Bad-Debt Recapture

Rep. Bill Archer

Republican of Texas

Thrifts will be exempt from $3 billion in taxes on bad-debt reserves made before 1988 as part of a sweeping tax-relief bill passed by Congress on Aug. 2. The bad-debt provision would also make thrifts liable for $1.5 billion of taxes on reserves made since Jan. 1, 1988.

The legislation reduces the tax exposure for thrifts that convert to commercial banks and is crucial to plans for merging industry charters.

Institutions maintaining current levels of mortgage lending will be able to delay tax payments on post-1987 reserves for two years.

House Ways and Means Committee Chairman Bill Archer proposed the bad- debt provisions last fall. The tax legislation was combined with a bill increasing the minimum wage.

Tax Provisions

Sen. William Roth

Republican of Delaware

Four tax provisions benefiting banks were attached to the minimum wage bill:

*Tax-free rollover of common trust assets into mutual funds.

*Creation of "financial asset securitization investment trusts" for securitizing nonmortgage debt.

*Allowing small financial institutions to structure themselves as "subchapter S" corporations and pass along income to stockholders without being taxed first.

*Increasing individual retirement account contributions for spouses who don't work outside the home to $2,000 from $250.

The four banking provisions were originally approved by the Senate Finance Committee, which is chaired by Sen. William Roth, R-Del.

Electronic Benefit Transfer Rules

Rep. Ray LaHood

Republican of Illinois

A measure folded into the welfare reform package will subject nonbank electronic benefit transfer companies to the same anti-tying restrictions faced by banks. The new rules will bar nonbanks from offering discounted debit and credit card transactions in order to obtain customers' EBT business. Congress passed the welfare reform package Aug. 1, and President Clinton has promised to sign the bill. The anti-tying restrictions were introduced by Rep. Ray LaHood, R-Ill.

ATM Fees

Rep. Marge Roukema

Republican of New Jersey

House Banking's financial institutions subcommittee July 31 approved a bill to require ATM operators to disclose all surcharges. Notices would have to be posted on the machines and on video screens. The panel, led by chairwoman Rep. Marge Roukema, R-N.J., dropped a provision requiring banks to report information about their surcharges to regulators.


Business Checking Accounts

Rep. Jack Metcalf

Republican of Washington

Rep. Jack Metcalf, R-Wash., introduced legislation Aug. 2 that would allow banks to pay interest on business checking accounts. House Banking's financial institutions subcommittee will hold a hearing on the legislation Sept. 11.


Thrift Fund Rescue/Regulatory Relief

Rep. Jim Leach

Republican of Iowa

House Banking Committee Chairman Jim Leach asked Republican leaders to schedule a floor vote in September on legislation to capitalize the thrift insurance fund and providing regulatory relief.

Rep. Leach's proposal includes "Leach Lite," a scaled-down version of his regulatory relief/financial modernization plan as well as the banking panel's July 25 compromise on the thrift fund fix. The committee's new plan would make thrifts pay a greater share of interest due on Financing Corp. bonds than banks would pay until the their two deposit insurance funds are merged in 1999.

Rep. Leach also resurrected his plan to create uninsured wholesale financial institutions, or "woofies." A new provision would allow all bank holding companies to make venture capital investments through subsidiaries.

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