FDIC Offers Guidance for S-Corp Dividend Exceptions. July 22, 2014
Following a grassroots advocacy campaign by ABA and its members, the FDIC yesterday provided guidance to S-corporation banks on how it will handle requests for exceptions to limits on dividends. The exceptions will help to address, and in some cases remedy, a disadvantage for S-corp banks in Basel III’s capital buffer provision. Under the capital buffer, S-corp shareholders might face a tax liability even if they had not received a dividend -- thus making it more difficult to attract capital.
Banks with CAMELS ratings of 1 or 2 that request a dividend of no more than 40 percent -- what the agency considers sufficient to cover any tax liability -- and will remain adequately capitalized after the dividend will generally have their requests approved, the FDIC said.
Furthermore, “the factors described are not meant to limit any bank’s ability to request dividend exceptions,” the FDIC said. For example, “banks that had experienced difficulty but are returning to health” would also be eligible to apply. Read the guidance. For more information, contact ABA’s Jim Chessen or Fran Mordi.
ABA WINS EXTENSION ON RULE REQUIRING UNBUNDLING OF TRUSTEE FEES. July 18,2014
ABA yesterday won a rare extension from the IRS on the effective date of its final Section 67(e) rule -- commonly referred to as the trustee fee “unbundling” rule -- that provides guidance on the tax deductibility of costs incurred by estates or non-grantor trusts. ABA and 14 state bankers associations informed the IRS of the challenges of complying with the new rule in the timeframe allotted. The regulations will now apply to tax years starting on or after Jan. 1, 2015.
Under the final rule, banks and trust companies that charge a “bundled” fee to act as trustee or executor must “unbundle” for tax purposes the portion of that fee allocable to investment management services. Because the final rule was to take effect for tax years starting on or after May 9, 2014, the rule would have applied immediately to any non-grantor trust created after May 8, as well as to an estate of a decedent who dies after May 8.
Read the IRS notice. Read ABA's Comment letter
AmBA: BANKS NOT COVERED BY MINIMUM WAGE PROPOSAL. July 11, 2014
The Department of Labor’s proposed regulations implementing Executive Order 13658 -- President Obama's directive to raise the minimum-wage rate for workers on federal contracts from $7.25 per hour to $10.10 per hour -- would not cover banks, ABA said yesterday in its HR Issues and Resources e-bulletin.
The proposal does not cover insurance contracts, such as deposit insurance, with the federal government. However, the order may impose certain affirmative action requirements on banks depending on particular activities -- serving as a paying agent for federal savings bonds, for example. Read more in HR Issues and Resources.
AmBA ANNOUNCES NEW TWITTER HANDLE. July 11, 2014
ABA’s main Twitter handle has changed from @ABABankingNews to @ABABankers. Current followers will automatically be switched over to the new account, whose name is both more descriptive and shorter -- a bonus on Twitter. More than 8,000 people follow ABA on Twitter.
CONGRESSMAN CHALLENGES FARM CREDIT SYSTEM IN OP-ED. July 11, 2014
The Farm Credit System has overstepped its mission and crowded out private lenders, Rep. Marlin Stutzman (R-Ind.) wrote in an American Banker op-ed on Tuesday. He warned that, as a government-sponsored enterprise, the FCS also puts taxpayers at risk. Stutzman, a fourth-generation family farmer, also challenged the FCS’ increasing involvement in non-agricultural activities, in which it undercuts community banks by offering tax-advantaged pricing.
“It’s time for the Farm Credit System to focus back on the farm to help farmers,” he wrote. “As a member of the House Committee on Financial Services I will further investigate the soundness of the Farm Credit System. It’s time for the government’s manipulative policies to stop picking winners and losers.”
Stutzman’s op-ed follows a June 25 hearing on agricultural credit during which House Agriculture Committee members aggressively questioned the FCS’ top regulator. Lawmakers specifically asked about the FCS's “mission creep,” its extraordinary loan last year to Verizon and the appropriateness of a tax-advantaged GSE competing directly with banks. Read the op-ed.