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Last year, President Joe Biden signed a bill on June 17, 2021, to create Juneteenth National Independence Day. The new law amends 5 U.S.C. 6103(a) to add “Juneteenth National Independence Day, June 19” as a specified legal public holiday. While this created a bit of a stir within the lending industry when the bill was signed so close to the date of the new holiday, banks have now had a year to prepare for its second observation.

Banks will have determined the extent to which they will observe the new federal holiday, including whether offices will remain open. As with any time a bank closes, it should consider what functions will remain available. Among other things banks should ensure they have provided adequate notice, consider cut-off times and prompt crediting of payments, access to safe deposit box operation, funds availability schedules, and any impact this might have on lending operations such as closing and rescission rights.

For example, as a result of the new law, the date of June 19 is not a business day under Regulation Z. Because June 19 is a Sunday this year, the holiday will be observed on the following Monday, June 20. For purposes of rescission under Reg Z, a “precise” business day test applies, meaning, the precise day is excluded from the definition of “business day” while the observed holiday (in this example, June 20) is a business day.

In summary, banks should consider if and how they have decided to observe Juneteenth this year and how it will affect their business functions. In addition, banks should consider the regulations with a definition of “business day” to determine how it might affect compliance considerations. Each regulation should be considered individually, as they define “business day” differently.

Triangle Background

By John Cronin

This legislative session we have seen red proposals and blue proposals that have a lot of people wondering if Wisconsin will soon be going green. No, nobody is commending the Packers for that lackluster playoff performance or proposing we replace Bucky with the Grinch. Though we see a lot of these, I’m not referencing environmentally conscious measures, either. Ranging from people tuned into government and the apolitical, people in banking and those who are not — what is one of the most common questions I get asked? When is Wisconsin going to legalize marijuana?

I’m sure people think to themselves ‘Hey this government guy ought to know,’ but it’s also a topic lots of folks are genuinely curious about, especially as versions of marijuana legalization have been adopted by numerous states across the country, including our neighbors in Illinois, Michigan, and Minnesota. Indeed 39 states either allow for some type of marijuana consumption — either medicinal or recreational — or have removed penalties for possessing small quantities.

From the banking industry perspective, the cannabis industry represents a largely untapped market shrouded in regulatory uncertainty since marijuana technically remains a scheduled drug under the federal Controlled Substances Act. The SAFE Banking Act would go a long way to alleviating this issue by protecting financial institutions serving legitimate cannabis-related businesses operating in compliance with each respective state’s legal framework. Support for the SAFE Banking Act seems to grow each time it is voted on, but final Congressional approval remains elusive out in Washington, D.C.

Shifting back to Wisconsin and the question posed at the outset — the answer remains “To Be Determined,” but the conversation has shifted dramatically from where the discourse was just a few years ago. So where do things stand now?

Marijuana used to be a legislative subject broached exclusively by Democrats. For consecutive sessions, Democrats, including Governor Evers, have pitched full recreational marijuana legalization and regulation. Those attempts may be a bridge too far at the moment and haven’t gained much traction, failing to net even a committee hearing. But they have moved the needle.

Though derived from hemp, Republicans have embraced CBD therapeutics for certain medical disorders. GOP Assembly Speaker Robin Vos is open to a medical marijuana program. But most significantly, we have also seen two Republican-led legislative proposals this session. One bipartisan proposal would create uniform low civil penalties for possessing small amounts of marijuana, so as to prevent those individuals from being convicted of a misdemeanor or felony. In late January, a cohort of thirteen Republican legislators began seeking co-sponsors for a bill creating a medical marijuana program that tightly regulates cultivation, processing, testing, and dispensing to patients. Neither have received action this session.

Both medicinal and recreational marijuana remain illegal in Wisconsin. The 2021–22 legislative session is effectively over, and illegality will remain the status quo for now. However, as Republican aversion continues to thaw, we are bound to hear this conversation ramp up in the near future and could see movement in the 2023–24 session.

