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Inside Washington (03/10/2008)

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* WASHINGTON (3/11/08)—A free webinar on key issues surrounding unrelated business income tax (UBIT) for credit unions is now available online. The Credit Union National Association (CUNA) offered the UBIT webinar live during the March 3-6 Governmental Affairs conference here. Featured panelists are: Mary Martha Fortney, president/CEO, NASCUS; Faye Patzner, chief legal officer, CUNA Mutual Group CUNA General Cunsel Eric Richard, and Brett Thompson, president, Wisconsin CU League. n January, Community First CU, Appleton, Wis., filed a court challenge against the Internal Revenue Service regarding its UBIT determination on insurance products… * WASHINGTON (3/11/08)--Guy Hood, right, president/CEO of the Florida Credit Union League and a director on the board of the Credit Union House in Washington, D.C., was inducted into the CU House Hall of Leaders March 3. Congratulating him here is Dan Mica, Credit Union National Association president/CEO. The Hall of Leaders was created by Credit Union House to provide lasting recognition for individuals who have demonstrated an outstanding commitment to credit unions and who have made a significant impact on the credit union movement at the local, state, or national level. Hood was the first inducted. (Photo provided by the Florida Credit Union League) ... * WASHINGTON (3/11/08)--The Maryland and District of Columbia congressional delegation spoke to 80 credit union officials at the Maryland and District of Columbia Credit Union Association Congressional Luncheon on Capitol Hill Wednesday (Focus Newsletter March 10). Sen. Ben Cardin (D-Md.), pictured, voiced his support for credit unions, encouraging them to continue helping their members. Rep. Roscoe Bartlett (R-Md.) discussed his support for credit union regulatory reform legislation. Rep. C.A. Ruppersberger (D-Md.) said he was glad to be the first co-sponsor of the Credit Union Regulatory Improvements Act from the Maryland delegation, and Rep. Elijah Cummings (D-Md.) noted credit unions are a bridge to help those cross over financial difficulties to meet goals and attain wealth. (Photo provided by the Maryland and District of Columbia Credit Union Association) ... * WASHINGTON (3/11/08)--A Friday hearing where lawmakers expected to grill executives who profited off three companies hurt by the subprime mortgage market crisis did not go as expected (American Banker March 10). The executives, E. Stanley O’Neal, Merrill Lynch and Co.; Charles O. Prince, Citigroup; and Angelo Mozilo, Countrywide Financial Corp., did not apologize for their companies--.instead, they defended themselves. Mozilo took responsibility for the downfall and empathized with those who cannot afford their mortgages. He also said he would provide company employees to Rep. Elijah Cummings’ (D-Md.) staff to solve foreclosure problems ... * WASHINGTON (3/11/08)--Housing and Urban Development (HUD) Secretary Alphonso Jackson will testify before the House Financial Services Committee today and the Senate Banking Committee Wednesday to discuss oversight of HUD, as well as the department’s budget request for fiscal year 2009. He is slated to be the sole witness before the House panel, but is scheduled to precede these witnesses on the Senate side: Michael Kelly, executive director, District of Columbia Housing Authority; Hector Pinero Sr., representing the National Multi-Housing Council and the National Leased Housing Association; Diane Randall, director, Partnership for Strong Communities; Edgar Olsen, economics professor, University of Virginia; and Barbara Sard, director of housing policy, Center on Budget and Policy Priorities …

