Legislative and Regulatory Update

​House passes landmark tax relief bill; feedback wanted on CFPB overdraft proposal; FinCEN wants comments on BOI; and much more. 

by John Alexander, Director of Legislative & Regulatory Affairs

House passes landmark tax relief bill in H.R. 7024.
In a noteworthy advancement in U.S. tax policy, the House of Representatives recently passed the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) with overwhelming bipartisan support, by a vote of 357 to 70. This legislation, which is now set to be considered by the Senate, represents a significant shift in the tax landscape, particularly for U.S. based research and development (R&D) investments, business interest limitations, and bonus depreciation.

Key components of this bill include the restoration of Section 174 expensing, pivotal for U.S. based R&D investments. This provision allows for current deductions of domestic research and experimentation costs from December 31, 2021, to January 1, 2026. However, it's important to note that foreign R&D expenses will continue to be subjected to a 15-year amortization.

Another notable feature of the bill is the expansion of the child tax credit, which has been a focal point in recent tax policy discussions. The bill proposes an enhancement of this credit, albeit falling short of the $3,600 per child figure that was part of the COVID era expansion. Instead, the expansion reaches $2,000 per child in 2025.

The bill addresses the issue of double taxation for residents of Taiwan, bringing the U.S. in line with its standard bilateral treaties. It also includes provisions for tax relief related to qualified disaster areas and expands the low-income housing tax credit (LIHTC).

To counterbalance the fiscal implications of these tax reliefs, H.R. 7024 proposes changes to the Employee Retention Tax Credit (ERTC), including an acceleration of the termination period for new claims and increased penalties for erroneous or fraudulent credit claims. The bill is expected to have a relatively neutral impact on long-term economic growth, with temporary policies not significantly affecting long-run investment or work decisions.
The overall cost of the bill over a ten-year period is estimated at $79 billion, with the Joint Committee on Taxation estimating a reduction in federal revenues by about $399 million over this period.

Seeking CU data, feedback on CFPB overdraft proposal.
In alignment with America's Credit Unions, the Dakota Credit Union Association (DakCU) is also actively engaged in gathering feedback regarding the CFPB’s proposed rule on overdraft fees. This proactive approach mirrors the efforts of America’s Credit Unions in understanding and responding to the implications of the proposed regulation, especially considering its potential impact on credit unions with assets exceeding $10 billion.

DakCU, understanding the significance of this development for its member institutions, is seeking detailed input from these credit unions. This feedback is critical for shaping DakCU’s response and ensuring that the concerns and perspectives of credit unions in the Dakota region are adequately represented in the dialogue surrounding this regulatory change.

Credit unions affiliated with DakCU are encouraged to participate in this feedback process, contributing their insights and experiences. The association recognizes the importance of a comprehensive and representative response to the CFPB’s proposal, especially given the potential ripple effects on the entire credit union market, regardless of size.

Comments are due to DakCU by March 15, aligned with the timeline set by America’s Credit Unions, allowing for a coordinated and well-informed response to the CFPB’s proposed rule by the April 1 deadline.

FinCEN seeks comments on info collected from BOI access.
The Financial Crimes Enforcement Network (FinCEN) is actively seeking input regarding the information collection process from authorized entities, including credit unions, who request access to beneficial ownership information (BOI). This initiative is part of the implementation of FinCEN's final access and safeguards rule, in line with the requirements stipulated by the Corporate Transparency Act (CTA).

The CTA mandates that legal entities must report their BOI directly to FinCEN. This information is then compiled into a database, which can be accessed by certain authorized parties, such as law enforcement agencies or financial institutions, as necessary. The final rule of the BOI "reporting" phase became effective on January 1.

FinCEN's current call for comments, which are due by April 1, focuses on two main areas:

• Information that should be collected from individuals or entities requesting access to the BOI from FinCEN.
• An estimation of the burden involved in this information collection process.

This request for comments is a crucial step in ensuring that the process of accessing BOI is both efficient and secure, catering to the needs of various stakeholders, including credit unions. The input gathered will play a significant role in shaping the practical aspects of BOI access under the CTA.

Credit unions, given their unique position in the financial landscape, have a vested interest in how this process is structured and implemented. Access to BOI is essential for these institutions to conduct due diligence, comply with anti-money laundering regulations, and effectively manage risks.

CFPB proposal would prohibit NSF fees on transactions declined in real time.
The Consumer Financial Protection Bureau (CFPB) has proposed a new rule aimed at banning non-sufficient funds (NSF) fees for transactions that are declined instantaneously or near-instantaneously. This proposal, dated January 24, 2024, is a proactive step to prevent financial institutions, including banks and credit unions, from charging NSF fees on transactions like ATM withdrawals, debit card purchases, and certain peer-to-peer payments, which are declined in real-time due to insufficient funds in the consumer's account.

The rationale behind the CFPB's proposal is rooted in consumer protection, particularly for those deemed financially vulnerable. The CFPB's stance is that NSF fees on instantaneously declined transactions disproportionately impact consumers with lower incomes and credit scores, who may lack sufficient financial resources to maintain a buffer in their accounts to avoid such fees. The bureau argues that charging fees for a service where the consumer receives no tangible benefit could be considered taking unreasonable advantage of consumers, particularly those who may not fully understand the risks, costs, or conditions associated with their deposit accounts.

Interestingly, the CFPB acknowledges that NSF fees on transactions that currently take place instantaneously are rarely charged by financial institutions. However, with the evolution of technology and the potential for instantaneous payments to become more common, the bureau believes it's important to set regulations now to protect consumers from what it considers abusive practices in the future.

The proposal is part of a broader initiative by the Biden administration to combat so-called junk fees charged by financial institutions. The CFPB sets a deadline of March 25 for public comment on the proposed rule.
Critics of the proposal have questioned the rationale behind it, pointing out that the CFPB itself admits that few, if any, financial institutions currently charge NSF fees on instantaneously declined transactions. Some view the proposal as a solution in search of a problem, arguing that it addresses a fee that is rarely imposed and could represent an overreach by the CFPB.

As always, DakCU members may contact John Alexander with any advocacy or regulatory concerns.