Contact your state elected officials and request they *not* co-sponsor companion bills LRB-4436 or LRB-1512, relating to: fees imposed on merchants in connection with credit card transactions.

This proposal, authored by Sen. Dan Feyen (R- Fond du Lac) and Rep. Tyler Vorpagel (R-Plymouth), would be very harmful to Wisconsin's financial institutions and create a mandate our members would not be able to implement. Under the bill, it would be illegal to charge a merchant (retailer) a swipe fee for the tax portion of a credit card transaction. This would require electronic payment systems to distinguish between the pre-tax sale total and the amount of tax applied to the sale, a distinction that cannot currently be made using existing technology.

Therefore, if this legislation is passed, our members would be stuck with a law they could not comply with and penalized for every violation.

Here is how you can help:

  • Look up your state legislators by typing in your address here.
  • Send your representative an email with the following information:
  • State your name, that you are a banker, and that you are a constituent of their district.
  •  Ask that they not sign on as a co-sponsor of LRB-4436 or LRB-1512.
  • Explain this is a mandate banks cannot comply with, and that government should not be interfering in contractual business agreements.

WBA and the Wisconsin Credit Union League sent a joint memo to the Legislature asking they not sign on to these bills. Feel free to use the memo as inspiration.

Thank you to the bankers who have already notified me they've contacted their elected officials!

By, Ally Bates

Late Thursday evening, the Legislature’s Joint Finance Committee concluded its work on the 2022-23 state budget. The budget bill now heads to both houses of the Legislature for their approval. Like any other bill, it must pass in identical forms in both the Assembly and Senate before it can move on to Gov. Tony Evers

The Committee’s agenda on Thursday included the Wisconsin Economic Development Corporation, shared revenue and tax relief, and general fund tax sections. In light of the $4.4 billion in surplus revenue the state recently learned they would be taking in over the next three years, perhaps it was best the committee left the tax section for last. On party-line votes, the GOP-controlled committee voted to return about $3.4 billion of that surplus to taxpayers through an individual income tax reduction, property tax relief, and setting in motion the elimination of the personal property tax. 

Most notably, the individual income tax rate for the third bracket would be reduced from 6.27% to 5.30%, which would begin in tax year 2021. Individual income tax withholding tables would also be updated to take effect in tax year 2022. 

As part of the committee’s wrap-up action, they also allocated additional funding to K-12 education. This was done to ensure compliance with a federal maintenance of effort requirement so the state can continue to draw down $2.3 billion in federal funding for public education. Funding was provided by general school aids through the equalization formula. Generally, school funding is split between state aid and property taxes. All else being equal, the more the state contributes, the less has to be put on the property tax levy. With this additional investment through the formula, property taxes will be driven down. 

Though the budget still has a way to go before becoming law, this action is a key milestone in that process. It also means we’ve successfully navigated numerous landmines that would have proven problematic for WBA members. Those included harmful tax increases on banks and bank customers and an attempt to disrupt the electronic payment ecosystem. 

Though floor vote dates have not yet been set, the Assembly and Senate will likely vote on the budget in the next two weeks. 

By, Alex Paniagua

A fight over swipe fees may be coming to Wisconsin. 

A bill that would exclude the tax paid on retail purchases in the state from being part of the swipe fee calculation has been drafted. If the bill is introduced to lawmakers, it will launch the latest battle between banks and retailers over fees merchants pay when they accept credit and debit cards from customers. 

The possible move comes as consumers increasingly have used cards instead of cash during the coronavirus pandemic. 

Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association, said her organization would oppose legislation that seeks to exempt the tax portion of a credit or debit card purchase from the interchange fee.  

The interchange fee, which is a small percentage of the total amount of each purchase, is paid to the bank that issued the credit or debit card. 

“The interchange fee revenue is important and necessary to the banking industry because we pay and spend a lot of money, both in terms of staff resources as well as technology, to help prevent fraud,” said Oswald Poels. “That already costs us a lot of money." 

