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Author:  Houman Shadab.


Source: Volume 30, Number 01, Fall 2016 , pp.1-60(60)




Journal of Taxation and Regulation of Financial Institutions

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Abstract: 

The issue begins with an article by James D. Goeller and Charlie E. Shureen, who analyze the distinct tax issues facing online (FinTech) marketplace lenders. As the authors note, marketplace lenders are not treated as banks under the Internal Revenue Code, and as such are not subject to traditional tax rules applicable to depository institutions. The authors explain the main tax issues facing online lenders—treasury activity gains or losses, mark-to-market for loans originated and held for sale, hedging interest rate risks, the timing of deductions for loan losses, and the tax character of loan losses. Our second article, by Kat Gregor, Nicholas Berg, and Bradley Lewis, discusses the lessons for asset managers from the IRS’s strategy of bringing follow-on actions based on the enforcement activities of the Securities and Exchange Commission (SEC), Department of Justice, and other government bodies. The authors discuss strategies employed by the IRS, including obtaining documents submitted to the SEC and expanding the definition of “fines and penalties” to challenge the deductibility of disgorgement payments made to regulatory bodies. Bank capital and related rules continue to develop. In our third article, Oliver I. Ireland and Elizabeth C. Schauber discuss the 30-day Net Stable Funding Ratio (NSFR) jointly proposed by U.S. banking regulators on June 1, 2016, and set to become effective on January 1, 2018. The authors discuss the framework and requirements of the proposed rule, and also provide a detailed explanation of how the NSFR is calculated. Our next article, by Elliot Dater and Jon Hughes, analyzes the March 28, 2016, United States District Court for the District of Massachusetts decision in Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund , in which the court extended withdrawal liability to two private equity funds owning 100 percent of a portfolio company that sold its interests in a multi-employer defined benefit pension plan. As the authors note, the case represents the trend of courts broadening the scope of withdrawal liability under the Employee Retirement Income Security Act of 1974 to reach private equity funds. Captive insurance companies are the subject of our fifth article, by Michael F. Lynch, Nicholas C. Lynch, and David B. Casten. The authors discuss the importance of captives in assisting small business estate planning and capital formation, and how captives should be structured to withstand a challenge by the IRS. Captive insurance companies may used by financial institutions and, increasingly, by smaller institutions as several states have recently made them easier to operate. This issue closes with a piece on implied false certification liability under the False Claims Act (FCA) in the June 16, 2016, U.S. Supreme Court opinion in Universal Health Services v. United States ex rel. Escobar. As authors Jason W. McElroy, Michael Y. Kieval, Michael S. Trabon, and Joseph M. Katz note, the primary implication for financial services is for Federal Housing Administration lenders, who have recently been the target of DOJ suits under the FCA, based on allegations of deficient underwriting and quality control processes.

Keywords: loan losses; SEC regulatory examination; IRS follow-on action; Net Stable Funding Ratio; withdrawal liability; Sun Funds cases; captive insurance; False Claims Act; implied certification; Universal Health Services. v. United States ex rel. Escobar

Affiliations:  1: New York Law School.

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