Pub. 4 2016 Issue 2

18 The Community Banker www.mibonline.org REAPING DIVIDENDS INDUSTRY ADVOCACY NETS KEY EXEMPTION FROM BACKDOOR TAX HIKE By Paul Merski, ICBA Executive Vice President Washington Watch I CBA and community bankers scored an important victory in Washington with the pas- sage of a law exempting most of the industry from a backdoor tax hike on Federal Reserve members. Following unwaver- ing ICBA and community bank advocacy, a new transportation funding law exempts commu- nity banks with $10 billion and under in assets from cuts to Fed stock dividends. Also significantly, the law also includes a number of ICBA’s Plan for Prosperity regulatory relief measures for community banks. Tangible rewards. The community bank exemption followed passionate indus- try advocacy to completely scrap a Senate-passed Fed dividend cut to help pay for federal highways. Congress’ final compromise legislation exempts the vast majority of community banks from the dividend cut. Meanwhile, banks over $10 billion in assets will receive a floating dividend not to exceed 6 percent, which is a vast improvement over the flat 1.5 percent rate the original bill contained. The $10 billion-asset ex- emption will make a tangible difference for many community banks and their customers. More than 1,800 members of the Federal Reserve are under the asset threshold, and the dividend cut would have cost them an estimated $200 million per year. Provisions for prosperity. Further demonstrating the industry’s clout in Congress, lawmakers also attached sev- eral beneficial regulatory-relief provisions from ICBA’s Plan for Prosperity agenda to the final transportation law. ICBA had teed these measures up in various bills in Congress and planned to use any moving legislation as a vehicle to get them to the president’s desk to sign into law. These measures will: • eliminate redun- dant privacy notice requirements when a bank has not changed its privacy policies; • expand the 18-month exam cycle to CAMELS 1 and 2 banks with assets up to $1 billion; • make it easier for community banks with assets below $2 billion to qualify as “rural lend - ers” under the Qualified Mortgage rules by elim- inating the requirement that they lend “predomi- nantly” in rural areas; • allow thrift holding companies to join bank holding companies in using the relaxed shareholder registration thresholds of the 2012 JOBS Act: and • allow more community banks to count trust-pre- ferred securities as Tier 1 capital. The final law also restores $3 billion in funds cut from the federal crop insurance program and drops an ICBA-opposed plan to raise Fannie Mae and Freddie Mac guarantee fees. Advocacy in action. While ICBA was opposed to any change in the Fed dividend policy, Congress clearly listened to the nation’s community bank and made substantial improvements to the final law. In addition to ICBA’s sustained meetings and communications with congressional offices, community bankers them- selves reached out to Congress in thousands of messages to lawmakers—including an important letter from 43 state community banking associa- tions. Ultimately, members of Congress did not completely withdraw the pay-for proposal, but they listened and showed what the community banking sector can accomplish in Wash- ington. Paul Merski (paul.merski@icba.org ) is ICBA executive vice president of congressional relations and chief economist.