Matthew Hauser, president and CEO of the Wisconsin Petroleum Marketers and Convenience Store Association, said he couldn’t comment on the legislation because it hasn’t been introduced. But he said, generally speaking, the credit card fees retailers pay have been “rising at a dramatic rate for a generation.” 

“Convenience retailers pay about as much in swipe fees each year as they make in total pre-tax profits,” Hauser said. 

He said while swipe fees still trail labor among a retailer’s operating costs, swipe fees now exceed rent and utilities. 

“The fees keep going up,” Hauser said. “Retailers are losing revenue collecting and remitting taxes to the state.” 

An early draft of the legislation shows it would prohibit a “swipe fee" from being imposed against a merchant on the tax portion of a transaction when a purchase is made using a credit card. 

Corey Miltimore, spokesman for the Electronic Payments Coalition, said if that bill is introduced it likely would include debit card transactions as well as credit cards. 

Miltimore said what the retailers are seeking isn’t warranted or practical, and that similar legislation has been turned down in 28 states over the past 15 years, most recently in Tennessee. 

“They say the swipe fees keep going up, but the rate is actually steady,” said Miltimore, who is managing partner of Rauschenberger Partners LLC. “When they say it’s going up, it’s because consumers are spending more on credit and debit transactions. But the rate is the same. It’s simply because their volume is increasing.” 

Miltimore said to separate the tax portion of a total sale from the cost of the product in a credit or debit card transaction isn’t simple or inexpensive. He said current systems only recognize a final purchase amount and adapting them for the potential Wisconsin law would be costly to all businesses, including retailers. 

“If something like this were to be implemented, what would have to happen is the merchant would bill the customers’ debit or credit card for the cost of goods sold, and then would have to do a separate transaction to pay the tax in cash or check,” Miltimore said. “The networks are not going to process free transactions for taxes.” 

The law would make Wisconsin an island in the national credit card and debit card payment system and raise the question of whether a state law could be applied to businesses based outside the state, according to the Electronics Payments Coalition. 

Exactly how much money is at stake in revenue for retailers is hard to say and made more difficult to ascertain by the heightened use of electronic payments since the pandemic began. 

According to the Nilson Report, U.S. merchants that accepted credit, debit, and prepaid cards as payment paid $116.4 billion in processing fees in 2019, which was up 7.7% from the previous year. Interchange fees charged in the Visa and Mastercard systems are the largest component of total processing fees merchants pay, the Nilson Report said. 

Banks and retailers have wrangled over interchange fees for years. In April, two lobbying associations representing merchants in North Dakota sued the Federal Reserve to win a reduction in the fees they pay to banks each time a consumer swipes a debit card, Bloomberg News reported. 

In Wisconsin, a bill to prohibit interchange fees on the tax segment of a purchase would amount to an attempted use of government to shift costs from one industry to another, the Electronic Payments Coalition asserts. 

The organization says similar bills that have been introduced to state legislatures in the U.S. have been rejected in committees “due to harm to consumers, loss of sales tax revenue, legal deficiencies, and operational hurdles.” 

“It has met defeat everywhere,” Miltimore said. 

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years. Have a story idea? Contact him at paul.gores57@gmail.com.

By, Alex Paniagua

The state Senate’s Committee on Financial Institutions and Revenue postponed a vote on Senate Bills 19 and 20 after a lobbying group raised questions that caused confusion about the scope, purpose, and practical application of the bills.  

The State Bar of Wisconsin, the state trade association for lawyers, was represented by Carol Wessels of Wessels & Liebau LLC in Mequon, who testified in opposition to the elder fraud protection legislation. “These bills have the potential to cause long-lasting, severe damage," stated Wessels. "Not only do these bills cause. . . severe financial damage and irreparable harm to the citizens of this state, who are 60 and over, but the bills are a substantial threat to individual liberty.” 

