Author: Alexis Long

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Financial Institutions and Banking

5 Tips for Fair Lending Compliance

Community banks need to develop and follow fair lending practices; providing customers with nondiscriminatory access to credit is, of course, the right thing to do. What’s more, violations of fair lending laws and regulations can result in costly litigation and enforcement actions, hefty monetary penalties and serious reputational damage.

What are the laws?

The two primary fair lending laws are the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). The FHA prohibits discrimination in residential real estate-related transactions based on race or color, national origin, religion, sex, familial status (for example, households with one or more children under 18, pregnant women, or people in the process of adopting or otherwise gaining custody of a child), or handicap.

Similarly, the ECOA prohibits discrimination in credit transactions based on race or color, national origin, religion, sex, marital status, age (assuming the applicant has the capacity to contract), an applicant’s receipt of income from a public assistance program, or an applicant’s good faith exercise of his or her rights under the Consumer Credit Protection Act.

The Home Mortgage Disclosure Act (HMDA) requires certain lenders to report information about mortgage loan activity, including the race, ethnicity and sex of applicants. Finally, the Community Reinvestment Act (CRA) provides incentives for banks to help meet their communities’ credit needs.

How can you comply?

Here are five tips for developing an effective compliance program:

  1. Conduct a risk assessment. Conduct a thorough assessment to identify your bank’s fair lending risks based on its size, location, customer demographics, product and service mix, and other factors. This assessment can pinpoint the bank’s most significant risks. It also can reveal weaknesses in the bank’s credit policies and procedures and other aspects of its credit operations. It’s particularly important to examine the bank’s management of risks associated with third parties, such as appraisers, aggregators, brokers and loan originators.
  2. Develop a written policy. A comprehensive written fair lending policy is key to help minimize your bank’s risks. And by demonstrating your commitment to fair lending, this document can go a long way toward mitigating the bank’s liability in the event of a violation. The policy should cover all of the bank’s products, services and credit operations and provide details about which practices are permissible and which aren’t.
  3. Analyze your data. Analyzing data about your lending and other credit decisions is important for two reasons: First, it’s the only way to determine whether disparities in access to credit exist for members of the various protected classes. These disparities don’t necessarily signal that unlawful discrimination is taking place — but gathering this data is the only way to make this determination.

Second, lending discrimination isn’t limited to disparate treatment of protected classes. Banks are potentially liable under the FHA and ECOA if their lending practices have a disparate impact on protected classes. For example, a policy of not making single-family mortgage loans under a specified dollar amount may disproportionately exclude certain low-income groups, even though the policy applies equally to all loan applicants. Banks can defend themselves against allegations of discrimination based on disparate impact by showing that the policy was justified by business necessity and that there was no alternative practice for achieving the same business objective without a disparate impact.

  1. Provide compliance training. Even the most thorough, well-designed policy won’t be worth the paper it’s printed on unless you provide fair lending compliance training for bank directors, management and all other relevant employees (and evaluate its effectiveness). Indeed, lack of training is a red flag for bank examiners. (See “Discrimination risk factors” at X.)
  2. Monitor compliance. You’ll need to monitor your bank’s compliance with fair lending laws and promptly address any violations or red flags you discover. You can do this by, among other things, performing regular data analysis, monitoring and managing consumer complaints, keeping an eye on third-party vendors, and conducting periodic independent audits of your compliance program (by your internal audit team or an outside consultant).

Reduce your risk

Fair lending laws are complex, and guidance can sometimes be ambiguous. Although a full discussion of the subject is beyond the scope of this article, the five tips outlined here are a good start in helping you evaluate the effectiveness of your fair lending compliance program.

Sidebar: Discrimination risk factors

A useful source of guidance on fair lending compliance is the Interagency Fair Lending Examination Procedures used by federal financial agencies. Among other things, the guidelines list the following compliance program discrimination risk factors:

  • Overall compliance record is weak,
  • Legally required monitoring information is nonexistent or incomplete,
  • Data or recordkeeping problems compromise the reliability of previous examination reviews,
  • Fair lending problems were previously found in one or more products or subsidiaries, and
  • The bank hasn’t updated compliance policies and procedures to reflect changes in law or in agency guidance.

If any of these problems are present in your institution, it’s important to rectify them as soon as possible. That way, you’ll avoid penalties and at the same time contribute to fair lending practices.

