Legislative Update: February 23, 2015

The legislature is now almost done with the first half of the session.  The number of bills considered has grown substantially over the last 10 days.  The transmittal deadline is this coming Friday, the 27th.  For those of you know familiar with the legislative process, the transmittal deadline means that a bill that has been introduced in the House has to have been passed by the House by that date and moved over to the Senate for its consideration.

Last week’s interesting legislation included:
  • Repeal of the death penalty – this bill passed out of the House Judiciary Committee for the first time ever.
  • A proposal to transfer management of federal public lands to the State of Montana for management purposes. This bill was defeated.
  • A bill to require persons to pass a drug test before they can receive public assistance. This bill passed the House and is on the way to the Senate.
  • Numerous campaign finance reform proposals.
  • The CSKT water compact. This bill passed out of Senate Judiciary by a 6-4 vote.
  • A bill to allow workers’ compensation insurers to recover medical benefit payments paid out from the at-fault party, i.e. subrogation. This bill passed the Senate and is on the way to the house.
  • A bill to increase the speed limit to 85 on the interstate highways. This bill was heard in House Transpiration.
This Week’s Interesting Bills:

SB 351 – Prohibit compulsive union membership for a person under age 18 – Sen. Mark Blasdel
SB 353 – Constitutional referendum to divert coal trust; create Build Montana program – Sen. Rick Ripley
SB 354 – Create infrastructure funding program – Sen. Rick Ripley

SB 379 – Revise work comp laws related to administrative expenses – Sen. Gordon Vance

Other Legislation of Interest to the Industry:

House Bill 5 – As you know, the Governor has come forward with a ‘bonding’ proposal to pay for state-related construction projects.  And, as you have likely read or heard, the Republican-led legislature has balked at paying for state construction projects using bonds, preferring to pay for such projects on a cash basis.

The Governor’s construction proposal is contained in House Bill 5.  The Bill is being carried by Republican Jeff Welborn of Dillon.  That bill passed out of the appropriations committee on Tuesday, with the Republicans cutting surprisingly little from the proposal.  The only large appropriation that was stripped was a proposal that authorized FWP to buy more property.

The Republicans have indicated that they are going to break that larger bill into separate legislative proposals, thereby reducing the chances of an omnibus type package.

The first of these bills was considered by the House Appropriations Committee this past week.  This bill, which is being carried by Speaker Knudsen, provides $55 million in grants to local governments experiencing significant impacts from natural resource development.  This bill passed House Appropriations Committee 12-8 on Tuesday.

HB 5 contains $45 million for bonding for an oil and gas grant mitigation program.   You can review what is in HB 5 by clicking on this link: http://leg.mt.gov/bills/2015/FNPDF/HB0005_1.pdf.

Tax relief –

  1. Income tax relief: The House passed House Bill 166, sponsored by Rep. Keith Regier (HD 4 – Kalispell).  This bill, if enacted, will reduce each of Montana’s seven marginal tax rates on personal income by 0.1%.  A second senate hearing will be heard on the bill.  There is an excellent article on that hearing linked here: http://flatheadbeacon.com/2015/02/13/senate-hears-tax-cut-plan-gop-representatives/.
  2. Business equipment tax relief: House Bill 213 sponsored by Rep. Mike Miller (HD 80 – Helmville) has passed the House Tax Committee. It is awaiting house floor action.  If passed, HD 80 would cut the business equipment tax by raising the amount of equipment valuation exempt from taxation from $100,000 to $500,000. More than 20 different business groups as well as several business owners supported the proposal.  The Governor’s office opposed this bill in Committee.
  3. Corporate income tax relief: Tutvedt has reintroduced a corporate and other tax relief bill, SB 157 from last session that was vetoed by Governor Bullock.   The proposal was heard in front of the Senate Taxation Committee on Thursday, the 4th of February.  Here are major provisions in the bill as described by the Montana Society of CPAs:

The filing status would be the same as federal.

