We hope you had a relaxing July 4th weekend! I just realized that this is our 43rd edition of the Minutes…it’s sure been a fun journey. I hope you enjoy reading these every Monday!
This week, we’ll take a more casual, yet informative look at the MCDC, share the latest on the Internet Sales Tax debate as well as our proud announcement that PIC Essentials: The Audit-Proven Blueprint is now available!
So…here goes…today’s Monday Muni Minutes – Edition#43!
Enjoy and have a great week! Deb
CURRENT EVENTS
Internet Online Sales Tax – Is it Finally Coming to a Computer near You?
Whether you are a municipality which relies on sales tax collections as part of your operating budget revenues, an online retailer who may have to start collecting sales tax if your purchaser lives in all but a few states, or a consumer who does lots of online shopping, this will impact you.
Last week, the Government Finance Officers Association (GFOA) encouraged its members to contact their respective congress members and support pending legislation which would require out-of-state online retailers to collect sales taxes.
The topic of collecting sales tax across state lines is hitting a fever pitch.
Although the online sales tax has been an issue for several years…given the financial plight of states and local municipalities, as well as the ever-increasing level of “online sales,” I suspect the tide may be turning – and quickly.
There are two Acts to watch…
The first is in the Senate – The Marketplace Fairness Act (S.698) and the second is in the House – the Remote Transactions Parity Act (H.R. 2775).
Here are a few key points to note:
- Current law only allows states to collect sales tax if the business has a physical presence in that state – think Amazon.
- The tax would be levied based on the state where the purchaser lived, not where the business was domiciled or operated from
- The bill does not propose new taxes, just enforcement of taxes not being collected – as consumers are supposed to file and pay “use taxes” on their out-of-state purchases…most individual consumers do not, although businesses usually declare it on their quarterly tax filings
The GFOA has set up a new resources segment on their website, with updates, proposed talking points and draft letters to send to legislators – so members can be prepared to respond quickly.
GFOA is also encouraging members to provide estimates to their congressional liaisons regarding the amount of sales tax being lost and what the state or locality could provide in the way of services and infrastructure if there was a way to capture that lost revenue.
Stay tuned. We can expect to see this topic heat up even more over the coming weeks…
[Editor’s Note: This is going to be a big deal. Along with the multitude of states which are increasing their gasoline taxes in the wake of the federal Highway Trust Fund funding stalemate, I think the time for an across-the-board online internet sales tax is upon us…all of us.]
OUT & ABOUT
Conferences:
There are now about 30 conferences and regional events for the second half of 2015…
You can go to this Bond Buyer link to review what coming up and register!
Resources:
NEW! Webinar: MCDC – What Comes Next for Muni Underwriters
Date: Tuesday, July 21, 2015
Time: 12:00 PM Eastern Daylight Time
By: DIVER by Lumesis
Check out the “muni deal of the week”…and look at it from the bondholder’s perspective.
On-Demand Post Issuance Compliance Training for Issuers
“Compliance Basics” – a Free, 3-part video training, plus the Monday Muni Minutes
On-Demand Webinar
Resource: On Demand Replay of Continuing Disclosure after MCDC
Slides: Final Slide Deck for Continuing Disclosure after MCDC
Muni Market Minute Updates
(Quick news bits on topics we’ve covered in earlier MMM editions!)
A Few More Legal Thoughts on the MCDC Settlements…A Commentary
Over the last three weeks, we have showcased the issuer, the underwriter and legal views on the MCDC Settlement, which was announced by the SEC on June 18th.
Today, we will share a little bit more insight – and a couple of predictions…
Predictions of what’s to come for the entire community, not just the 36 firms who were individually cited, but collectively fined $9.3 million dollars for disclosure violations under the Initiative…
In a Bond Buyer commentary by Elaine Greenberg and Robert Feyer from Orrick, they noted the following…
A few more insights:
- Each citation had an average of three violations
- Roughly half of the violations reported involved failures to make required filings – often for multiple years, with late filings ranging from two weeks to over a year
- less than 30 = 2
- 30-90 days = 16
- 91-180 days = 9
- 270-365 days = 11
- Over 1 year = 19
- One obligor remedied late filings, but on the wrong NMSIR – not EMMA
- 31 examples were from pre-EMMA transactions in 2010-2011
- None of the orders were for material event notices, but that may happen in the future
The predictions going forward:
- There will be at least one more wave of underwriter settlements
- The SEC will then seek settlements with issuers – but it is unclear whether the same parameters will be used
- It is unclear whether actions against individuals will be taken or not
- It is also unclear what will happen for underwriters and issuers who did not self-report
There are also remaining questions from the settlements thus far.
