Ten days to go in this session, and bills are dropping like flies.  Critical deadlines established to avoid game playing and passage of bills that no one has read have either come or are around the corner.  This session is shaping up to have a really low bill passage rate....which isn't all bad!  The problem is eternal vigilance to ward off the amendment of an innocuous bill with a stinker that has languished in a dark corner!

 

Taxes.  Crystal ball time--which is always dangerous!  Conferees have been appointed by the House and Senate to reconcile the different approaches of each chamber.  The Senate had focused on a gross receipts business tax as a substitute for property taxes.  The House focused on property tax relief and business tax choice.  The Senate has maneuvered closer to the House approach, which would cover virtually all businesses (except sole proprietorships and passive income entities).  Business would elect between a payroll tax and a revised "franchise tax" but would have to pay at least a minimum amount (probably based on half of the higher tax).  Without some floor, the Comptroller of Public Accounts pointed out that some businesses could still largely avoid taxes.

 

IBAT pulled together banking and tax experts to assist us in drafting clarifying language to make sure that banks and their holding companies don't pay double taxes.  The House bill  purported to prevent this, giving the Comptroller some rule making authority, but the applicable section didn't deal with both taxable capital AND taxable earned surplus.  The powers that be have all assured the industry that there is no intent to tax banks/BHCs twice.  They simply want to target those structures that have avoided paying anything at all!

 

Financial Modernization Act.  HB 955 by Solomons/Averitt has passed the House and was approved by the Senate Business & Commerce Committee yesterday with no opposition!  We expect to see this bill on the floor of the Senate on Tuesday.  At that time, Sen. Averitt has avowed to not accept any amendments.  As noted earlier, this bill provides more flexibility in consumer lending for banks, cleans up some commercial usury issues, and tightens up some regulation of finance companies and mortgage brokers (but in a reasonable, negotiated fashion).  We have kept a coalition together in support of this bill and worked hundreds of hours to get this far.  This time the light at the end of the tunnel is NOT an oncoming train!

 

The bill also includes a provision that would exclude $7 million real estate transactions and $500,000 non-real estate commercial loans from usury provided that a constitutional amendment passes to that effect.  This would bring Texas more into the mainstream.  Almost no state regulates usury on commercial loans!

 

Garnishment Relief.  Our thanks to our friends at Sterling Bank for bringing us an initiative to deal with the age-old dilemma of default judgments on garnishments.  If a bank fails to answer, it is liable for the full amount of the judgment debt--even if the judgment debtor has no deposits at the bank!  HB 3428 by Elkins/Seliger has passed the House and was approved by the Senate Business & Commerce Committee yesterday, with no opposition.  The bill also has a section that permits a commercial borrower to take loan proceeds and deposit them back into the lending bank (as a CD, regular deposit, or whatever!).  This fixes a 30's era usury court case that had prevented borrowers from tying up proceeds in a CD in the lender bank.  This bill puts control back into the hands of the borrower to use their funds as they see fit!

 

School Funds.  The problem of collateral/deposit ratios is one step closer to resolution.  Last session, a bill intended to allow the use of declining balance securities as collateral for school funds inadvertently made the collateral ratio 110% on those and other (non-governmental) securities.  HB 573 by Flynn/Duncan was approved by Senate Finance yesterday (already approved by House and ready for a vote on the floor).  This bill will cut the cost of deposits for the bank (and thus the school district)--a good thing all around!

 

Foreclosures.  Several bills are pending on foreclosure procedures, but one has made it through and been signed by the Governor.  HB 1236 by Paxton/Harris clarifies that a person does NOT have to hold a real estate license in order to conduct a foreclosure sale.  A newsletter from the A&M Real Estate Center had thrown a little doubt on this issue, but now it is clear!