©2021

Categories
News

Biden Administration Unveils Tax Blueprint as Part of American Jobs Plan

The Biden administration on March 31, 2021, unveiled a jobs and infrastructure plan, the American Jobs Plan, to address the nation’s pressing infrastructure needs. The plan calls for about $2 trillion in spending over eight years. To pay for these expenditures, the plan also includes a proposed overhaul of the corporate tax system that would increase the corporate tax rate and the global minimum tax, eliminate federal tax benefits for fossil fuel companies, and strengthen enforcement against corporations.

While the proposed spending would be spread out over eight years, the tax increases would continue for 15 years.

Proposed Tax Measures–The White House released a Fact Sheet that lists the proposed tax measures under the plan:

Corporate Tax Rate — The Biden plan would increase the corporate tax rate from 21% to 28%. The rate had been reduced by the Trump administration from 35% to the current rate of 21%.

Global Intangible Low-Taxed Income (GILTI) Modifications – President Biden’s proposal would increase the effective rate on GILTI for U.S. corporations to 21% and calculate GILTI on a country-by-country basis. It also would eliminate the rule that allows U.S. companies to reduce their GILTI inclusion by 10 percent of their average adjusted basis of qualified business asset investments.

Encourage Other Countries to Adopt a Minimum Tax Regime – The plan proposes to encourage other countries to adopt strong minimum taxes on corporations, and deny deductions to foreign corporations on payments that could allow them to strip profits out of the U.S. if they are based in a country that does not adopt a strong minimum tax.

Inversions – In addition to enacting reforms that would remove incentives for U.S corporations to invert, President Biden’s proposal would make the inversion process more difficult.

Offshoring/Onshoring Jobs –President Biden’s reform proposal would deny companies deductions generated by offshoring jobs and would also propose a tax credit to support the onshoring of jobs.

Eliminate the Foreign Derived Intangible Income (FDII) deduction and Invest in R&D Incentives – The Biden plan proposes the complete elimination of the FDII deduction, which was introduced as part of the Tax Cuts and Jobs Act. The revenue collected as a result of the repeal of the FDII deduction would be used to expand other R&D investment incentives.

Minimum Tax on Book Income – The plan includes a proposed 15 percent minimum tax on U.S. corporations’ book income, which would apply only “to the very largest corporations,” according to the Fact Sheet.

Tax Preferences for Fossil Fuels – Biden’s plan would eliminate all subsidies, loopholes, and special foreign tax credits for the fossil fuel industry.

Enforcement – The plan calls for increased investment in enforcement so that the Internal Revenue Service has the necessary resources to effectively enforce the tax laws.

Categories
Financial News

Paycheck Protection Program (PPP) Extension Act of 2021

President Biden has signed the Paycheck Protection Program Extension Act of 2021, which extends the covered period for the PPP. Before the law was passed, the loan application deadline was set to expire on March 31, 2021.

The new law extends the deadline to May 31, 2021. In addition, the Small Business Administration (SBA) is given until June 30, 2021 to process loan applications submitted before June 1. The PPP permits the SBA to provide loans to qualified businesses affected by the pandemic. The loans must be used for payroll and certain other costs. Visit SBA’s website for more information. 

Contact us if you have questions about forgivable PPP loans or if you would like to apply for one so you can retain employees at your business. 

Categories
General Press Releases

ATA Named a 2021 Accounting Today Top Regional Leader

ATA named top accounting firm.

 

Alexander Thompson Arnold PLLC (ATA) has been recognized as a top regional leader as well as a top firm to watch for 2021 by Accounting Today, maintaining their ranking from the previous year.

Accounting Today releases a publication every year detailing the top 100 accounting firms in the country, firms to look out for, regional leaders, top tax firms and highlights from the previous year relating to the top 100 firms. The roster includes firms with positive growth rates, which landed ATA on the top firms list for the southeast. The report also evaluates a firm in all aspects and not just growth numbers, looking at cutting-edge business practices, which differentiated ATA and put the company on the firms to watch list.

“This achievement shows that the strides we are making to improve our firm and expand our reach are paying off,” said Managing Partner John Whybrew. “Our firm has emphasized working as a team, so this recognition is due to the hard work and improvements we have made together.”

To view the full rankings, click here.

About Alexander Thompson Arnold PLLC (ATA)

ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting. For example, Revolution Partners, ATA’s wealth management entity provides financial planning services; ATA Technologies provides trustworthy IT solutions; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and newly added ATAES a comprehensive human resource management agency.

ATA has 13 office locations in Tennessee, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies and international corporations. ATA is also an alliance member of BDO USA LLP, a top-five global accounting firm, which provides additional resources and expertise for clients.