  • Montana returns would start with federal taxable income and would reduce substantially the additions to and subtractions from Federal taxable income. This constitutes the most substantial aspect of simplification.
  • By starting with federal taxable income, much of the effect of the repeal of subtractions and credits would be offset by the higher personal exemption and standard deduction allowed on a federal return for many taxpayers – especially those in the lower tax brackets.
  • Tax rates would be 4.8% and 6% with separate rate tables for taxpayers who file a joint return, head of household, single, or married separate.
  • The capital gains credit (2%) would be repealed. A 1.5% rate reduction would be adopted for capital gains. Taxpayers in the 4.8% tax bracket would have a 3.3% capital gains rate. Taxpayers in the 6% bracket would see a 4.5% rate.
  • The corporate income tax rate would be reduced from 6.75% to 6.5% for most corporations. For corporations that make the water’s edge election, the rate would decrease from 7% to 6.75%.
CSKT Water Compact

The water compact bill has been introduced by Senator Vincent of Libby.  It had its first hearing in Senate Judiciary on Monday, the 16th.  Senator judiciary passed the bill 8-4 on the 20th.  It now moves to the full Senate for consideration.  A copy of the bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0262.pdf.

The Banking Commissioner’s Bills

Commissioner Hall’s clean up/compliance bills for the Division of Banking continue to make their way through the legislative process.  These bills and their status are as follows:

SB 75 – This bill seeks to better regulate nondepository lenders; namely out-of-state lenders.  The bill has now passed both the Senate and the House of Representatives.  Governor Bullock has signed the bill into law.  MIB supported this legislation.  A copy of the bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0075.pdf.

SB 98 – This bill revises the Montana mortgage act by revising the criteria for who meets the mortgage licensing requirements, the amount of experience needed to be responsible for a mortgage, and by allowing the department to use national licensing forms approved by the NMLS, as opposed to state based forms.  During the hearing on this bill in the Senate, State Farm came in and again attempted to get an exemption from Montana for its contractors.  That state farm request was turned down by the Committee, but with an admonition from the Committee to Melanie Hall to engage in active discussions with State Farm about State’s Farm’s request.   More on the state farm bill below.  Governor Bullock signed the bill into law.  MIB supports this legislation.  A copy of the bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0098.pdf.

HB 66 – This bill provides that the call reports you electronically transmit to the FDIC or other federal banking regulatory agency satisfies the Department’s requirement for transmitting the same to Melanie; the bill also eliminates the Department’s legal obligation to requisition those reports.  MIB supported this bill during the house hearing.  The bill easily passed the House and the Senate.  The bill has been signed into law by the Governor.  A copy of that bill is linked here: http://leg.mt.gov/bills/2015/billpdf/HB0066.pdf.

Other Bills of Interest to Banking

SB 39 – This is the Attorney General’s bill to authorize the AG to tackle and redress the problem of patent and copyright trolling.  Specifically, the bill authorizes a civil claim and civil penalty for instances of bad faith assertions of patent rights.  The bill received a favorable hearing, with only the trial lawyers raising objection.  MIB spoke in favor of this bill, and noted the instances where Montana banks are receiving abusive patent infringement letters related to ATM machines.  Several patent attorneys asked that the bill be amended to better protect the ability of true patent holders to send cease and desist letters.  The bill passed out of the Senate last week.  It will now go to the House for its consideration.  A house hearing has yet to be scheduled.  A copy of that bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0039.pdf.

SB 54 – This bill would authorize public disclosure of real estate sales prices for tax appraisals.  In effect, it would make reality transfer certificates filed on real estate sales a matter of public record.  Those certificates are not a matter of public record at present.  MIB did not take a public position on this bill.  There was strong testimony both for and against this legislation during the hearing, with the opposition coming mostly from realtors and title companies.  The Senate passed this bill this week, with 21 votes against.  The bill now moves to the House for consideration.  A copy of that bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0054.pdf.

HB 29 – This bill revises the regulation of real estate appraisers, namely by making it easier to become a licensed real estate appraiser. This Bill would give the board of appraisers greater flexibility to train new appraisers.  At present, most, if not all of the out of state appraisal companies will not allow a state licensed trainee to participate in the completion of an appraisal assignment, nor will they allow an appraisal firm to assign an appraisal assignment to another appraiser in the firm. These two items have had a very negative effect on the appraisal and lending business.  The appraisers claim that there are 21,000 less appraisers as a result of Dodd-Frank.  This bill is intended to give more authority to the state licensing entity to qualify new appraisers.  The bill passed out of the House with some small opposition last week, 10 votes against.  The bill moves to the Senate.  A Senate committee hearing that was slated for February 18th was cancelled.  The bill will be heard on Monday or Tuesday of this week.  MIB supported this bill so long as it was amended.  The bill was amended in committee as requested.  A copy of that bill is linked here: http://leg.mt.gov/bills/2015/billpdf/HB0029.pdf.

