Makes technical corrections relating to registration of tax return preparers and refund anticipation loans

BILL NUMBER:A8959

Title of bill

An act to amend the tax law and the general business law, in relation to tax return preparers and refund anticipation loans

Purpose or general idea of bill

The purpose of this bill is to amend Section 32 of the tax law, enacted as part of the 2009-2010 Executive Budget, to reflect current practices in the tax preparation business and allow for the regulation of refund anticipation loan transactions.

Summary of specific provisions

The bill would amend Section 32 of the tax law to:

*Delete references to refund anticipation checks;

*Clarify the language with regard to the solicitation of refund anticipation loans;

*Clarify the language with regard to who is considered a facilitator;

*Clarify the language with regard to who is considered a third party as it pertains to directly or indirectly arranging for third parties to charge interest or fees;

*Delete language that prohibits a tax preparer or lenders from seeking to collect on delinquent tax preparer fees and loans;

*Delete language that would prohibit a loan agreement from requiring arbitration of disputes;

*Provide for annual cap of $25,000 for violations;

*Modify the prohibition on check cashing by a RAL facilitator to only apply when the tax preparer received ten percent or more of its annual revenue from check cashing fees.

Justification

This bill would amend Section 32 of the tax law to better reflect current practices in the tax preparation business and the facilitation of refund anticipation loans. The bill would delete references to refund anticipation checks or RACs. A RAC is not a type of loan, nor is it an interest barring bank credit product. A RAC is an inexpensive alternative to RALS that benefit consumers who would prefer not to pay their tax preparation fees until they have received their refunds. It also provides consumers the ability to direct deposit their tax returns in to a bank account, an advantage for those who do not have bank accounts but are looking to open one. For these tax payers, this can reduce the refund time from 4 to 6 weeks for a paper check to 8-14 days. RACS are inexpensive, no interest is charged, and no credit check is needed.

The bill specifically clarifies language regarding who is and who isn't a facilitator of loans so as not to include lenders, marketing professionals, advertisers or media outlets. The amendments to Section 32 will allow tax preparation firms to continue to negotiate agreements with banks that have lead to lower costs for RAL loans. Recent industry data suggests that tax preparers have negotiated a 40 percent decrease in RAL rates in the last two years.

The bill modifies language that would have prohibited check cashing by a facilitator to only come into play if the tax preparer received ten percent of more of its annual revenue from check cashing fees. The language as originally drafted would prevent those tax preparation firms who operate in Sears and Wal-Mart and have check cashing operations from entering into arrangements with those merchants. It would also impact tax preparers who have check cashing machines in their tax offices. The revised language will help New York address check cashers who do tax preparation just to drive check cashing revenue, but not inadvertently impact tax preparers who are partnering with merchants such as Sears and Wal-Mart.

Prior legislative history

This is a new bill.

Fiscal implications for state and local governments

There is no fiscal impact for state and local governments

Effective date

This bill would take effect January 1, 2010.