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Legislative Committees Hard at Work in Advance of Cross-Over Day

The traditional “final push” has begun at the Legislature.

Monday, February 18, was the last day to introduce bills. The deadline for getting all bills out of one house or the other (the so-called “cross-over” day) is next Wednesday, February 27. All bills that do not make it out of one house by next Wednesday will be dead for this year.

In the face of the cross-over deadline, several legislative committees have labored through frequent and lengthy meetings. Both Houses are also holding two-a-day floor sessions to advance bills in a timely fashion once they emerge from committee.

Major Bills in Play Relate to the State Budget

These bills include several tax reduction bills being advanced in the Senate and competing bills in the House of Delegates (one from the Governor and one from the leadership of the House of Delegates) to merge the two existing teachers’ retirement programs – the Defined Contribution Plan and the Defined Benefit Plan. The House of Delegates’ version of the bill, HB 4496, which passed the House on Thursday, carries a $78 million price tag. The interplay of the tax reduction and teachers’ retirement bills will constitute the core drama for the balance of the 2008 Regular Session.

Of greatest interest to bankers this year is SB 680, which advanced unanimously out of the Senate Finance Committee on Thursday. An amendment developed by the Administration that provides some phase-in relief for banks in respect of combined reporting was also unanimously adopted by the Senate Finance Committee and is included in the bill.

Following our conference call last Friday, the Tax Secretary and Tax Commissioner contacted your Association to communicate the terms of a bill they were prepared to run. The terms of the Administration bill are as follows:

1. A credit shall be allowed against any increase in corporate net income tax experienced by any financial organization over a base year (2008), as follows:
   
   

   Year	Percentage Credit
   2009	80%
   2010	60%
   2011	40%
   2012	20%
   2013	10%
   2014	0%

2. The credit may not be used to reduce any individual financial organization’s corporate net income tax liability below $1 million in any given year.
   
   In subsequent discussions with legislative leaders, the Administration determined that it would seek to amend these provisions into SB 680, rather than run a separate bill. This was accomplished Thursday in Senate Finance.
   
   The Administration’s amendment, while not responsive to the request of banks for the full restoration of the tax regime in place before the passage last year of SB 749, nevertheless provides some relief for banks over the next few years.
   
   The Administration’s rationale for a phase-in is that the business franchise tax will be entirely eliminated over the next seven years on a phased-out basis, and the corporation net income tax will be reduced on a phased basis from 8.75% to 6.5% over the next five years. In the view of the Administration, banks experiencing a tax increase as a result of the adoption of combined reporting in SB 749 and SB 680 will enjoy the benefit of decreased CNIT and BFT taxes over the next several years.
   
   The special rules for taxation of banks have four components: (1) a nexus definition; (2) special apportionment rules; (3) sourcing rules for income of banks; and (4) provisions that establish the mechanics as to how tax is computed for multi-bank companies that do business in more than one jurisdiction.
   
   As a result of the efforts of banks across the state, the first three of these rules are fully restored in SB 680. These rules are critically important to virtually all banks operating in West Virginia, and inclusion of these three rules represents a significant accomplishment for banks.
   
   Despite our strenuous efforts over the past three weeks to preserve the ability of banks to file consolidated returns in the future, we were not successful. In the end, the Administration responded to our determined efforts by adopting a limited tax credit for financial organizations that provides temporary, partial relief designed to assure that no bank faces an immediate and dramatic increase in its taxes as a result of combined reporting.
   
   We thank the many banks who actively assisted in working on these issues over the past several weeks. SB 680 is expected to advance to passage by the Senate over the next several days. From there, we will work hard to assure that the hard-fought gains for banks in SB 680 remain intact in the House of Delegates. The Administration has consistently voiced concerns about its ability to sustain the bank-favorable provisions of SB 680 in the House of Delegates.
   
   We will continue to work on this bill as our #1 priority and will keep you posted as to developments in the House.

Paycard Legislation

The paycard bill, HB 4032, remains parked in Senate Finance. We have reached agreement with the bill sponsors on the language of a committee substitute, and are simply awaiting the passage of cross-over day, following which the Senate Finance Committee will resume working on House bills.

Consumer advocate groups are beginning to call for further amendments to HB 4032 beyond those agreed to between banks and the bill sponsors. We remain cautiously optimistic that HB 4032 will advance in a form desired by and acceptable to banks.

Security Breach

SB 340, the notice of security breach bill being advanced by the AARP, was comprehensively amended on Thursday in a form strongly favored by many constituencies, including bankers. There is no private cause of action under the bill as amended. The Attorney General is vested with enforcement authority over most constituencies, but the primary regulator has exclusive enforcement authority over banks. We anticipate SB 340 to advance to passage this year in its present form, which is acceptable to banks.

Predatory Lending

There is apparent good news on the predatory lending front. Earlier in the session, HB 4007 (dealing with predatory lending abuses) effectively died, when a subcommittee in the House of Delegates declined to report a bill out. The follow-on bill introduced last week in the House of Delegates, HB 4563 (revamping state law regarding deed of trust foreclosures), also appears to lack support at this time and is not expected to advance. The State Bar Association and several other groups expressed grave concerns over the bill.

We will continue to monitor HB 4563 in the days ahead, but remain cautiously optimistic at this time that no bill of this ilk will advance in the 2008 Regular Session.

Division of Banking

HB 2517 (requiring notice to the Division of Banking in respect of state banks’ and holding companies’ applications for out-of-state bank acquisitions) has passed the Legislature and been signed into law by Governor Manchin.

SB 292 (allowing the Commissioner of Banking to collect certain unpaid penalties and invoices on bond claims) is also advancing nicely. SB 292 passed the Senate two weeks ago, was reported out of the House Banking & Insurance Committee this week, and presently rests in the House Judiciary Committee, where it is expected to advance without opposition following cross-over day.

CDARs/Collateral for Public Deposits

The CDARs/collateral for public deposits bill has been introduced in both Houses (SB 731 and HB 4692). The House bill will likely be worked in the days ahead. The Treasurer has expressed concern over the pooled collateral and bankers’ surety company provisions of the bill and, accordingly, the path ahead for this bill appears to be challenging. We will continue to actively advocate for this bill and report on this bill’s progress in the days ahead.

Other Items of Interest

SB 415 and its House counterpart, HB 4198 (permitting the sharing of insurance commissions), have both advanced out of committee in their respective houses, and appear well on their way to passage. Your Association supports this bill, and anticipates the continued advance of the bill in one house or the other after cross-over day.

SB 332, dealing with tax refund anticipation loans, was reported out of the Senate Banking & Insurance Committee on Tuesday. The Committee adopted an amendment requested by bankers, making clear that only advertising by a “facilitator” is subject to regulation under the bill. Banks are exempted from the definition of “facilitator.”

SB 332 was read a first time on the floor of the Senate this week and then referred to Senate Judiciary. We will continue to monitor the bill, which is expected to continue to advance.

We continue to monitor and oppose bills that have been introduced in the Senate and House of Delegates regarding tow trucks, SB 556 and HB 4325. As introduced, these bills not only severely restrict tow truck drivers, but likewise severely limit their ability to repossess automobiles. Neither bill appears to be advancing at this time, and we will work to keep it this way.

 

New Bills of Interest to Bankers - Week 7

Following is a list of bills introduced since last week's Legislative Bulletin.