Other Bills:

HB 225 – The House passed 100-0 the bill proposed by the funeral directors association to allow them to deposit pre-paid funeral expenses in any banking institution that maintains an office in this state, as opposed to the current law that requires that the principal place of business for that institution be located within the state of Montana, and to give them 10 days to deposit such funds instead of 3.  Aside from the obvious problem of extending the depository time as it relates to possible theft of such funds, I don’t see a concern with this bill from the MIB perspective.  The bill now moves to the Senate.  A hearing was slated for the 19th but that hearing was cancelled.  The bill is slated to be heard in committee on Tuesday.  A copy of that bill is linked here: http://leg.mt.gov/bills/2015/billpdf/HB0225.pdf.

SB 53 – This bill would impose stricter fiduciary requirements and competency standards on those who serve as directors for credit unions.  MIB has taken no position on this bill, but the bill is, on its face, good public policy.  The bill passed out of Senate 32-17 late last week.  It now moves to the House for committee consideration.  A copy of that bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0053.pdf.

SB 266 – This bill would enact a uniform Montana statute for trustees, conservators, personal representatives to access the digital assets, e.g. Facebook pages, electronic medical records, of the ward, the deceased.  The bill passed out of Senate Judiciary unanimously.  The bill passed the House unanimously.  A copy of that bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0266.pdf.

MBA Bills

MBA notified us at the joint board meeting that it would be bringing forth legislation to redress the Morrow decision.  Further, MBA was pushing a bill to authorize statutorily credit unions and banks to charge a fee to those persons, entities, seeking to execute  a writ of execution.  This fee would have been in addition to fees already charged to customers for such collections work.

The MBA has indicated they will not introduce that legislation this session due to concerns from their members, and ours frankly, that banks already have the authority to charge such a fee and the authorized amount of $50.00 was too low.  MBA and MIB will work with the debt collectors association after the session to determine if this legislation is needed/necessary.

As to the Morrow decision, the two MBA proposals are being carried by Senator Moore – who is majority whip in the Senate.  The bill numbers on these bills are SB 280 and 281.  Both SB 280 and 281 passed out of Senate Business and Labor despite the opposition of the AG’s office.  In addition, on Saturday the 21st, both of these bills passed second reading by the full Senate on a 29-21 vote.  Third reading in the Senate will be February 23rd.  I expect the bills to pass the Senate this week.

These bills will then be referred to the House business and labor committee.  As a result, I expect these bills to eventually move to the Governor’s desk.

The State Farm Bill – SB 346
  • Yes, it is back. The bill was heard Friday in Senate Business and Labor.
  • MIB, MBA and the credit unions opposed. The state farm independent agents located in Montana supported.
  • We have been able to kill off this bill the last several sessions. However, much of that success was due to the Division of Banking, i.e. Melanie, opposing the State Farm Bill.
  • This year, State Farm has taken a new approach to the bill in that the bill requires the designated manager/supervisor of the local State Farm agent to be a licensed mortgage loan originator in Montana and to have three years of experiencing working as a mortgage loan originator. The way the bill was drafted in previous sessions did not require the manager to be Montana licensed.
  • Melanie did not testify for the bill this time, but, most importantly, did not testify against the bill. She stated that, as written, the Division could live with the bill if enacted.
  • Thus, our strongest link to blocking the bill has been removed. There is a likelihood that the Senate Business committee could pass the bill as it now becomes a public policy question, as opposed to a regulatory reach question – as the bill boiled down to in the past sessions.
  • Senator Dee Brown questioned both me and Steve Turkiewicz about whether banks are engaging in the sale of insurance products. Further, there were questions about whether there should be more competition in the mortgage loan origination industry.

A copy of the bill is linked here: http://leg.mt.gov/bills/2015/billpdf/SB0346.pdf.