Tuesday, March 26, 2019

Week of Feb. 18

In This Issue…

Treasury partially clarifies Subchapter ‘S’ deduction
House panel holds hearing on cannabis banking
Senate Banking Committee to look at housing finance reform plan
OBA education corner …

Treasury partially clarifies subchapter ‘S’ deduction

We’ve been working with the ABA, ICBA and the Subchapter “S” group to do what we can to help clarify the pass-through rules emanating from the tax reform act signed into law last year. In August, an earlier version of the proposed rule was released for public consumption and it raised a number of concerns and objections for Subchapter S banks.

The Treasury Department has just recently released its final rule that will allow Sub “S” shareholders, including the 135-plus OBA-member banks, to take a 20-percent deduction on qualified business income. The final rule was taken into consideration after many of the comments and concerns that were expressed by many of us after the initial proposal were made public.

The final rule does not clarify whether income from wealth management and trust services qualifies for the 20-percent deduction. That’s a bit different than the earlier proposal.

For more details and information from American Banker magazine, click here.

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House panel holds hearing on cannabis banking

The Subcommittee on Consumer Protection and Financial Institutions held a hearing last week titled: “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses.” The focus of the hearing was a draft of Representatives Ed Perlmutter (D-Colo.), Denny Heck (D-Wash.), Steve Stivers (R-Ohio) and Warren Davidson’s (R-Ohio) SAFE Banking Act, which establishes a safe harbor from federal sanctions for financial institutions that serve cannabis-related businesses in states where cannabis has been legalized at the state level.

We strongly believe Congress should address the conflicts between federal and state law in those states that have legalized marijuana use in some form. Of course, that includes Oklahoma.

The OBA has never taken a position on whether to support full legalization of marijuana, even though the drug has been legalized for medical or adult use in 33 states. What the Association does support, however, is resolving the conflicting laws for financial institutions that choose to bank both direct cannabis businesses as well as ancillary businesses which, under current law, present banks with a number of legal and regulatory risks.

Meanwhile, ABA President and CEO Rob Nichols submitted an op-ed which appeared in “The Hill” magazine this morning:

“Washington had a turning point in the national debate over banking and cannabis this month. For the first time, Congress held a hearing on the issue, with lawmakers and witnesses outlining the harm resulting from the growing gap between state and federal laws. The House Financial Services hearing was welcome but overdue.

Today, 33 states and the District of Columbia have legalized cannabis in some form, and more states are now moving to join that club. At the federal level, however, marijuana remains illegal, putting banks in an impossible situation only Congress can resolve.

With cannabis now legal in 33 states and the District of Columbia, an overwhelming number of banks – 99 percent, according to a recent ABA survey – want Congress to take action to address the gap between state and federal law that prevents banks from serving marijuana-related businesses in states that have legalized the drug.

Three in four ABA member banks reported having had to close an existing account, terminate a banking relationship or turn away a potential customer because of a connection to cannabis. As a result, many marijuana-related businesses have resorted to dealing entirely in cash, which can make them lucrative targets for criminals and create potential public safety risks for local communities.

While ABA is not taking a position on the legalization of marijuana, reconciling the cannabis conundrum would allow the profits from cannabis sales — which are estimated at $24 billion by 2025 — to be safely deposited within regulated financial institutions. But we welcome the discussion on this bipartisan legislative proposal led by Rep. Ed Perlmutter (D-Colo.) to address the issue of cannabis and banking. It’s an important first step toward bringing cannabis-related businesses into the mainstream financial sector.

Read the op-ed by clicking here.

Click here to read the discussion draft of the SAFE Banking Act.

Click here to read the ICBA position paper

Click here to read ABA’s Statement For The Record.

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Senate Banking Committee to look at housing finance reform plan

Last week, Sen. Mike Crapo (R-Ind.), who chairs the Senate Banking Committee, unveiled his suggestions about how to restructure the federal housing finance system that’s likely to be brought before the full Committee sometime this spring.

