Washington, DC Update – March 2015
Don’t Forget to Complete the GFOA Survey on SEC’s MCDC Initiative
The GFOA is circulating a survey to our members to inquire about their experiences with the SEC’s
Municipalities Continuing Disclosure Cooperation (MCDC) initiative. The MCDC initiative was
launched by the SEC last March and invited issuers and underwriters to self-report instances of material
misstatements in bond offering documents regarding the issuer’s prior compliance with its continuing
disclosure obligations. The initiative incentivized underwriters to self-report, which in turn caused many
issuers to be questioned about their prior continuing disclosure compliance. Issuers could report instances
of material misstatements up to December 1, 2014. The brief, multiple-choice, 19-question GFOA survey
is designed to gather information so that we can estimate the time and costs incurred by issuers
responding to the MCDC initiative. GFOA members interested in participating in the survey can access it
at https://www.surveymonkey.com/s/gfoamcdcsurvey. The survey will close on April 3, 2015.
Treasury Closes SLGS Window
On March 13, the U.S. Treasury Department announced that it is suspending sales of state and local
government series securities until further notice. The suspension is aimed at helping the Treasury manage
debt subject to the federal debt ceiling. The Treasury Department announced that debt would reach the
debt ceiling on March 15. Suspension of SLGS sales has become a standard component of the
extraordinary measures implemented by the Treasury Department over the past several years to keep the
government from defaulting on its debt during partisan congressional and White House battles over
increasing the debt ceiling. Beyond curtailing SLGS sales, additional extraordinary measures have
included halting investments in federal employee pension funds. The SLGS window is unlikely to reopen
until later this fall when the federal government will exhaust its borrowing ability. Until then,
governments can buy Treasuries from brokerage firms instead of using SLGS, but that might be more
costly. The GFOA will continue to closely monitor the Treasury Department and alert members to the
reopening of the SLGS window.
Senate Finance Committee Collecting Tax Reform Recommendations
Last week, the Senate Finance Committee announced that it will begin collecting federal tax reform
recommendations as part of its efforts to restructure the federal tax code. Under the new leadership of
Chairman Orrin Hatch (R-UT), the committee has organized five working groups, led by a bipartisan pair
of lawmakers from the committee, who will review different segments of the code and provide suggested
reforms. GFOA members interested in providing input to these working groups can do so by contacting
them at the addresses below. The GFOA is particularly interested in the recommendations being
organized by the Community Development & Infrastructure working group, as this group is tasked with
recommending reforms to the portion of the tax code that contains tax-exempt bonds.
Preservation of the tax exemption on municipal bond interest is a core priority of the GFOA, and we
encourage our members to weigh in with the Community Development & Infrastructure task force and
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discuss the importance of maintaining this critical infrastructure financing tool. GFOA members can
access draft advocacy letters and talking points to use in this outreach at GFOA’s Tax Exemption
Resource Center. The deadline for comments is April 15. All submissions must be saved as pdf files
and e-mailed as attachments to the appropriate groups. Use the name of the submitting organization or
individual submitting the comment. Make sure to list the name of the tax working group you are
contacting in the subject line of the e-mail, and include the contact name, organization (if the submission
is being submitted on behalf of a group), phone number, and e-mail address of the submitter, in the body
of the e-mail.
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Individual Income Tax - Individual@finance.senate.gov
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Business Income Tax - Business@finance.senate.gov
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Savings & Investment - Savings@finance.senate.gov
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International Tax - International@finance.senate.gov
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Community Development & Infrastructure - CommunityDevelopment@finance.senate.gov
Supreme Court Justice Kennedy Weighs In on Online Sales Tax Legislation
On March 3, 2015, Supreme Court Justice Anthony Kennedy invited a legal challenge over whether states
can require out-of-state and online retailers to collect sales taxes. Justice Kennedy’s opinion was issued as
part of the Supreme Court’s unanimous ruling in the case of Direct Marketing Association v.
Brohl. Justice Kennedy’s comments reveal the Court’s awareness of the need for federal intervention to
enable states to collect e-commerce taxes. In his opinion, Kennedy added that he believes that the Quill
and National Bellas Hess decisions establishing the physical presence rule for sales tax are “now inflicting
extreme harm and unfairness on the States.” Justice Kennedy cited the growth of Internet commerce, the
reality of business presence even in the absence of physical presence, and his view that “it is unwise to
delay any longer a reconsideration of the Court’s holding in Quill….The legal system should find an
appropriate case for this Court to reexamine Quill and Bellas Hess.” Background on the Quill and Bellas
Hess cases is available here.
Kennedy’s opinion comes as federal lawmakers face a stalemate on legislation that would allow states to
enforce sales taxes on remote online vendors. Though a bipartisan group of Senators reintroduced
legislation (see press release here) this week that would enable state collection of e-commerce taxes, and
the House is also discussing a legislative path forward on this issue, significant disagreement over the
contents of these bills still remains. In the face of these obstacles, the GFOA and our state and local
association partners continue our work to meet with congressional offices to build support for enacting
online sales tax legislation this year. As this campaign continues, we will continue to keep GFOA
members informed on the status of these discussions and, where appropriate, engage our members to
weigh in directly with their federal elected leaders in this campaign.
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