eNews February 24, 2011

February 24, 2011

News Briefs

  1. Pair of 1099 Repeal Bills Could Reach House Floor
  2. South Africa a Wildcard on International Trade
  3. New NACM Teleconferences Focus on Accounting Basics, Internal Audit Controls
  4. Where Was the Commercial Real Estate Recovery Again?
  5. SBA Tries to Ride to the Rescue on Commercial Balloon Payments
  6. Finance Committee Schedules Hearings for Major Reform of Tax Code


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Pair of 1099 Repeal Bills Could Reach House Floor

The House Ways and Means Committee has passed two related bills that would repeal the 1099 reporting provisions included in last year's health care reform legislation.

Whereas the Senate earlier passed a single amendment that would repeal the upcoming 1099 reporting requirement on businesses, the Ways and Means Committee approved a similar repeal measure along with a separate piece of legislation that would both repeal the mandate and offset some of the repeal's $19 billion in lost revenue. H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011, is the repeal-only bill and H.R. 705, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, is the offset bill.

Should neither bill be enacted, businesses would be forced to file an Internal Revenue Service Form 1099 for every vendor from whom they annually buy $600 worth of goods or services starting in 2012.

H.R. 705 would lightly offset the revenue lost by reducing improper overpayments on exchange subsidies established as part of the health care reform bill and are set to go into effect in 2014. It would also repeal a separate 1099 requirement, also enacted as part of the health care reform bill, that applies to owners of rental real estate. "The legislation approved by the Committee today is a victory for America's small businesses, families and individuals," said Ways and Means Committee Chairman Dave Camp (R-MI). "Congress should make every effort to reduce the heavy burden of paperwork that takes time, energy and resources away from creating jobs."

"We took a fiscally responsible path to achieve this relief by reducing waste, fraud and abuse from the Democrats' health care law, which also allowed us to reduce the deficit," said Camp, referring to the Joint Committee on Taxation's finding that H.R. 705 would reduce the deficit by $166 million between 2011-2021. "I look forward to consideration of this legislation by the House very soon so that all those affected by the uncertainty of these provisions can breathe a long-awaited sigh of relief."

Both bills could reach the full House, but action on H.R. 705 rather than H.R. 4 could set up a showdown in the Senate, which is still controlled by Democrats and has so far rejected any offset efforts.

Stay tuned to NACM's eNews and Credit Real-Time Blog for updates.

Jacob Barron, NACM staff writer

New Take on Leadership

"Don't strive to be a leader in your category. Create a different category, and be the only one in it."

That's the idea behind Becoming a Category of One, the book written by Joe Calloway, speaker at this year's Credit Congress Super Session.

Learn more about Calloway, his book and Credit Congress by clicking here.

South Africa a Wildcard on International Trade

Stability and predictability have never been among South Africa's strengths, economically or otherwise. However, as conditions deteriorate in northern Africa, the nation at the bottom tip of the continent continues to reveal itself as the entire region's economic anchor and an increasingly relevant player in the world of trade.

When the BRICs (Brazil, Russia, India, China) hold their annual meeting in 2011, they'll be joined for the first time by a fifth nation: South Africa. David Atkinson of the Economic Studies Department at Euler Hermes said the invitation to the table, even if only for one year, is significant because of the high profile emergence of the four BRICs. Additionally, Atkinson noted that, despite South Africa's various differences, there are plenty of divides among the four original nations.

"They have lots of things that are not in common," Atkinson told NACM. "Even in terms of size, China is still way bigger than the others. So, as a functioning group, it's basically a group of leaders who have a lot of weight in the world scene—the meeting just gives them a regular means of communication."

John Hardy of the Coalition for Employment through Exports (CEE) told NACM the virtual "feeder system" for business development and their continental hub status that can only be rivaled by Nigeria, if that, gives South Africa "both significant business commercial weight and political weight." He added that along with a handful of nations such as South Korean, Turkey, Mexico and Indonesia (which are all discussed in feature-length story in the March issue of Business Credit); there's a new momentum and "dynamism" that's creating a growing middle class in many up-and-coming, BRIC-like nations.

"In terms of their business relationship to the United States, there's a very positive road ahead for doing business around the world. They're a tier of new countries that will become significant U.S. markets," said Hardy.

Still, concern often rears its head when talking about South Africa. Though pragmatists have long and firmly controlled, the nation has tended to generate attention that is hard to ignore—both good and bad. Take last summer, for instance:

After a hugely successful run as host for the 2010 World Cup competition raised optimism of South Africa's potential to step up as a worldwide economic player, a public workers protest organized by the nation's largest labor union, the Congress of South African Trade Unions (COSATU), went a long way to undoing those gains for a spell. Just weeks after the tournament and glowing international attention, the COSATU spearheaded a weeklong public workers strike after the government balked at demands for a sizable pay raise of 8.6%, more than twice the rate of inflation.