Crapo’s suggestions focus on making Fannie Mae and Freddie Mac guarantors to provide guarantees on mortgages eligible to be securitized by primary market participants. Crapo’s suggestions would replace the current affordable housing goals and duty-to-serve requirements with a new Market Access Fund. This fund would, in turn, provide grants, loans and credit enhancement to address the homeownership and rental housing needs in underserved and low-income communities

These two GSEs (government-sponsored enterprises) would also be able to buy mortgages from the primary market through a cash window and guarantee and securitize them through a platform operated by Ginnie Mae. Ginnie Mae would then provide a catastrophic government guarantee at the security-level to cover tail-end risk. Crapo’s suggestions also place regulatory oversight of the GSEs with the Federal Housing Finance Agency as it changes to a bipartisan board of directors who would be responsible for chartering, regulating and supervising the system of private guarantors.

The GSEs have been in conservatorship since the financial crisis that took place in 2008, more than 10 years ago and that led directly to the enactment of the Dodd-Frank Act signed into law in 2010.

“We’ve been supporting Sen. Crapo’s suggestions for some time now, as long as community banks continue to have access to the secondary market,” OBA President and CEO Roger Beverage said. “We also think the new system that is under consideration should also labor to maintain the 30-year mortgage instrument and keep the goal of affordable housing viable.”

Click here to read Crapo’s suggestions.

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OBA education corner …

Snow and ice are falling today, but surely warm weather is around the corner! Right?! Even if it’s a few weeks away, one thing that’s ALWAYS around the corner is another OBA education offering! Take note of the following:

  • Opening Minor Accounts, Feb. 26, webinar — During this webinar, you will learn how to answer your adult account holder’s questions on how to set up accounts for grandchildren, for college, and many other reasons to set up minor accounts.
  • OnBoarding Your New Hire, Feb. 26, webinar — This dynamic program will help raise the bar when it comes to engaging and training new employees from the start.
  • TRID Checkup, Feb. 27, webinar — This two-hour introductory level webinar will cover the following and will be presented as always, in a Plain English format!
  • 2019 CFO Conference, Feb. 27, Oklahoma City — The 2019 CFO & Financial Officers Conference is specifically designed to provide strategic insights and critical industry updates you need to lead your bank to success.
  • TRID Checkup, Feb. 27, webinar — This two-hour introductory level webinar will cover the following and will be presented as always, in a Plain English format!
  • W-9, W-8BEN and W-8BEN-E, Feb. 27, webinar — During this program, we will do a line-by-line review of the W-9 and W-8BEN forms and the subsequent tax reporting to the IRS. This program will focus on what a US financial institution has to do from the tax reporting and documentation process.
  • Federal Benefit Payments: Garnishment Requirements, Feb. 28, webinar — This program will include a general review of the requirements for processing garnishments and state tax levies under the final rule and more.
  • Prepaid Accounts Final Rules, Feb. 28, webinar — During this webinar, you will receive a compliance checklist and a comprehensive look at the rule. Sample policy and procedure language will also be provided.
  • Letters of Credit, March 1, webinar — This webinar provides an essential understanding of letters of credit, including letter of credit terminology, structure and function.
  • ACH Origination and Same-Day Entries, March 5, webinar — In this session, we are going to review the general origination warranties and then review the most used Standard Entry Class (SEC) Codes.
  • Cash Management, March 5, webinar — During this two-hour webinar, you will gain a more in-depth knowledge of cash management (aka treasury management) products and services.
  • Commercial Construction Lending, March 6, webinar — This program provides an overview of the key steps involved in effectively administering commercial construction loans.
  • Call Report Seminar, March 12, Oklahoma City — The Call Report Preparation seminar will help preparers and reviewers understand the preparation process and eliminate errors.
  • 2019 Branch Managers School, March 13, Oklahoma City — Developing leadership at the branch level is what the OBA’s Branch Manager School is all about!
  • 2019 Technology Conference, March 27, Oklahoma City — This conference will help bankers keep in touch and understand the latest offerings in the IT world.

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