Wessels continued, “We recognize these bills protect the public good, but it comes at a price of a very important liberty…these bills threaten that third interest (money) that is critically important to seniors." 

WBA Chair-Elect Ken Thompson, president/CEO of Capitol Bank in Madison, testified in support of both bills on behalf of Wisconsin’s banking industry stating, “there should be a sense of urgency to do something. . . Since COVID-19 began, fraud attempts have nearly tripled.” Thompson told the committee the bills will “give bankers tools, hopefully to reduce the probability of financial loss.” 

Senate Bill 19 allows that if a financial service provider reasonably suspects that financial exploitation of an adult at risk or an individual who is 60 years of age or older has occurred or been attempted, the financial service provider may, but is not required to, refuse or delay a financial transaction on an account of the vulnerable adult or on which the vulnerable adult is a beneficiary or on an account of a person suspected of perpetrating financial exploitation.  

The definition of “financial service provider” under the bill includes financial institutions, mortgage bankers and brokers, other types of lenders, and check cashing services. In addition, a financial service provider may, but is not required to, refuse or delay a financial transaction if an elder-adult-at-risk agency, adult-at-risk agency, or law enforcement agency provides information to the financial service provider that financial exploitation of a vulnerable adult may have occurred or been attempted. The bill requires notice if a financial service provider refuses or delays a financial transaction under these circumstances and establishes certain time limits applicable to the refusal or delay of the financial transaction. In addition, the bill allows a financial service provider to refuse to accept a power of attorney of a vulnerable adult if the financial service provider reasonably suspects that the vulnerable adult may be the victim of financial exploitation. 

Supporters of the legislation include the Wisconsin Bankers Association, Wisconsin Credit Union League, AARP Wisconsin, and the Alzheimer’s Association.

Please contact members of the Senate Committee on Financial Institutions and Revenue to urge them to support SB 19 and SB 20: 

Sample Message:
Dear Senator Stafsholt:  

My name is [name], and I am [role] at [name of bank] in [city/town], Wisconsin. I am writing to urge you to vote in favor of Senate Bills 19 and 20. Bankers are in a unique position to be able to identify, prevent, or stop elder financial abuse – they just need some additional empowerment. Our goal is to be part of the solution, so any tools that help bank staff prevent customers from becoming elder fraud victims are efforts we support. Over the next two decades, Wisconsin’s 65 and older population will increase by 72%, and one in nine seniors have reported being abused, neglected, or exploited in 2017. According to the Wisconsin Department of Justice (DOJ), the rate of elder financial abuse has increased by double digits in our state in recent years. These bills will enhance financial institutions’ ability to detect and prevent the increasing problem of elder financial exploitation in our state and we encourage you to support them.  

Sincerely,  
[Name] 

By, Alex Paniagua

It has been 64 years since Fred Risser (D-Madison) was first elected as a Wisconsin legislator. In 1956 he was elected to the Wisconsin Assembly, and then to the State Senate in 1962 where he has served since, making him the longest-serving state or national legislator in U.S. history.

Earlier this year, Senator Risser announced he would not seek reelection this fall and will be retiring after a lifetime dedicated to public service. Risser has been a longtime friend of the WBA so we took some time to talk to the Senator about his lengthy career and celebrate his accomplishments.

Quite a deal has changed since the beginning of Risser’s legislative career, the individuals who serve in the legislature have become more diverse, politics and partisanship have changed, and even the day-to-day operations of the legislature have evolved. “We now have better tools to operate. No legislature can claim they can’t operate,” he explained. “We have phone calls and computers. When I started, we had to ask the Sergeant of Arms for permission to use his phone” 

The job has changed as well. When Risser was first elected, being a legislator was a part-time job. “We met 6 months out of 24. We’d meet, sign the budget, and sine die. You didn’t have to spend a fortune to become a legislator and you maintained your job as a farmer or business owner, or what have you.” 

