Morning minutia: Legislation to protect bank from lawful taxes | Arkansas Blog

Thursday, March 12, 2015

Morning minutia: Legislation to protect bank from lawful taxes

Posted By on Thu, Mar 12, 2015 at 4:43 AM

Todd Turner, an Arkadelphia lawyer, steps in today to provide one of those lessons in what's behind one of the dozens of arcane pieces of legislation that sail into law every legislative session with the public none the wiser.

Today, Turner educates me on HB 1817, by Reps. Laurie Rushing of Hot Springs and Bill Gossage of Ozark.

Turner boils it down: It's a legislative way to allow big bank lenders like Wells Fargo to get out of property transfer taxes they owe from buying property in foreclosure sales.

The law requires them to pay the tax. They haven't been paying it. A lawsuit has established the law requires the payment. So the banks hopes to persuade egislators to get behind a bill to forgive them for past taxes not paid and all that would otherwise come due in the future.

The great part of this is that in the current legislation, Rushing and Gossage declare  the intent of the 1971 and 1987 legislature was to exempt foreclosures, judicial and non-judicial, from transfer taxation. It is a well-established rule of Arkansas law that the only gauge of legislative intent is found in the plain words of the statute. Look there and you'll find no exemption.

Turner said Clark County three years ago sued out-of-state banks that were conducting non-judicial foreclosures and then filing deeds that they'd been the high bidder at a public auction and paid cash. They filed deeds that certified "true and correct deed stamps" were affixed. But they hadn't paid the tax or bought the deed stamps.

Clark County sued on behalf of all 75 counties. Turner said the case has bounced from state to federal court and back and is nearing a final hearing. He said a judge has ruled that the taxes should have been paid, but he said money damages couldn't be claimed because the state Department of Finance and Administration was not a plaintiff and it was the only agency that could make the claim for the unpaid tax. DFA has repeatedly said the tax is owed, including in audits of some of the transactions, an opinion upheld by administrative law judges that heard specific cases.

Facing a court loss, the banks have gotten legislators to propose a law change to forgive past actions and protect them in the future. A significant part of the money goes to counties. Circuit clerks are opposing the bill. You'd think the legislature would have more interest in helping counties than giving out-of-state megabank lenders a corporate bailout.

Turner adds about the proceedings at issue:

There is no real "auction" and homeowners sometimes don't know their house has been "foreclosed" until they get an eviction notice. Also, the company doing the foreclosing is almost always some company that took the mortgage after several assignments (none of which are filed of record in the Clerks' office) and is probably a company that the homeowners have never heard of.
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