Both Greenberg and Feyer noted that, due to anonymity, no patterns regarding region, size of issuer or type of bonds issued can be determined. What they do think is that, given the large number of issuers and obligors who access the market – a small % could actually translate to a larger actual number.
Stay tuned…
[Editor’s Note: I am not sure if I mentioned this earlier or not, but Ms Greenberg had an amazing 25-year career at the SEC prior to joining Orrick in 2013. See why I think Orrick is so great?]
The Next Step to Takeover? Looking at the Wayne County Books
As shared in earlier editions, Wayne County, Illinois (the home to Detroit) has been teetering on shaky financial ground for some time…with County Executive Warren Evans asking on June 
17th for a declaration of financial emergency.
Last week, Governor Rick Snyder agreed and took the next step…
Snyder said in a prepared statement, “While county officials are working to address this growing financial crisis, the recent request of the county and the finding of probable financial stress by the Emergency Loan Board indicates a deeper review is necessary,” he said. “And given the county executive’s request for an expedited review, I have directed this review team to work as quickly and efficiently as possible, to establish a solid baseline of facts of the county’s finances and a report which we can collectively work from.”
Wayne County has had difficulties since 2010, and, to-date, no turnaround plan has been developed…
So, what’s next? I think we will find out much more shortly.
[Editor’s Note: This finding of “probably fiscal stress” and the review is the second step which could ultimately lead to takeover by the State. More to come as it progresses…]
Panel to IRS – 2 Ways to Increase Efficiency in Tax-Exempt Bond Office
In a helpful report a couple of weeks ago, the advisory panel shared two ways the IRS could “do more and better with less” in a time of dwindling resources amid increasing market complexity.
“These challenges point to the need for a reexamination of many of the ‘old’ ways of doing things,” the report stated.
What they came up with involved two programs the IRS currently uses:
Those two programs are, 1) The Industry Issuer Resolution (IIR) Program and, 2) The Industry Director Directive (IDD) Program. Here are the suggestions from the report:
Under the IIR: Stakeholders request published administrative guidance on FAQs and disputed issues. Here are two key quotes:
- “However, adoption by TEB of the IIR program would include procedures such as prioritizing issues, setting due dates for response and interacting with industry experts that provide a framework for resolving issues more quickly and effectively.”
- “In addition, the IIR program could provide a framework for identifying ways of streamlining audits of issues within TEB’s jurisdiction.”
Under the IDD: The Director provides guidance on consistent internal operations and tax administration, including streamlining the audit process and other interactions with issuers
Examples:
- Arbitrage rebate – identify bonds that should not be subject to audit due to low interest rates
- Planning & conducting audits to reduce time and resources needed – by both the issuer and the IRS
However, there’s one important point to note.
Also included in the report was the recommendation that the IRS TEB Office consider using written compliance examination requests as a way to narrow its scope on which bonds should be audited…a rifle rather than shotgun approach?
Two more recommendations…
Along with the limited-scope audit approach from the written requests, the panel suggested:
- Training for TEB employees – including allowing market participants to be involved
- Knowledge management tools, such as an “online experience database” for subject matter experts
So, what are your thoughts?
[Editor’s Note: Remember when I wrote some months ago that compliance questionnaires would be making a comeback? Although I was not aware of the IIR and IDD programs, I believe many of the suggestion for improvements will result in more compliance, higher transparency and efficiency…and ultimately less work for both issuers and the IRS.]
We hope you found this week’s edition of the Monday Muni Minutes valuable and informative.
Chat soon!
As always, your comments are welcome…scroll down and let us know what you think about any of the articles!
To your compliance success,
Debbie
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NOTE: PIC Essentials is now available! If you are a current issuer2issuer member and did not get a chance to take the original live training in January, look in your inbox later today for your special discounted “member’s only” e-mail and link for PIC Essentials: The Audit-Proven Blueprint.
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