The switch to Wisconsin having full-time legislators has been positive, Risser says. “With full-time legislators, the public has a better chance of contacting their legislators. We’re available around the clock all year round now.”

The connection to the public and his constituents has been one of Risser’s favorite parts of serving. “The best thing is meeting people. With the legislative office here in Madison, I have my office hours and people can come up and discuss issues with me,” he said. “The legislators have become more involved with the public than they used to be.”
 
With such a long legislative career, Risser has a lot to be proud of. “In 64 years I don’t think I’ve missed a single roll-call vote. I’ve been extremely active,” he noted. “In the Senate in the past 58 years I haven’t missed a single vote. Everyone knows where I stand because I’ve voted. We have roughly 2,000 bills per session, and we vote anywhere from 1,000 to 2,000 times, so I’ve voted somewhere between 50,000 and 60,000 times.”

This dedication to the work of being a legislator is reflected in Risser’s various leadership roles including Senate Minority Leader and 25 years as Senate President. Risser’s dedication is also displayed in how long he’s been willing to work to enact change. His signature bill, the Clean Indoor Air Act, took nearly 40 years to pass. “When I started, you could smoke at any age just about anywhere,” Risser said. “I introduced a bill to outlaw smoking under age 16, but it was defeated in committee. It took many years and many bills to accomplish.”

Risser truly was in it for the long haul. “I was in leadership during the Capitol Master Plan for restoration the capitol building,” he said. “That took a lot of time and several different governors. We had to reeducate every new legislature. It was a long activity.”

Sixty-four years of public service is not something that can simply be summed up in a single interview or a press release. Risser has been a fixture in Wisconsin politics since before many of us were even born. We at the WBA would like to thank Senator Risser for his decades of service to the people of Wisconsin and for being a great ally and friend to the banking industry.

When asked if he had any final thoughts, Risser concluded: “I’m honored that the people of this district allowed me to represent them, and I did my best. I gave my full energies to the effort. I’ve enjoyed the process.”

By, Ally Bates

Late last year, President Donald Trump signed into law the long-awaited 2018 Farm Bill, with broad ramifications for agriculture and related industries nationwide. In its more than one thousand pages the bill covers a lot of ground, including crop insurance and farm subsidies, conservation topics and much more. There are also several provisions that affect federal regulation of the cultivation and production of industrial hemp that deserve attention from banks and some of their Ag customers.  

Hemp production in the United States goes back centuries. George Washington grew hemp at Mount Vernon, and the USS Constitution used more than 120,000 pounds of hemp fiber rope in its rigging. Though the Marijuana Tax Act of 1937 raised the cost of production, hemp was used extensively through World War II in uniforms, canvas, and rope. Because of efforts in efficiency and mechanization by International Harvester and the state Department of Agriculture, by the 1950s, Wisconsin was one of the leading producers of industrial hemp, just in time for the introduction of less expensive synthetic fibers that made hemp products uncompetitive. Hemp production dropped rapidly. In 1970, the Controlled Substances Act finished the industry by declaring all cannabis varieties Schedule I controlled substances, including hemp. Growers were required to obtain a rarely granted permit from the Drug Enforcement Administration (DEA) and production trailed off to essentially zero.  

Despite a resurgence of interest in hemp production in the 1990s, there were no significant changes until the 2014 Farm Bill which allowed states to create agricultural pilot programs to grow hemp. The State of Wisconsin did just this in 2017 with a licensing and registration process for an industrial hemp research pilot program through the Department of Agriculture, Trade and Consumer Protection (DATCP). Hundreds of producers registered into the program for 2018 and 2019 and banks could finally consider banking these customers again. The 2014 Farm Bill also created a legal definition of industrial hemp, requiring it to contain 0.3% or less of tetrahydrocannabinol (THC), the psychoactive compound in marijuana.  

The 2018 Farm Bill addresses various issues relating to industrial hemp and lowers the hurdles to legal cultivation under federal law. However, the bill legalizes industrial hemp only subject to significant conditions.  

