Mr. WILLIAMS, from the Committee on Banking, Housing and Urban Affairs, submitted the following REPORT [to accompany S. 2136] The Committee on Banking, Housing and Urban Affairs, to which was referred the bill (S. 2136) to amend the Securities Exchange Act of 1934, relating to state and local stock transfer taxes, having considered the same, reports favorably thereon and recommends without objection that the bill do pass. COMMITTEE DELIBERATIONS The bill (S. 2136) was introduced by Senators Williams and Tower on July 17, 1975, and was referred to the Committee on Banking, Housing and Urban Affairs. On July 29, 1975, the Committee on Banking, Housing and Urban Affairs met in open executive session and ordered S. 2136 to be reported to the Senate. BACKGROUND AND HISTORY The purpose of S. 2136 is to make technical and clarifying changes in Section 28 (d) of the Securities Exchange Act of 1934 (the "Act"). This section of the Act is concerned with state and local transfer taxes on securities and was contained in the Securities Acts Amendments of 1975 (Public Law 94-29). The development of a modern, nationwide system for the clearance and settlement of securities transactions was a principal purpose of Public Law 94-29. As clear evidence of that purpose, Public Law 94-29 expressly included within it stated purposes the removal of impediments to and the perfection of a national system for the clearance and settlement of securities transactions. Moreover, the Securities and Ex change Commission was directed and empowered to facilitate the establishment of such a system. Due to the fact that the imposition of state and local transfer taxes could well impede the development of a national securities processing system, Section 28 (d) was originally intended to remove impediments which might arise from state and local taxes imposed on changes in ownership of securities merely because the facilities of a clearing agency was physically located in the taxing jurisdiction. This provision was drafted to preserve state taxing powers on transactions over which the taxing state had a traditional jurisdictional basis. As Public Law 94-29 emerged from the Committee of Conference, and was enacted into law, the phrase "or registered transfer agent" was inadvertently added to Section 28 (d). A practical consequence of this phrase was to impact seriously on the ability of certain state and local governments to raise revenues through the levy of stock transfer taxes in a manner not necessary to achieve the Congressional intent of creating a national securities processing system. Thus Section 28(d) of Public Law 94-29 provided that no state or political subdivision thereof may impose a tax on a change in beneficial or record ownership of securities effected through the facilities not only of a "registered clearing agency" but also a "registered transfer agent" where the change in ownership would not otherwise be taxable by such jurisdiction if the facilities of the clearing agency or transfer agent were not physically located in the taxing jurisdiction. The effect of the additional phrase would preclude a state from imposing a stock transfer tax where the only basis for the tax is the transfer and issuance of a new certificate by a transfer agent located within the state. As a result, the present taxing powers of state and local governments are circumscribed, with serious effects on stock transfer tax revenues. Public Law 94-29 was never intended to have this effect. Nevertheless, this is the legal and economic result, albeit inadvertent, of Public Law 94-29 dealing with so-called transfer-agent depositories ("TAD's")-entities transferring record ownership by bookkeeping entry without physical issuance of securities certificates. While the Congress fully intended to place the operations of such entities beyond state taxing powers, it is now aware that the exemption contained in present Section 28(d) is much broader than necessary to achieve this goal. Thus, the Committee feels it is necessary, to undertake prompt consideration of the necessary technical amendments to avoid an unintended loss of taxing power by state and local govern ments. NATURE AND PURPOSE OF THE LEGISLATION S. 2136 is curative legislation. Section 25(d) of the Act would be amended to restore the ability to a state or political subdivision to impose a transfer tax where the basis of the tax is the transfer and issuance of a new certificate by a transfer agent. It would make it equally clear that such taxes could not be imposed on registered transfer agents that transfer record ownership of securities by bookkeeping entry without physical issuance of securities certificates ("TAD's") and which perform certain described additional functions incidental S.R. 340 to such bookkeeping transfers. Consequently, the bill would make clear that the transfer agent which is the subject of Section 28 (d), and as to which a stock transfer tax may not be imposed, is one which performs in the manner described in Section 3 (a) (25) (E) of the Acte.g., transfer agent depositories. While the Committee is cognizant that this bill will result in additional stock transfer tax revenues, it is also mindful of its longstanding commitment to the development of a national securities processing system. To restate the purposes of Section 28 (d), the Committee believes it is essential to the development of that system to remove such taxes to the extent they are now, or in the future may become, impediments. Thus, the Committee believes Section 28(d), as amended by S. 2136, provides the proper resolution of the state transfer tax problem on a nationwide basis and will facilitate the development of a national securities processing system. ESTIMATED COST OF THE LEGISLATION In accordance with Section 252 of the Legislative Reorganization Act of 1970, the Committee reports no costs will be incurred in carrying out the bill. CORDON RULES In compliance with subsection 4 of the rule XXIX of the Standing Rules of the Senate changes in the first Section of Section 28 (d) of the Securities Exchange Act of 1934 that would be effected by S. 2136 are indicated as follows: existing law in which no changes is proposed is in roman and new matter is in italic. (d) No State or political subdivision thereof shall impose any tax on any change in beneficial or record ownership of securities effected through the facilities of- (1) a registered clearing agency; or (2) a registered transfer agent when performing the function described in Section 3(a) (25) (E) of the title or, in connection with such function, any functions described in section 3(a) (25) (B) through (D) of this title, or any nominee thereof or custodian there for or upon the delivery or transfer of securities to or through or receipt from such agency or agent or any nominee thereof or custodian therefor, unless such change in beneficial or record ownership or such transfer or delivery or receipt would otherwise be taxable by such State or political subdivision if the facilities of such registered clearing agency, registered transfer agent, or any nominee thereof or custodian there for were not physicially located in the taxing State or political subdivision. S.R. 340 94TH CONGRESS 1st Session SENATE REPORT No. 94-341 MOBILE-HOME LOAN CEILINGS JULY 30 (legislative day, JULY 29), 1975.-Ordered to be printed Mr. SPARKMAN, from the Committee on Banking, Housing and Urban Affairs, submitted the following REPORT [To accompany S. 848] The Committee on Banking, Housing and Urban Affairs, to which was referred the bill (S. 848) to increase the ceilings for mobile-home loans available for insurance under Title I of the National Housing Act, having considered the same, reports favorably thereon without amendment and recommends that the bill do pass. EXPLANATION OF THE LEGISLATION S. 848 would establish new ceilings for mobile-home loans which the Secretary of Housing and Urban Development is authorized to insure under Title I of the National Housing Act. Existing law limits HUD-insured loans to finance the purchase of a mobile home to $10,000 (or $15,000 for a mobile home composed of two or more modules). The bill, S. 848, would raise these ceilings to $12.500 and $20,000 respectively. The higher ceilings are necessary to take into account rising costs in the construction of a mobile home. The existing ceiling of $10,000 for a single-module mobile home was established in 1969 and for a double-module mobile home in 1970. No increase in maximum loan amount for mobile homes eligible under the program has occurred since that time, despite subsequent increases in mobile home manufacturing costs (including the cost of raw materials, labor, shipping, and carrying charges) and consequent increases in purchase prices. During the same period, maximum mortgage limits for FHA-insured homes have been increased substantially. The proposed increases in Title I statutory loan limits would assure the continued usefulness of the Title I program to prospective mobile. |