Financial Crisis News Center

Low-Income Housing Tax Credit May Be Transferred

This story appeared in Bank Digest.

Shortly after the establishment of the conservatorships for Fannie Mae and Freddie Mac, Federal Housing Finance Agency issued a statement emphasizing the importance of all aspects of the Enterprises’ multifamily businesses to a healthy secondary market and housing affordability—including the low-income housing tax credit (LIHTC) program. However, the FHFA has informed Fannie Mae that a possible transfer of a portion of its LIHTC investments to unrelated third-party investors is consistent with FHFA’s ongoing efforts to conserve Enterprise assets and with the Enterprise’s multifamily housing mission.

Towns Highlights “Public Directors” for Bailouts

This story appeared in Bank Digest.

In his Sept. 18, 2009, opening remarks before the Center for American Progress program entitled “A Fair Deal for Taxpayer Investments,” House Oversight and Government Reform Committee Chairman Edolphus Towns, D-N.Y., noted that “taxpayers instinctively continue to dislike the idea that their tax dollars have been used to bailout Wall Street as Main Street continues to struggle. They want to know that their money is being used wisely. And, they want assurances that, ultimately, they are going to get their money back.” Chairman Towns added that “It is indeed [Congress’s] moral responsibility to check and be sure that every dime and every dollar invested in banks and other private entities are properly accounted for.” To achieve this, Towns highlighted a proposal put forth by Emma Coleman Jordan, Professor of Law, Georgetown University Law Center, which would implement “public directors” whenever significant public funds are directed toward private entities.

Towns’ Remarks athttp://oversight.house.gov/documents/20090916105443.pdf

Jordan Proposal at http://www.americanprogress.org/issues/2009/09/pdf/public_directors.pdf

UBS-IRS Bargain Noted by Committee Leadership

This story appeared in Bank Digest.

Two members of the Senate Finance Committee have commented on the agreement announced by the Justice Department between UBS AG and the Internal Revenue Service on account information. Committee Chairman Max Baucus, D-Mont., called it “an important step in the fight against offshore tax fraud.” On the other hand, Ranking Member Chuck Grassley, R-Iowa, said he needed more information before he would be willing to support the arrangement. Grassley questioned how the IRS reduced from 52,000 to 4,450 the number of accounts for which it wanted information and also called for more information on the use of financial institutions in countries other than Switzerland to avoid taxes.

President Voices Concern Over Taxing Executive Bonuses

By Stephen K. Cooper and Paula Cruickshank, CCH Washington News Bureau, Contributing Authors, the CCH Federal Banking Law Reporter, March 23, 2009.

President Obama raised concerns about House legislation (H.R. 1586) that would tax bonuses received from certain companies receiving TARP funds. Obama, in an interview on CBS’s “Sixty Minutes” on March 22, cautioned that, as a general rule, legislation should not be designed to target “a handful of individuals” and that the tax code should not be used “to punish people.”

Obama said the administration would like to consider alternative approaches that are both legal and constitutional and that do not “hamper us from getting the banking system back on track.” At the same time, he said that financial institutions must realize they cannot operate the same as they did before the economic crisis, particularly when they are using taxpayers’ money.

Practitioners Await Guidance on ARRA Executive Compensation Limits

By George L. Yaksick Jr., CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, March 20, 2009.

The Treasury Department is expected to release guidance soon on executive compensation limitations in the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act) (P.L. 111-5), practitioners said during a Web cast sponsored by the American Bar Association’s Joint Committee on Employee Benefits on March 19. In the meantime, practitioners are left questioning if many of the 2009 Recovery Act limitations apply now or when the Treasury Department issues guidance

Senate Finance Committee Preparing Legislation on Executive Compensation

The leaders of the Senate Finance Committee set forth the principles for draft legislation designed to discourage excessive compensation at companies that have taken taxpayer funds, including executives at recipient institutions of TARP funds. The core principles are a federal excise tax on excessive compensation and a $1 million cap on deferred compensation. The draft will also include regulatory safeguards to prevent companies from characterizing bonus payments as salaries in an effort to avoid the tax. The principles were announced by Finance Chair Max Baucus and Ranking Member Charles Grassley. The excise and compensation cap will apply to all TARP recipients of government funds as well as companies in which the government holds an equity interest, including Fannie Mae and Freddie Mac.

AIG Bonus Tax Bill on Fast Track in House

By Stephen K. Cooper, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, March 19, 2009.

In the face of spiraling outrage among members of Congress and the American public, House lawmakers will consider legislation on March 19 that would tax the bonuses paid to employees of American International Group and other firms that received bailout money under the Troubled Asset Relief Program (TARP). House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., introduced legislation to impose a 90-percent tax on bonuses received by married individuals with adjusted gross incomes of more than $250,000, or $125,000 for married individuals who file individual returns. “When you weigh the harm that AIG and other bad actors have done to the system, our economy, and American families, with the concerns regarding the precedent of using the tax code, there is no question this legislation is the best decision we can make,” said Rangel.

Baucus Blasts Bonuses at AIG

Senate Finance Committee Chairman Max Baucus, D-Mont., has challenged a move by American International Group (AIG) to use hundreds of millions of taxpayer dollars to pay executive bonuses. “I’m outraged by this. At one point the Treasury was in a position to stop these bonuses—those were the terms of TARP, terms that I helped draft. The argument in defense from AIG is that this is retention pay, not executive bonuses. Well, I’m not buying it,” said Baucus. In a Finance Committee hearing, Baucus pressed a panel of tax experts on ways to prevent or limit AIG’s apparent abuse of taxpayer money. Baucus posed the question of how large an excise tax could be imposed on AIG for paying these retention bonuses while still being lawful. http://finance.senate.gov/press/Bpress/2009press/prb031709a.pdf

Lawmakers Considering Excise Tax on Excessive Bonuses

By Jeff Carlson, Paula Cruickshankand Sarah Borchersen-KetoCCH Washington News Bureau, Contributing Authors, the CCH Federal Banking Law Reporter, March 17, 2009.

Outrage over excessive bonus payments to American International Group employees has fueled talk of using the federal tax code to recover the funds. The office of Senate Finance Committee Chairman Max Baucus, D-Mont., reports that that he has begun working on a proposal to address the issue of excessive executive compensation paid by recipients of Troubled Assets Relief Program (TARP) funds, including a possible excise tax on institutions paying retention and other bonuses.

Small Businesses to Benefit from Recovery Package and Unlocking Credit Initiative

By Paula Cruickshank, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, March 16, 2009.

Several provisions of the recently enacted economy recovery package will provide tax cuts for small businesses or tax incentives to encourage investment in them, President Obama said on March 16. The president noted the tax incentives during his announcement of a new Treasury plan to jumpstart credit markets for small business owners and entrepreneurs.

The American Recovery and Reinvestment Act of 2009, P.L. 111-5, includes provisions to allow small businesses to immediately write off up to $250,000 in plant and equipment investment and to reduce estimated tax payments to 90 percent of the previous year’s taxes.   The 2009 Recovery Act also allows small businesses to carry back their losses for up to five years.