First, the requirement to maintain 0.3% THC content or less was carried forward. “Hemp” is legally defined as any part of the Cannabis sativa plant containing THC below this threshold. Any product exceeding this threshold is “marijuana” and is still a controlled substance. This replaces previous guidance under the Agricultural Marketing Act of 1946 which specified certain parts of the plant as hemp.

Testing THC concentrations will be an important qualifier for legalized hemp production. However, discussion on how this will be done, who will oversee testing (the US Department of Agriculture, state departments or both), and how these results will be verified and recorded is just beginning. Banks that move forward with industrial hemp customers should look for a careful and deliberative process in measuring THC to ensure they are not inadvertently facilitating the production of a Schedule I drug. 

Second, nothing in the Farm Bill invalidates the DATCP pilot program. Under the bill, states are allowed to become the primary regulators of hemp cultivation. As part of their due diligence, Wisconsin banks should look for participation and annual registration. This is still the right way in this state to become a producer in what will be a heavily regulated industry. The DATCP does not intend to publish a list of participants in the program, though they will confirm for particular customers by email. DATCP is also coordinating THC testing of industrial hemp crops in Wisconsin. More information is available on their website under Programs and Services.

Third, while the Farm Bill provides clarity around non-food hemp products, it doesn’t change the Food and Drug Administration’s (FDA’s) regulation of cannabidiol (CBD) oil. The FDA maintains that, except for some limited pharmaceutical grade production, the use of CBD as an ingredient in food or dietary supplements remains prohibited. Also, while hemp cultivation in a manner consistent with the Farm Bill will produce low-THC CBD, any that exceeds 0.3% THC remains a Schedule I controlled substance. This means that while customers that sell CBD oil have a standard to meet to avoid DEA violations, they might still face challenges from the FDA. Banks should consider these issues when performing due diligence on any customer that sells CBD, though replacement of zero tolerance for THC with 0.3% tolerance can provide some protection against the most serious, drug-related complications.

Finally, the patchwork of state laws around medicinal and recreational use of marijuana has not changed, and high-THC products are still Schedule I controlled substances according to the DEA. Despite the carve-out for hemp provided by the Farm Bill, marijuana remains illegal under state and federal law in Wisconsin. Banking marijuana-related businesses still means following Financial Crimes Enforcement Network (FinCEN) guidance and taking on some compliance risk.

With the passage of the Farm Bill, banks have opportunities to take on industrial hemp customers with more confidence than in the past. As an added benefit, the bill permits hemp researchers (under the DATCP pilot program in Wisconsin) to apply for federal grants and they are eligible for federal crop insurance. Banks may see customers looking to take advantage of hemp production as a new, potentially higher margin crop. However, the road to successfully serving those customers and meeting regulatory requirements is not without complications. In addition to the considerations above, banks that take on these customers should update their BSA policies and procedures to include any enhanced due diligence performed on industrial hemp customers. With careful planning and risk-based monitoring, industrial hemp producers could prove to be some of your best customers.

This article has been written by Shane Bauer, First Vice President – Compliance, BSA and Security Officer with Bankers' Bank in Madison.

By, Lori Kalscheuer

Events

For the first time in nearly 20 years, due to the SECURE Act, the IRS is requiring all IRAs to be amended in 2022. To avoid IRS penalties, financial organizations must use the correct and properly amended IRA opening documents. This course provides information on how to properly establish Traditional and Roth IRAs and how to amend IRAs.

Presented by Ascensus

Registration Option

Live presentation $275

Recording available through May 16, 2022

The rules and regulations governing IRAs, HSAs, and other tax favored savings accounts are constantly evolving, and can be challenging to keep up with. Rely on our industry experts to bring you up to date on recently proposed legislation and regulatory updates that may affect your organization and your clients.

Presented by Ascensus

Registration Option

Live presentation $275

Recording available through May 9, 2022