The demands and violent nature for the effort, though not at the level of recent unrest in areas such as Libya but much more than initial anti-austerity demonstrations in Greece, caused many analysts to characterize it as yet another large barrier to business progress set up by the powerful union. The union's grip on the working population, as well as weak employment opportunities for black South Africans and a need for educational reform, are among the overarching issues that remain apparent, as noted by NACM Economic Advisor Chris Kuehl, PhD S.J. Rundt & Associates President Hans Belcsak, PhD and a summer report penned by the Organization for Economic Co-operation and Development (OECD).

Brian Shappell, NACM staff writer

Distressed Business Services

Many NACM Affiliates are involved in a national network to provide assistance in the rehabilitation (if possible) or liquidation (if necessary) of businesses in severe financial difficulty.

While courts can take several months or more to start a reorganization plan, NACM Affiliates can assist in getting a plan approved in as little as 30 days. Most helpful is the knowledge that experienced professionals are ready to step in at the most difficult time. NACM Affiliate staff members can serve as secretary to creditors' committees, provide other needed advisory services and are fully aware of the prevailing laws and regulations relevant to each situation.

Click here to learn more about NACM's Distressed Business Services.

New NACM Teleconferences Focus on Accounting Basics, Internal Audit Controls

They're two fairly unrelated things that every credit manager needs.

Next week's duo of NACM teleconferences will focus on the basics of accounting and the internal audit controls credit professionals need to have in order to better analyze their customer's financial statements and to prevent internal fraud and theft, respectively.

Starting with "Internal Audit Controls," led by NACM Past National Chairman Phyllis Truitt, CCE on February 28 at 3:00pm EST, listeners will receive all the information they need to prevent simple everyday security errors that could potentially have dire consequences. "Some of it's really simple," said Truitt. "You protect your passwords, you don't share passwords and then there are checks and balances to make sure one person doesn't do all the accounting processes, putting it in writing, establishing lines of communication and accountability."

Other aspects of maintaining internal controls can be a tad more complicated, and Truitt will go into the training necessary to keep data secure and safe from identity theft and fraud. "People don't realize some of the simple things that they do can create theft," she noted, referring to a simple, risky situation at a previous employer. "We locked up our credit card information in a filing cabinet and kept the key on top of the filing cabinet. We didn't stamp our checks, and the first thing you should do with a check is stamp it for deposit only."

This careful attitude should extend both to company customers and employees, Truitt noted, adding that a previous employer had also had issues with their own workers. "We trusted everyone and I think what sometimes causes theft is that we trust people we work with and they can always run into problems," she said, noting that preventing such occurrences would also be addressed in the teleconference. To learn more about Truitt's presentation, or to register, click here.

Then, on the Wednesday after "Internal Audit Controls," NACM will host "Accounting Basics," led by Meredith Mostochuk, CBA. Whether you're an experienced credit professional looking to brush up on the basics or looking to dip your toe into the accounting world, this presentation is designed to meet your needs. Mostochuk will use her more than 10 years of experience in auditing, financial analysis and collections to illustrate the relationship between the four financial statements and provide a review of T accounts, transaction recording and the accounting equation.

Mostochuk is one of NACM's most popular certified instructors, having risen fast—from taking NACM courses, to designing and leading them. She currently facilitates NACM's Online Accounting course and contributes heavily to the Credit Learning Center.

To learn more about "Accounting Basics," click here to register today.

Jacob Barron, NACM staff writer

Employers: Last Chance to Save 30% on Any Job Posting

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C4F: Employment Connections for the Business Credit Community

Where Was the Commercial Real Estate Recovery Again?

Continued sputtering of an oft-predicted 2011 rebound in the commercial real estate sector has some increasingly wondering about the accuracy of forecasts as the prices of such buildings and rental occupancy rates tripped again in recent studies. Still, there appear to be pockets of positive signs in some areas of the nation that will continue to fuel hopeful predictions that better days are not too far off for commercial real estate.

The latest shot of troubling news for the sector came as a streak of three consecutive months of gains in U.S. commercial prices ended with a near 1% decline for the month of December, according to a just-released study conducted by Moody's Investors Service and Real Estate Analytics LLC. Key to the December drop was an overall lack of demand or investment in office and retail-related property, though some markets saw improvement. It caused one Moody's official to admit that a widespread, noticeable recovery remains "elusive," at best, in many U.S. markets.

Andres Carbacho-Burgos, associate director of Moody's Analytics, told NACM he believes the rebound has started and will continue, but will somewhat lag behind the overall pace of the U.S. economic recovery. As such, a sizeable escalation in occupancy levels and rental prices, especially in larger markets, may have to wait until 2012, short of a faster than expected turnaround for the U.S. economy. That likely would have to be driven by increased hiring by businesses, improved home prices/household wealth and a return of consumer confidence. The latter actually hit a three-year high this week, according to a government survey, though the other two areas again failed to demonstrate improvement of late.

