The New Legislative The New Legislative Landscape and BeyondLandscape and Beyond

FIRMAFIRMANew Orleans, LANew Orleans, LA

April 27, 2009April 27, 2009

Sally Miller202-663-5325smiller@aba.com

Emergency Economic Emergency Economic Stabilization ActStabilization Act

$700 Billion to purchase $700 Billion to purchase troubled assets (Troubled troubled assets (Troubled Assets Relief Program)Assets Relief Program)

$150 Billion in tax cut $150 Billion in tax cut extensionsextensions

Emergency Economic Emergency Economic Stabilization ActStabilization Act

Fannie Mae/Freddie Mac losses Fannie Mae/Freddie Mac losses treated as ordinary losses for treated as ordinary losses for tax purposestax purposes

FDIC insurance coverage for FDIC insurance coverage for interest bearing accounts interest bearing accounts raised to $250,000raised to $250,000

Emergency Economic Emergency Economic Stabilization ActStabilization Act

Charitable IRAsCharitable IRAs

One-year AMT patchOne-year AMT patch

Cost basis reportingCost basis reporting

Other Emergency MeasuresOther Emergency Measures

PPIPPPIP

TGLPTGLP

TALFTALF

MMIFFMMIFF

●Common/ Collective FundsCommon/ Collective Funds

FDIC InsuranceFDIC Insurance

Premiums- 12-16 bpsPremiums- 12-16 bps

Special Assessment- 10-20 bpsSpecial Assessment- 10-20 bps

Impact on deposit insurance levelsImpact on deposit insurance levels

Sweep disclosuresSweep disclosures

American Recovery and American Recovery and Reinvestment ActReinvestment Act

Executive CompensationExecutive Compensation

Bonuses/ ClawbacksBonuses/ Clawbacks

Golden ParachutesGolden Parachutes

Say on PaySay on Pay

AccountingAccounting

Mark-to MarketMark-to Market

OTTIOTTI

Market IssuesMarket Issues

Naked Short Selling/Uptick RuleNaked Short Selling/Uptick Rule

Credit Rating AgenciesCredit Rating Agencies

CommoditiesCommodities

Safety of Trust and Custody AssetsSafety of Trust and Custody Assets

Segregated from bank assetsSegregated from bank assets

Custody assets on trust system: Custody assets on trust system: samesame

Deposit instruments of trustee Deposit instruments of trustee bank, collateralized over insured bank, collateralized over insured amountamount

Safety of Managed AssetsSafety of Managed Assets

Supervision/ExaminationSupervision/Examination

Segregation of DutiesSegregation of Duties

RecordkeepingRecordkeeping

AuditAudit

Regulatory RestructuringRegulatory Restructuring

Systemic RegulatorSystemic Regulator

Resolution Process for Non-Resolution Process for Non-BanksBanks

GAPsGAPs

●Regulatory GroupsRegulatory Groups

●Credit Default SwapsCredit Default Swaps

●Hedge FundsHedge Funds

Trust and Wealth Management Trust and Wealth Management IssuesIssues

TaxTax

Employee BenefitEmployee Benefit

SecuritiesSecurities

Deductibility of investment Deductibility of investment advisory feesadvisory fees

●Section 67(e)(1) exception to 2% floor: Section 67(e)(1) exception to 2% floor:

“ “costs which are paid or incurred in costs which are paid or incurred in connection with the administration of connection with the administration of the estate or trust and which would not the estate or trust and which would not have been incurred if the property have been incurred if the property were not held in such trust or estate.”were not held in such trust or estate.”

IRS ProposalIRS Proposal

IRS Proposal: Only costs that are IRS Proposal: Only costs that are “unique” are fully deductible; “unique” are fully deductible; “unique” if an individual could not “unique” if an individual could not have incurred the cost in have incurred the cost in connection with property held in connection with property held in trust/estate, e.g., accountings, trust/estate, e.g., accountings, fiduciary income tax filings, estate fiduciary income tax filings, estate tax returns, beneficiary tax returns, beneficiary communications, will or trust communications, will or trust contests or constructions, fiduciary contests or constructions, fiduciary bonds.bonds.

IRS ProposalIRS Proposal

Non-unique: custody, Non-unique: custody, management, investment advice, management, investment advice, gift tax returns, and property gift tax returns, and property management, thus subject to 2% management, thus subject to 2% floor.floor.

Unbundling of trustee fees required Unbundling of trustee fees required under proposal to identify under proposal to identify unique/non-unique portions.unique/non-unique portions.

Supreme Court DecisionSupreme Court Decision

Supreme Court decision: Supreme Court decision: Investment advisory fees subject to Investment advisory fees subject to 2% floor of Section 67(e).2% floor of Section 67(e).●Rejected taxpayer argument.Rejected taxpayer argument.

● Impact on IRS proposal?Impact on IRS proposal?

Practical ConsiderationsPractical Considerations

Practical Considerations as a Practical Considerations as a result of result of KnightKnight decision: decision:●KnightKnight does not require unbundling of does not require unbundling of

trustee fees for 2008 tax year.trustee fees for 2008 tax year.

●Impact on income beneficiariesImpact on income beneficiaries

●Next StepsNext Steps

Cost-basis ReportingCost-basis Reporting

Require brokers to report adjusted Require brokers to report adjusted cost basis, and acquisition or cost basis, and acquisition or disposition datesdisposition dates

Equity 1/1/11Equity 1/1/11

Mutual Funds: 1/1/12Mutual Funds: 1/1/12

Debt: 1/1/13Debt: 1/1/13

Treasury to issue proposed Treasury to issue proposed regulationsregulations

Estate Tax ReformEstate Tax Reform

Economic Growth and Tax Reconciliation Economic Growth and Tax Reconciliation Act of 2001 (EGTRA) Act of 2001 (EGTRA) ●Complete repeal of estate tax in 2010 with Complete repeal of estate tax in 2010 with

carryover basis; carryover basis;

●Reverts in 2011 to a 55% tax rate on that Reverts in 2011 to a 55% tax rate on that portion of an estate exceeding $1 million with portion of an estate exceeding $1 million with step-up basis. step-up basis.

Estate Tax ReformEstate Tax Reform

Administration Proposal – Administration Proposal – freezes in 2009 form - $3.5 freezes in 2009 form - $3.5 million exemption; top tax rate million exemption; top tax rate of 45%of 45%

Retroactivity?Retroactivity?

Tax Filing For TrustsTax Filing For Trusts

Auto. filing extension for K-1: Auto. filing extension for K-1: currently 10/15currently 10/15

IRS Regulations: shorten to IRS Regulations: shorten to 9/159/15

Possible compromise 9/30Possible compromise 9/30

Employee Benefit IssuesEmployee Benefit Issues

Fee disclosureFee disclosure

Collective fund educationCollective fund education

Investment adviceInvestment advice

Employee Benefit IssuesEmployee Benefit Issues

Defined benefit fundingDefined benefit funding

Required minimum Required minimum distributionsdistributions

Target date fundsTarget date funds

Call Report ChangesCall Report Changes

Confidential treatment Confidential treatment eliminatedeliminated

●Fiduciary Income, Expense & Fiduciary Income, Expense & Loss DataLoss Data

●Effective 3/31/09Effective 3/31/09

Other changes- 12/31/09Other changes- 12/31/09

Questions?Questions?