Please find the NAHEFFA comments in the pending SEC proceeding. Many comments will be filed and this matter has a long way to go. Thanks for the input of the Advocacy Committee.
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Last week, President Trump unveiled a high-level plan for what he wants to see in tax reform, with a more detailed plan expected as early as June. Although sparse with details, the proposal is being interpreted as eliminating tax exempt bonds. This will more formally launch the debate on tax reform, with House Ways and Means hearings expected to begin in the near future. We anticipate a series of issue-specific hearings starting with a hearing on the proposed Border Adjustment Tax (BAT), and then a general hearing on tax reform and a hearing on the interest expense deduction.
Following the release of the president’s plan, Republican members of the House Ways and Means Committee met for an already planned two-day discussion over this past weekend to determine where members stand on tax reform. As we shared with you last week, committee chairman Brady (R-TX) wants any tax reform legislation produced by the committee to have the support of all Republicans on the committee, and this unusual weekend meeting was intended to gauge where his membership is on tax reform generally, but more specifically on the proposed BAT. In reaction to comments by NAHEFFA and other issuers, MSRB will be going out for a second round of comments on the CUSIP rule proposal. We and other participants said the change would have negative effects on the market, including disincentivizing banks from buying municipal securities, and would add to transactions’ regulatory burden.
This probably is good news and we thank all of you who helped us prepare our comments. We are presently preparing comments on the SEC's 15c2- 12 proposal. If you are not on the Advocacy Committee and wish to input to the comment development please let Chuck Samuels know. The White House unveiled the President’s propsal for tax reform. We’ll be providing more analysis of the propsal and the tax reform debate in general, but for now wanted to be sure that you saw the proposal itself. We haven’t received a copy of the document yet, but we do have the photo of the one-page plan. As you’ll see, it is limited in details.
For business taxpayers, the proposal calls for:
For individual taxpayers, the proposal:
Please let us know if you have any questions, and be on the lookout for more details from us shortly. The High Quality Liquid Asset rules of the Federal Reserve and other bank regulators restrict big bank purchases of non-HQLA. The present rule established a minimum liquidity requirement for large banking organizations and identified acceptable investments – deemed HQLA – to meet this requirement. It failed to include municipal securities in any of the acceptable investment categories.
As part of The Public Finance Network, we have supported legislative relief to classify all investment grade, liquid and readily marketable municipal securities as HQLA. Because of the limited scope of this regulation, I do not consider it a critical issue. But, we should support efforts to maintain our purchaser base and to make common cause with our muni allies. Below are testimony, in which we joined, to the Senate Banking Committee in support of S. 828 and to the House on H.R. 1624. If you wish to contact your congressional delegation on this issue, this material should be helpful. But, if you need help let us know. Senate Banking Committee S. 828 House H.R. 1624 Legislation has been introduced that would allow high quality municipal debt to levels equivalent to debt issued by corporation.
Rounds, Warner Reintroduce Legislation to Provide Financial Stability to Muni Bonds State and Local Governments Urge Congress to Preserve the State and Local Tax Deduction and the Municipal Bond Exclusion in Tax Reform Efforts Muni Letter on behalf of State and Local Officials Your Advocacy Committee has determined that we should file comments on the pending SEC Rule 15c2-12 proposed revision and the MSRB proposal on CUSIP numbers. Below are brief descriptions of the notices, a blog by one of my NY partners and a BB article. If you have any thoughts about the content of the comments, particularly the effects on conduit financings, please provide them to me, Chuck Samuels, directly.
The Congressional Municipal Finance Caucus sent this letter to House Ways & Means Chairman Kevin Brady (R-TX) and Ranking Member Richard Neal (D-MA) on March 8, 2017, urging that any reform of the tax code protect the current treatment of tax-exempt municipal bonds. The letter was signed by 156 members of congress, many of them obtained from our efforts with authorities individually. This bipartisan letter was signed by 95 Democrats and 61 Republicans. The letter notes that:
“Nearly two-thirds of core infrastructure investments in the United States are financed with municipal bonds. In 2015 alone, more than $400 billion in municipal bonds were issued to finance the projects that touch the daily lives of every American citizen and business. They are the roads we drive on, schools for our children, affordable family housing, water systems that supply safe drinking water, courthouses, hospitals and clinics to treat the sick, airports and ports that help move products domestically and overseas, and, in some cases, the utility plants that power our homes, businesses, and factories. These are the pro-growth investments which spur job creation, help our economies grow, and strengthen our communities.” The letter states that any changes to the tax code should recognize the vital role of tax-exempt municipal bonds and that any changes to the tax exempt status should be provided very careful consideration. If your representative did not sign the letter, this would serve as a good leave behind for any Capitol Hill meetings you plan during Spring Conference in April; and of course, if your representative did sign the letter we’ll want to thank them during our Hill visits in April. Not affected by the Presidential executive orders freezing regulatory action(as an independent agency),on March 1, the Securities and Exchange Commission voted to propose amendments to Rule 15c2-12, with the goals of improving investor protection and enhancing transparency in the municipal securities market.
The proposed amendments to Rule 15c2-12 add two event notices to Continuing Disclosure Agreements. First, issuers and obligated persons must disclose information on the incurrence of alternative financings, including bank loans, direct placements, and similar obligations, and terms of such financings. Second, issuers and obligated persons must disclose any default or termination events with regard to those alternative financings. Acting Chairman Piwowar said the changes would “empower investors by improving their access to current information about the financial obligations incurred by municipal issuers.” The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register. ML Strategies is pleased to share with you our latest report on tax reform, below. Tax reform continues to be a top priority for congressional Republicans and the White House, although the specifics of how comprehensive reform is achieved, and the timing of legislation, is still unclear, although the general view is that we will see something by late summer or early autumn.
The only tax reform proposal thus far is the House GOP blueprint. Most debate on that proposal has centered on the proposed border adjustment tax (BAT) which has met with resistance in the Senate. While revenue measures, such as tax reform, must originate in the House, Senate Majority Leader McConnell has said he plans to also move a tax reform bill in the Senate through reconciliation, allowing passage with a simple majority and limiting the likelihood of a Democratic filibuster. At this stage of the debate, all eyes are on the president. Whether he produces a specific proposal for tax reform or offers up a set of principles – and whether or not he supports, opposes, or stays quiet on the question of the BAT – will tell us what to expect from the House (i.e. will they produce a bill based on the blueprint or fall back to the old Camp proposal), and from the Senate where both Republicans and Democrats are mostly keeping their powder dry to see whether Speaker Ryan is successful in moving his proposal forward. The President will deliver his first address to Congress on February 28th. We will likely know much more about what to expect on the tax issues discussed here after the president’s address. As always, ML Strategies is available to discuss any questions. |
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December 2019
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