CUs staggering burden will be forum topic

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WASHINGTON (3/11/08)—The Credit Union National Association (CUNA) will underscore the “staggering regulatory burden” on credit unions at the second national forum on regulatory fairness sponsored by the Small Business Administration (SBA) Wednesday. Mary Dunn, CUNA senior vice president and deputy general counsel, said she will note in oral and written testimony the following arguments:
* Credit unions are subject to the same consumer protection laws and regulations as other financial institutions, similar safety and soundness requirements, and are subject to the increasing requirements of the Bank Secrecy Act. * In addition, credit unions are subject to more restrictive capital requirements than those that apply to other types of financial institutions, field-of-membership and member-business-lending restrictions, as well as a usury ceiling, limitations on loan maturities, and stringent limitations on their investment options.
CUNA will also delineate the need for prompt corrective action reform to provide a more risk-based system for credit unions and the importance of allowing credit unions to offer more small business loans to their members. Both regulatory improvements are addressed within the language of the Credit Union Regulatory Improvements Act (H.R. 1537), and are expected to be included in a Senate version of the bill whose introduction is said to be imminent. CUNA will also address improvements in the SBA's processing of applications. In February, CUNA President/CEO Dan Mica and SBA Administrator Steve Preston met to discuss credit union participation in SBA lending. The meeting marked the five-year anniversary of when the agency expanded its guaranteed loan program to all credit unions, regardless of charter. Currently, more than 385 credit unions participate in the SBA 7(a) program, yet they accounted for only about 1% of such lending in 2007. Mica praised the SBA for improved paperwork processes, but said the agency should continue to improve efforts at speeding applications, a point Preston acknowledge and pledged to improve. SBA National Ombudsman Nicholas Owens said in a release that last year’s regulatory fairness hearing was “a great success, as groups explained the challenges their small business members face when trying to comply with regulations within their respective industries.” He added, “We would like to build upon last year’s hearing, and continue to successfully identify those federal regulatory enforcement actions that are excessive — rather than effective — for small businesses across the nation.”

Compliance T or Frefunded ATM fees are interest

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WASHINGTON (3/11/08)—If a credit union decides to refund foreign ATM fees to its members, does it have to treat the refund as interest and file a Internal Revenue Service (IRS) Form 1099 INT? The Credit Union National Association compliance team advises that any credit union considering such a refund program should look closely at the issue. “According to the IRS Information Return Hotline, the IRS has not issued anything on this particular issue and would prefer to determine if filing is appropriate on a case by case basis,” according to CUNA’s Compliance Challenge. The IRS requires the filing of a 1099 INT for any interest payments made to a consumer in relation to a deposit account, whether or not it is designated as interest, when it provides an incentive for the consumer to open or maintain a deposit account with a particular institution. “Interest” has been found to mean actual interest accrued on an account and monetary gifts or merchandise provided to consumers in connection with opening or maintaining an account with a particular institution. “So, it could be argued that ATM fee refunds offered as an incentive to keep existing members or solicit new members could be considered interest,” the Challenge says. For those considering a refund program, or other initiatives that bring up tax concerns, here’s the IRS Information Return Reporting Hotline: 1-866-455-7438.

NCUA guidance on sole proprietorship CTRs

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ALEXANDRIA, Va. (3/11/08)—The National Credit Union Administration (NCUA) recently offered currency transaction report (CTR) guidance on filing obligations incurred when a credit union reports transactions involving sole proprietorships and legal entities operating under a “doing business as” (DBA) name. The NCUA Letter No. 08-CU-03 is a follow up to a Financial Crimes Enforcement Network (FinCEN) clarification on the same topic. The FinCEN administrative ruling FIN-2008-R001 replaced a previous ruling, FIN-2006-R003. According to the NCUA letter, FinCEN defines a sole proprietorship as a business in which one person owns all the assets and owes all the liabilities. “When filing a CTR involving a sole proprietorship, credit unions are required to complete one section ‘A’, containing the owner’s name, social security number, home address, date of birth and occupation, as well as the DBA name,” the NCUA letter noted. It added that only one section ‘A’ is required, even if the business operations have a different address and tax identification number than its owner. The letter further stated that the FinCEN ruling also applies to CTRs filed on legal entities operating under a DBA name. “Credit unions are required to complete one section ‘A’ containing the entity’s name, Employer Identification Number (EIN), address and business activity, as well as the DBA name,” the letter said.