State and Local Governments in the Spotlight of Recent U.S. Supreme Court Decisions
The current term of the U.S. Supreme Court has seen a number of cases involving state and local governments, with some decisions potentially having a lasting impact. In a recent 5-3 ruling, the Court held in Bank of America v. Miami that local governments have standing to bring Fair Housing Act (FHA) lawsuits alleging discriminatory lending practices against banks. The City of Miami claims that Bank of America and Wells Fargo intentionally issued riskier mortgages on less favorable terms to minority customers. According to the city, this practice led to foreclosures and vacancies which harmed the city through decreased property values, reduced property tax revenue, and increased costs to the city.
To see extended summaries of the cases GFOA tracks, and other cases involving state and local government issues, visit the State and Local Legal Center (SLLC) here. The State and Local Legal Center, of which GFOA is an associate member, files amicus curiae briefs in support of state and local governments in the U.S. Supreme Court.
Congressional Hearing Focuses on Social Security Coverage and Payroll Tax Compliance for State and Local Governments
On June 29, the U.S. House of Representatives Ways and Means Subcommittees on Social Security and on Oversight held a joint hearing titled “Complexities and Challenges of Social Security Coverage and Payroll Tax Compliance for State and Local Governments.” The hearing focused on how the Social Security Administration (SSA), the Internal Revenue Service (IRS), and states could work together to manage Section 218 Agreements, voluntary agreements between the state and the SSA to allow state and local government employees, if eligible, to participate in Social Security.
The committee heard testimony from only three witnesses. Two were from the federal government (IRS and SSA) and the third was Maryann Motza, former CORBA Committee member, representing the National Conference of State Social Security Administrators. In her remarks, Ms. Motza stressed that the working relationship between SSA, IRS, and the states, still faced challenges but improving the lines of communication and strengthening each entities role could vastly improve the administration of Section 218 Agreements. Ms. Motza cautioned that any effort to strengthen the federal, state, local relationship in this area should not be viewed as an opportunity to require mandatory Social Security coverage for public employees or for the federal government to intervene in the administration of state and local government pensions. For more information and to view an archived recording of the hearing, click here.
GFOA Submits Second Comment Letter on MSRB Rule to Require CUSIPS for Private Placements
On June 30, GFOA filed comments requested by the MSRB on a second draft of rule amendments to Rule G-34 that clarified exceptions to the proposed rule on obtaining CUSIPs for issued securities sold in private placement transactions.
In the comments, GFOA once again emphasized a major and overriding concern “Without clear language on how this exception can be easily met, the proposed amendment will dampen demand for bank loan and direct purchase financings entered into by state and local governments and authorities and therefore raise borrowing costs.”
To help clarify the exception, GFOA referred to the American Bankers Association’s suggestion that refines the language by adding that investor will provide representation of its intent to hold the securities to maturity. In addition, GFOA directed the MSRB to the common practice of state and local government bonds purchased by other state and local governments with no intention to resell and urged the MSRB to add this to the exception. Finally, GFOA encouraged the MSRB to consider certain types of transactions, such as in the case of competitive sales where CUSIPs are obtained in order to ensure compliance and in so doing could deter the potential bid of a private placement.
GFOA’s Federal Liaison Center will keep members up-to-date on next steps and potential advancement of this rule clarification in the coming weeks.
GFOA Defends the State and Local Tax Deduction
On July 11, 2017, local leaders from across the United States came together to in Washington, D.C., to defend the deductibility of state and local taxes, a fundamental feature of the U.S. tax code since 1913. GFOA Executive Director Chris Morrill moderated the Capitol Hill briefing, “Protecting Local Control in Our Tax Code,” to a standing room-only crowd.
Panelists (pictured above, from right to left) included Jamie Nicholson, GFOA Executive Board member and finance director of Pataskala Ohio; Bob Coiner, mayor of Gordonsville, Virginia; Allison Silberberg, mayor of Alexandria, Virginia; and Mike Fricilone, Will County, Illinois, board member. Eliminating the deduction would have material negative financial consequences to the families in their jurisdictions by increasing their federal and state tax liability, panelists warned.
The panel urged Congress to recognize the mutually beneficial partnership that exists among federal, state, and local governments, ensuring that taxpayers are not subject to double taxation and helping preserve the essential public services Americans rely on. GFOA referenced The Impact of Eliminating the State and Local Tax Deduction, a report that GFOA recently released, joined by eight other national organizations representing state and local elected and appointed officials. The report details the impact a repeal would have on individuals by congressional district and illustrates a strong linkage between home ownership and the preservation of the deduction. If this century-old intergovernmental agreement between all levels of government were to be eliminated, the report concludes, the effects on localities would be immediate and painful.
Contact your Congressional delegation and use the tools on www.gfoa.org/SALT, including an interactive map on impact by congressional district, to tell your story and urge the preservation of the deductibility of state and local taxes.
GFOA Joins Reply Comments in FCC Local Wireless Siting Proceedings
On July 17, GFOA joined several other organizations representing local governments to file Reply Comments in the current Federal Communications Commission (FCC) proceeding entitled “Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment.” The Reply Comments follow up efforts in similar proceedings currently before the FCC where siting authority of local governments could be negatively impacted. In general, the joint comments expressed opposition to efforts at the federal level that would preempt local government siting authority. Additionally, the comments urged the FCC to develop a process that would move state and local governments and industry parties away from an adversarial relationship, and more towards a partnership — a partnership that focuses on increasing access to advanced communications services for local communities, but that does so in a way that balances the needs of industry with the economic and regulatory concerns of those communities.
The other organizations joining GFOA for the comments are the National Association of Telecommunications Officers and Advisors (NATOA), National League of Cities (NLC), National Association of Towns and Townships (NaTaT), National Association of Regional Councils (NARC), and the U.S. Conference of Mayors (USCM). For more information on the FCC proceeding, and to view the joint comments and comments filed by other stakeholders, click here.
Senate Finance Committee Holds Hearing on Tax Reform
On July 18, the U.S. Senate Finance Committee held its second tax reform hearing of this Congress entitled “Comprehensive Tax Reform: Prospects and Challenges.” While the hearing focused on broad principles and challenges to reforming the federal tax code, it did involve some discussion on the state and local tax (SALT) deduction. Preserving the SALT deduction has been a long-standing priority for GFOA, and will continue to be as the debate on tax reform evolves. Committee members heard from four individuals who served as Assistant Secretary for Tax Policy in the U.S. Treasury Department. The witnesses were The Honorable Jonathan Talisman (2000-2001), The Honorable Pamela F. Olson (2002-2004), the Honorable Eric Solomon (2006-2009) and The Honorable Mark J. Mazur (2012-2017). To view an archived video of the hearing and to review the written statements of the panelists, click here.
The hearing comes on the heels of a request for public feedback on tax reform from Committee Chairman Orrin Hatch (R-Utah). Comments were filed on behalf of the Public Finance Network (PFN), a GFOA-led coalition of organizations in Washington, DC, representing various segments of state and local government on finance issues. The comments stressed the importance of maintaining the exclusion for municipal bond interest and the preservation of the SALT deduction as a necessity for a strong federal-state-local partnership that delivers core governmental services to citizens. Click here to review the PFN’s comments.