Categories
Financial News

IRS Extends Health, Retirement Contribution Deadline to May 17

The big news recently was an extension of the income tax filing and payment deadline for individuals from April 15 to May 17, 2021. But the IRS just announced the deadline is also extended to May 17 for tasks including:

1) making contributions to IRAs and Roth IRAs and

2) reporting and paying the 10% additional tax on 2020 distributions from IRAs or employer-based retirement plans.

However, the deadline for filing Form 5498, “IRA Contribution Information” series returns, is extended to June 30, 2021. The deadline also is extended to May 17 for making contributions to Health Savings Accounts, Archer Medical Savings Accounts and Coverdell education savings accounts. (Notice 2021-21)

Visit the IRS website for the official release. Contact your ATA representative if you have further questions about making contributions.

 

Categories
Construction Helpful Articles

Is a COVID-19 Baby Boom in the Cards for Real Estate?

The impact of blackouts, national emergencies, recessions and other singular or cyclical events on the U.S. birth rate has been a subject of study and interest since the Baby Boomer phenomenon displayed the far-reaching effects a population surge can have on everything from consumer spending to federal budget allocations. As such, there has been conjecture on what effect the pandemic may have on population growth and what the resulting impact on the real estate and construction industries may be.

The Baby Boomer generation, typically defined as those born between 1946 to 1964, was a boon to mid-century suburban development. Construction of homes soared as enticements to live in suburban communities, including tax breaks, home loans and mortgage subsidies, successfully generated demand. As families moved to the suburbs, there was a commensurate need to supply affordable housing and to build schools and amenities and the infrastructure to serve them.

Between the 1950s and 2010s, the suburban population grew from one-quarter to more than half of all Americans. The generation essentially created and defined many of the lifestyle values and habits that have arisen out of suburban life, which the majority of Americans now enjoy today.

As Boomers have aged, their changing preferences have continued to be felt on real estate and construction. Until recently, Boomers comprised a significant cohort of the urban and multifamily rental markets as they threw off the burdens of home ownership in favor of lighter living and to be closer to their children and grandchildren. A side effect of this is a boost to the self-storage facility market as downsizing into smaller living spaces requires external space to house decades of accumulated belongings.

Post-War Population Surge as Analogue

One of the reasons the baby boom happened, experts say, is because, after the conclusion of two world wars, Americans were optimistic that the economy would improve. The United States was positioned somewhat uniquely in that, apart from the bombing of Pearl Harbor, it escaped the kind of damage that had ravaged war-torn Europe. Infrastructure was intact and in place, for example. Amid the promise of post-war economic security, Boomers expanded their spending habits: U.S. gross national product doubled between 1940 and 1960.

Not just the reality of the economy’s performance, but people’s perception of economic performance and their future prospects likely will play a significant role in the decision to have children this time around. In the current economic climate, sentiments are far less rosy than they were post-WWII. U.S. population growth has been on the decline for the last ten years, notably beginning around the Great Recession. Polls have shown that among Millennials, the decision to delay having children or to have fewer children than desired arises from feelings of economic insecurity: the high expense of child care, student debt and concerns about the economy and financial stability. While the proclivities of Generation Zers remain to be seen, given the uncertainty of the current economic recovery, this may not change anytime soon.

COVID-19 Implications

Early indications point toward population growth in underdeveloped nations but population contraction in the United States and other developed nations. These early U.S. indicators make sense given the number of job losses and uncertainty about job growth and the ongoing uncertainty about an economic recovery. How will the U.S. real estate market adapt to a population contraction?

Today, Boomers own two out of five U.S. homes, and every day, 10,000 people turn 65 years old. Because some Boomers have migrated toward urban living and others are aging in place, the conditions may be ripe for significant residential vacancies when the pandemic-related population contraction meets the end of the Boomers’ actuarial life. Such oversupply would mean the dawn of a buyer’s market not only in the suburbs but also in urban environments. This will make residential buying decisions based on “location, location, location” even more important and will, in turn, ripple into other sectors of real estate, including commercial and industrial.

Leaders in the real estate and construction industries should pay close attention to the U.S. population and migration trends. This analysis will become more important as Boomers age and the population contraction impacts the market cycle. Real estate leaders should also consider further diversification of their holdings and activity if their portfolios show concentration in a market that may see vulnerabilities given potential trends.

 

Categories
Tax

Frequently Asked Questions about the Employee Retention Tax Credit

On March 1, the IRS issued guidance for employers claiming the employee retention credit (ERC) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as modified in December 2020 by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). The ERC is designed to help eligible businesses keep employees on their payroll by offering a credit against employment taxes when qualified wages and healthcare expenses are paid during the COVID-19 pandemic. The guidance under Notice 2021-20 clarifies and describes retroactive changes to the ERC under the new law for employers seeking to claim the credit for 2020 in the form of frequently asked questions. The IRS has stated that it will address calendar quarters in 2021 in later guidance.

