With final action on the bill delayed for at least two weeks, House staff negotiators are working to reduce the differences in tax treatment provided commercial real estate loans over small business loans in banking legislation that would facilitate securitization for both instruments. Both sides have agreed in principle, however, to develop securitization legislation that can pass Congress, according to a staffer, something Congress has been unable to do for a decade. At the same time,Rep. Paul E. Kanjorski, D-Pa., has apparently decided to co ntinue his efforts to mandate greater oversight over the commercial loan and small business secondary markets than provided for in the Senate bill. And, while the disparate treatment language is still raising concern, fears that the securitization provisions would be blocked by House Ways and Means conferees have subsided. Those conferees had been fearful of a revenue loss to the government. Specifically, House staffers familiar with the negotiations say that while the legislation would grant favorable tax treatment to commercial real estate loans that is not provided now, there is no way to quantify such a revenue loss. Therefore, the staffer said, negotiators wont be required to mandate cuts in the federal budget or increase revenues to make up for the losses, which would have been a potentially fatal issue. Regarding disparate treatment, the staffer said, Our analysis of the Senate version of the legislation, which is the basis for the negotiations, shows that the bill establishes a two-tier system for securitization of small business loans and commercial business loans. We dont agree with different treatment and are working to present a proposal to the Senate staffers working on the bill language that would reduce those differences. The staffer said the provisions dealing with commercial real estate amend the Secondary Mortgage Market Enhancement Act of 1984, therefore providing these instruments exemption from certain securities law rules that will result in favorable tax treatment through issuance of Real Estate Mortgage Investment Conduits, or REMICs. The provisions in the Senate version dealing with securitization of small business loans provide the exemption from certain securities law provisions for these instruments, but dont amend SMMEA to allow creation of REMICs, therefore potentially resulting in less favorable tax treatment for securi-tization of small business loans. House negotiators, representing the Banking Committee, the Ways and Means Committee and the Energy and Commerce Committee, are preparing a negotiating position on the securi-tization provisions against a background of a Congress in recess for two weeks.
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