Taxes and Title Insurance Highlight Enacted Budget

April 2, 2014 at 8:23 am Leave a comment

Late Monday, Legislators and sleep-deprived staffers put the finishing touches on the 2014-2015 New York State Budget.  For credit unions, the two most important take aways I have deal with title insurance and state tax policy. 

As for title insurance, the Legislature agreed to the Governor’s proposal, which I talked about in a previous blog, to establish licensing requirements for title insurers.  For those of you who want to take a closer look, you can find the relevant language in Part V in S.6537-D.  In addition to establishing title insurer licensing requirements, the legislation imposes new disclosure requirements whenever lenders suggests using a title insurer with whom they are affiliated.

As a result, this bill will have its largest impact on the relative handful of credit unions that have mortgage lending CUSOs that provide title insurance services.  The legislation is also significant because it gives the Department of Financial Services the authority it was seeking to more directly regulate title insurers by, for example, establishing minimum standards for the profession. 

A second part of the budget that doesn’t directly impact credit unions but could be helpful in seeking needed reforms has to do with corporate tax reform.  Specifically, the Legislature agreed to the Governor’s proposal to scrap Article 32 of the Tax Law, which imposed a tax specifically on banks.  As a result, banks will be subject to the same tax treatment as other corporations in New York State.  The proposal was perhaps the most controversial of the Governor’s Tax Package since some groups argued that it was essentially a tax cut for banks when New York is still suffering the effects of the Great Recession.  However, this argument overlooks the fact that New York may be the capital of the banking industry, but is not guaranteed to remain so. The bank tax is a vestige of the time when banks simply didn’t have the ability to shift from state to state the way they do today. 

Besides, the tax indirectly benefits credit unions.  How’s that, you say? Because credit unions are also seeking authority to help New York’s economy grow by allowing municipalities to invest their funds in credit unions.  Frankly, the argument that credit unions are somehow less deserving of these funds because they don’t pay corporate taxes rings all the more hollow now that the banks have successfully argued for their own tax breaks. 

One generic point,  Governor Cuomo and the Legislature deserve a tremendous amount of credit for four on-time budgets.  But the Governor and all future Governors should give a big thank you to former Governor Pataki.  It was his administration that laid the groundwork for these on-time budgets by successfully arguing that the Legislature could not amend the Executive’s Budget proposal without the Governor’s consent.  On a practical level this means that the Governor has a tremendous amount of leverage since the legislature must ultimately choose between accepting the Governor’s recommendations or shutting down the Goverrnment.  Simply put, the legislature doesn’t have as much leverage as they used to have in budget negotiations.

Entry filed under: General, New York State, Political. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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