Under the 2020 ERC rules, 50% of qualified wages and healthcare expenses (up to $10,000 of wages per employee in 2020) are fully refundable if paid by businesses that experienced a full or partial suspension of their operations or a significant decline in gross receipts. Prior to the Relief Act, employers that had received Paycheck Protection Program (PPP) loans were not eligible to claim the ERC. Now, employers with PPP loans can retroactively claim the ERC, however, the same wages cannot be used for both benefits. Q&A 49 of the notice outlines the IRS’ position on the interaction of the ERC with PPP loans for 2020.

Insight

Unfortunately, borrowers who have already received PPP loan forgiveness do not have the same planning opportunities that are available to borrowers who have not yet filed the SBA application, Form 3508 series, for forgiveness.

An eligible employer can elect which wages are used to calculate the ERC and which wages are used for PPP loan forgiveness. Generally, the election is made by not claiming the ERC on the federal employment tax return for the quarter. If the IRS adhered to this general rule, it would nullify the retroactive effective date of the credit. Therefore, in lieu of the general rule on how an employer would elect the wages used for ERC (i.e., by not claiming the ERC on the federal employment tax return for the quarter), the notice provides for a deemed election for any qualified wages that are included in the amount reported as payroll costs on the PPP Loan Forgiveness Application, unless the included payroll costs exceed the amount needed for full forgiveness when considering only the entries on the application.

For example, a business that borrows $100,000 of PPP loans and has both payroll and nonpayroll costs that far exceed the borrowed amount but reported payroll costs of $100,000 on their application to simplify the forgiveness process, cannot use any of the $100,000 of payroll cost to claim the ERC. This is notwithstanding the fact that 100% forgiveness may have been achieved by reporting only $60,000 of payroll costs and the remaining $40,000 from nonpayroll costs.

While the text of Q&A 49 appears to treat the minimum amount of payroll costs required for PPP loan forgiveness (i.e., 60%) as being the deemed election, the examples make it clear that the entire $100,000 in payroll costs reported on the PPP application cannot be included in ERC calculations. The IRS’ examples do not address the documented nonpayroll expenses that were excluded from the PPP application but were retained in the borrower’s files in accordance with the SBA’s instructions.

The notice also formalizes and expands on prior IRS responses to frequently asked questions and addresses changes made since the enactment of the Relief Act. It contains 71 frequently asked questions regarding the following topics:

  • Eligible employers
  • Aggregation rules
  • Governmental orders
  • Full or partial suspension of trade or business operations
  • Significant decline in gross receipts
  • Maximum amount of employer’s ERC
  • Qualified wages
  • Allocable qualified health plan expenses
  • Interaction with PPP loans
  • Claiming the ERC
  • Special issues for employees regarding income and deduction
  • Special issues for employers regarding income and deduction
  • Special issues for employers that use third-party payers
  • Substantiation requirements

 

For more questions regarding the Employee Retention Credit, contact your ATA representative.

Categories
Helpful Articles

May 17 Reminder

Individual taxpayers get extra time to file their 2020 tax returns and pay their taxes because of the pandemic. The IRS announced that the federal income tax filing and payment due date has been extended from April 15 to May 17, 2021.

The automatic extension applies to individuals, including those who pay self-employment tax. No penalties or interest will be added if all taxes due are paid by May 17. Even so, the IRS urges taxpayers to consider filing as soon as possible, especially those who expect refunds.

This relief doesn’t apply to corporate returns or estimated tax payments due on April 15, 2021. It also doesn’t apply to state tax payments or deposits or payments of any other types of federal tax.

For any additional guidance, speak to your ATA representative.

 

Categories
Tax

Tax Day for individuals extended to May 17

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

For more information, visit the IRS website. Please contact your ATA representative if you have any questions for them. ATA will send out more updates as needed.

Categories
Helpful Articles

COBRA Premiums

A 100% subsidy of COBRA premiums for involuntarily terminated employees is part of the recently enacted American Rescue Plan Act. The law establishes the subsidy for certain “assistance eligible individuals” (AEIs) from April 1, 2021, through Sept. 30, 2021.

An AEI is a qualified beneficiary who elects COBRA for a period of coverage within the subsidy period due to the involuntary termination or reduction of hours.

The employer (or, in some cases, the plan or insurer) will pay 100% of an AEI’s COBRA premium during that period and will be reimbursed by the U.S. government through a credit against payroll taxes, or for credit amounts exceeding payroll taxes, as a refund of an overpayment.