There are numerous issues that will be discussed and dealt with in Washington throughout 2014 that will be of acute interest to GFOA members. These include ongoing discussion related to the federal budget and deficit, which could include proposals to curtail funding to state and local governments, as well significant reforms to the federal tax code. The tax reform discussion will certainly include changing or eliminating the federal tax exemption on municipal bond interest as well as deductions for state and local taxes. Proposals to regulate public pensions plans, and new rulemaking from the SEC and MSRB related to the Dodd Frank Act and other areas involving state and local governments will come forward throughout the year. The GFOA’s Federal Liaison Center will monitor these legislative and regulatory activities and work to advance the public policy positions adopted by the GFOA membership. The association’s legislative and regulatory priorities for the year are listed below.
It is likely that either through incremental means or wholesale efforts, tax reform will be part of the 113th Congress’s agenda. There are numerous implications for state and local governments in this debate, and the FLC will advocate strongly on behalf of our members and work with the entire state and local government community on these issues.
- Changes to Municipal Securities. Similar to activities in 2013, Congress and the Administration will likely continue to present tax proposals that could diminish or eliminate the federal tax exemption on municipal bond interest. Any of the options brought forward could have a negative effect on state and local governments and increase their bond issuance costs. GFOA will oppose any plans to cap the amount of municipal bond interest that taxpayers can exclude from their federal taxes and oppose any proposals to eliminate the federal tax exemption altogether. GFOA will work with our state and local government association partners to educate Congress and the Administration on both the importance of taxexempt bonds and how they serve as the primary finance vehicle to meet our country’s infrastructure needs.
- Deductibility of State and Local Taxes. GFOA will work to ensure that any proposals to limit or eliminate the federal deduction of state and local taxes are defeated. GFOA continues to support legislation that would permanently allow taxpayers to deduct state and local sales taxes on their federal tax return.
Collection of Taxes on Remote Sales
GFOA supports legislation that would allow for the collection of taxes from sales made by remote means (e.g., internet and catalog). Congress was close to completing work on this matter in 2013, and the GFOA will work with its state and local government partners to push for passage in 2014. However, GFOA will oppose any efforts to include provisions in legislation that would limit the amount of tax that local governments can collect on remote sales as well as oppose mandates for state and local governments to simplify their telecommunication tax structures before being able to collect taxes on remote sales.
Preemption of State and Local Government Taxes
- Telecommunications Taxation: GFOA, in conjunction with our other local government partners – the National League of Cities, the National Association of Counties, and the U.S. Conference of Mayors, will vigorously oppose efforts to preempt state and local governments from assessing taxes and fees on various communication related goods and services.
- State and Local Hotel and Rental Car Taxes: GFOA opposes any efforts by Congress restricting the ability of states and localities from collecting hotel taxes on the full rental price that hotel occupants pay when renting rooms through online travel companies (e.g., Expedia, Travelocity, Hotels.com). Additionally, GFOA opposes any efforts to preempt the ability of state and local governments to levy rental car taxes and fees that are appropriate for their jurisdiction.
In addition to the tax reform efforts noted above that will affect municipal securities, there are many other bond issues of interest to GFOA members that will have the attention of the FLC. These include:
- Disclosure Standards. In July of 2012, SEC released a proposal on the need for greater issuer disclosure standards for governments that issue municipal securities. The recommendations in the report – both changes to SEC rules and legislative efforts to set disclosure and financial information standards – will likely be brought forward in 2014. GFOA and its state and local government partners will work to oppose such efforts.
- Implementation of the Dodd-Frank Act. Following the 2013 approval of a final rule on the definition of Municipal Advisor the GFOA is expecting additional regulations that affect municipal securities issuers and the professionals they hire to be proposed and finalized this year by the MSRB. As additional proposed regulations are issued we will comment in order to protect the interests of state and local governments. These expected new rules include: a new regulatory framework over financial advisors and changes to regulations over broker/dealers.
- Bank Qualified Debt Limit. GFOA will be working with our state and local government and industry partners to increase the bank qualified debt limit from $10 million to $30 million. The $10 million amount was set in 1986, and aside from a temporary change to $30 million in 2009 and 2010, the amount has not changed. GFOA will continue to support legislation that would permanently increase the annual bank qualified debt limit to $30 million, and have it indexed to inflation thereafter.
Public Pensions and Retirement Savings
GFOA along with other Public Pension Network members representing both state and local governments and retirement systems will continue to educate members of Congress regarding the true fiscal condition of public pension systems, as well as oppose congressional proposals to undermine state and local governments’ authority to effectively govern and finance their pension plans.
Health Care Reform Implementation
GFOA will continue to monitor regulations related to the implementation of the Patient Protection and Affordable Care Act, which remains largely the jurisdiction of the Departments of Health and Human Services, Treasury and Labor. These agencies continue to publish guidance to help define what the law requires of employers, insurers and participants alike. GFOA will advocate for a regulatory approach that allows states and localities to utilize the most cost effective means of complying with the health care law, while offering appropriate benefit options to employees and retirees.
The SEC will continue considering its 2013 proposed regulations on money market mutual funds that could adversely affect government investments (e.g., changes to the stable-net asset value feature of these products). GFOA will continue meet with SEC Commissioners and targeted congressional offices to ensure state and local governments are protected but are able to still use finance tools that are important to our sector.
GFOA will monitor and inform our members about various short and long term proposals to manage the federal budget, including cuts to programs important to state and local governments.