Metrostudy's Brad Hunter noted that while more banks are starting to lend in the commercial real estate side, he believes previous talk of a significant rebound in the sector by this point was tantamount to wishful thinking.

"I never believed the prognostications that commercial was going to rebound yet," Hunter told NACM. "We are actually closer to a housing market bottom than we are to a commercial bottom."

Still, the Moody's/Real Estate Analytics report did show some signs for hope in the near-term. Aside from three months of price increases last fall, the East region reported large commercial real estate price increases in December for both office and retail properties. The same goes for industrial properties in the South, with gains upwards of 40%. Meanwhile, industrial and office activity showed some promise, though mixed depending on the specific market, in the West region. In addition, the study's researchers noted the following U.S. markets simultaneously ranked in the top 10 for office, retail and industrial property categories: Atlanta, Chicago, Los Angeles, New York, San Francisco and Washington, DC.

Brian Shappell, NACM staff writer

MLBS Offers Complete Lien and Bond Services and More

NACM's Mechanic's Lien and Bond Services (MLBS) brings best-in-class service options to today's construction credit professional.

MLBS' Lien Navigator is a web-based service that provides up-to-date information for all 50 states and Canada, including notice, lien, payment bond and suit timelines, procedures and other relevant information in a state-by-state/province-by-province format.

MLBS also offers two preliminary notice to owner (NTO) services, deadline tracking, a lien and bond filing program, and a suit against bond and foreclosure service. Both NTO services include, at no additional charge, a Next Action Notification Email. These reminders are sent automatically to ensure that your lien and suit deadlines are met during each step of the lien process.

For more information on NACM's MLBS, click here.

SBA Tries to Ride to the Rescue on Commercial Balloon Payments

The U.S. Small Business Administration (SBA) will launch a program later this month to help small businesses refinance their commercial mortgage debt, especially in areas where they face a significant hike in payment requirements known as "balloon payments."

Starting February 28, small businesses contending with maturing commercial mortgages will be able to apply for temporary 504 loans from the SBA. It's part of a new refinancing loan program sparked by the ongoing struggles of the real estate sector and their collateral effects amid the tepid, if not delayed, economic rebound.

"The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years," said SBA Administrator Karen Mills. "As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt."

Businesses eligible to apply include those with the greatest perceived need: those facing a balloon payment before the end of 2012, said the SBA. Borrowers must commit at least 10% equity and work with approved third-party lenders. They will be able to refinance up to 90% of the current appraised property value or 100% of the outstanding mortgage, whichever is lower. Refinancing costs can also be covered, though no other business expenses are eligible. It is estimated by the SBA that upward of 20,000 U.S. small businesses could benefit from the program, which tweaks/relaxes some of the terms of previous 504 program requirements.

Brian Shappell, NACM staff writer

Leverage Goes a Long Way

Leverage the strength of FCIB's powerful global network by being an engaged member; we guarantee that you'll receive strong, sound and dependable guidance for your credit-related issues. As you continue to work through this tough economic climate, stay ahead of your competition by having access to the latest—and most reliable—information.

Stay engaged and get connected with the world of international credit and trade finance—share your insight in the FCIB Online Knowledge Center.

Finance Committee Schedules Hearings for Major Reform of Tax Code

The Senate Finance Committee has announced the continuation of a series of hearings examining the nation's tax code, which lawmakers say is ripe for reform.

The first of these hearings will take place next Tuesday, March 1, with a panel aptly titled "How Did We Get Here? Changes in the Law and Tax Environment Since the Tax Reform Act of 1986." Specifically, the hearing will feature testimony from five former assistant secretaries for tax policy and will examine changes since 1986, such as globalization, innovations in technology, advancements in the financial services industry and growth of tax-planning practices, and how the tax code has not responded.

"Today, there are just too many special benefits in the tax code for one industry or another," said Committee Chairman Max Baucus (D-MT). "All those credits and deductions make our code so complicated that those with an army of lawyers and accountants can slim down their tax bill while others are left paying one of the highest corporate tax rates in the world."

"All tax incentives, both personal and business, should produce the outcomes we intended, such as job creation and widespread economic growth," he added. "We need to figure out how to get rid of loopholes and simplify the system, so we can lower tax rates and keep our economy growing."

Baucus' sentiments were echoed by Finance Committee Ranking Member Orrin Hatch (R-UT), who noted that this analysis will continue throughout the next year. "Our tax system is burdensome, overly complex and stifles American competitiveness. It needs to be reformed," he said. "I'm pleased to announce with Chairman Baucus that the Finance Committee will spend the next year fully examining our tax code. With these hearings we hope to lay the groundwork toward a comprehensive overhaul to ensure we are putting real pro-growth policies in place that will spur investment, economic expansion and much needed jobs."

Hearings on the tax code held in the prior Congress focused on the lessons of the 1986 Tax Reform Act and new historical trends in income and revenue.

Jacob Barron, NACM staff writer

To view past eNews issues or to visit the NACM Archives, click here.



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