to infuse the small bank with cash and expand throughout New York City and beyond. The new bank would carry the name First National Bank of New York. The Times says the potential bank's parent holding company, called Modern Capital Holdings, is also seeking to acquire Upstate National Bank, based in the St. Lawrence County town of Lisbon.
Some watchdog groups are raising eyebrows at the endeavors of the elder Cuomo, seeing potential conflicts with son Andrew currently at the state's top post. A spokesperson for Governor Cuomo says there is no bank, only a group that is trying to acquire an existing bank, therefore no conflict could be possible. Other conflict questions arose when it was revealed that First National Bank of New York planned to lend to struggling municipalities across the state. Ronald S. Krolick of FNBNY Bancorp said, "Any potential lending to local governments would be a minor part of a full range of traditional and conventional local lending services." The Times says FNBNY Bancorp is the holding company set up to encompass the proposed bank.
| To see the whole New York Times article, click here
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Upcoming IBANYS Events!
| October 11th - Lunch with Senator Gallivan
Who: New York State Senator Patrick M. Gallivan (R, C, IP) 59th Senate District What: Lunch- Beef tenderloin, salad, potato & dessert; lunch will be served during discussion When: Tuesday, October 11, 2011 - 11:00 am to 1:00 pm Cost: $20 per person Location: Lancaster Country Club, 6061 Broadway Street, Lancaster, NY 14086 How to Register: If interested, e-mail us here and we'll send you the form! Please let us know before October 1st! Thursday, September 22, 2011 - Webinar Mandatory Compliance Training Series: Fair Lending Issues 3:00 - 4:30 pm ET More information and Registration
Friday, September 23, 2011 - Conference Call
Government Relations Committee Meeting
10:00 - 11:00 am
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