2007 Governor's Budget Proposal

The Governor's Article VII revenue proposal makes a number of significant changes impacting banks, including:

 

1.         REITS – disallows the exclusion of dividends and gains from a REIT under the Bank Tax. This is characterized as a loophole closer which would result in $104 million in additional revenue in the next fiscal year.

 2.         Eliminate use of subsidiaries to shelter income by establishing conditions that would revoke the election to be taxable as a business corporation, or subject a corporation that is taxable under the general business corporation franchise tax, pursuant to the Gramm-Leach-Bliley Act, to tax on banking corporations. This is aimed at investment subsidiaries which would be required to be taxed under the bank franchise tax.

 3.         To conform the Bank Tax to federal rules which allow certain commercial banks and thrift institutions a bad debt deduction calculated by the direct write-off rather than the reserve method.

 4.         Extend for two years implementation of Gramm-Leach-Bliley to permit certain corporations to maintain their tax status.

 5.         Eliminate certain deductions for expenses related to the production of exempt income, such as the deduction of 22.5% of the interest income from certain government obligations, and also eliminate the 20% reduction in the wage factor portion of the apportionment formula.

 The Governor has characterized the above tax changes as loophole closers, not tax increases.

William Y Crowell, III : Executive Director
Victoria Miller
Rhonda Van De Wal