BILL NUMBER:  S7766A

 TITLE OF BILL :
An act to amend the tax law, in relation to providing for a tax on
paying agent services, fiscal agent services, or any other similar
services on debt evading foreign states


 PURPOSE OF BILL :
This bill will amend the New York Tax Law to impose a sales and
compensating use tax on the provision of paying agent services, fiscal
agent services or other similar services by a financial institution to
(1) a foreign state that (i) has had one or more final judgments in an
aggregate amount exceeding $100,000,000 entered against it by any
state or federal court located in New York, including any final
judgment originally issued in a foreign court that is filed or
registered in New York; (ii) fails to satisfy any such judgment for a
period of more than 2 years after it becomes effective; and (iii) is
not a foreign state eligible for (a) financing through the
International Development Association, (b) debt relief under the
Enhanced HIPC Initiative (as defined in section 1625(e) (3) of the
United States International Financial Institutions Act), or (c) debt
relief under the Multilateral Debt Relief Initiative of the
International Monetary Fund, or (2) a political subdivision of such a
foreign state (any such foreign state or political subdivision, a
"debt evading foreign state"). This tax.  will recover a portion of
              

the costs, in the form of capital losses, lost interest, lost
investment returns, and accompanying losses of tax revenue, imposed on
New York taxpayers by foreign states through their evasion of valid
judgments rendered against them.

 SUMMARY OF PROVISIONS :
Section 1 - The New York Tax Law is amended to add a new paragraph (e)
to Section 1101 containing subsections numbered 1101 (e) (1) to 1101
(e) (7). Paragraph (e) defines the terms "agency or instrumentality of
a foreign state", "final judgment", "financial institution", "foreign
state", "debt evading foreign state", "state-owned corporation of a
debt evading foreign state" and "state". It defines debt evading
foreign states ("DEFS") as foreign sovereigns that have had judgments
rendered against them in New York, if the judgments in the aggregate
total $100 million and any of the judgments have been outstanding for
at least two years. The poorest developing countries are excluded from
this definition and would not be affected by this tax.

Section 2 - The New York Tax Law is amended by adding a new paragraph
(g) to Section 1105. Paragraph (g) imposes a new sales and
compensating use tax on the provision of a paying agent service,
fiscal agent service, or of any other similar service by a financial
institution to a debt evading foreign state. Foreign sovereigns that
qualify as DEFS, and their agencies and instrumentalities, would be
subject to a four percent tax on the gross amount of any funds
dispersed by a financial institution in relation the provision of such
services.

Section 3 - Provides that the act will take effect immediately.

 JUSTIFICATION :
New York taxpayers have invested billions of dollars in debt issued by
foreign sovereigns. To facilitate the issuance of their debt to New
York citizens and other individuals through New York's capital
markets, many foreign sovereigns designate New York as the place of
payment and the venue where the foreign sovereign. waives sovereign
immunity and consents to jurisdiction to be sued In the case of a
default. As a result, actions to enforce defaulted debt are frequently
brought in state and federal courts located in New York.  Although
many foreign sovereigns pay their debts responsibly, some foreign
sovereigns that are capable of making payments to their creditors
instead choose to repudiate their debts and to refuse to pay judgments
rendered against them.  Because of the difficulties associated with
enforcing judgments against foreign sovereigns, New York taxpayers
suffer significant losses, and have little legal recourse, when
foreign sovereigns choose not to pay their debts. The losses incurred
by taxpayers significantly affect New York tax revenue, not only
because New York cannot tax interest and other gains that are not
paid, but also because investors' losses can be offset against other
taxable gains.

The most egregious example of a foreign sovereign that is capable of
paying its debt, but that chooses not to, is the Republic of Argentina
In 2001, Argentina defaulted on $81.2 billion of debt, which is the
largest sovereign debt default in history. Argentina refused to
negotiate with its bondholders until 2005, and then offered the
bondholders an exchange worth about 25-cents on the dollar on a
take-it-or-leave-it basis. Approximately 76 percent of bondholders
accepted the exchange offer, and Argentina repudiated the remaining
portion of its debt.  Argentina has repudiated these debts while
claiming, in a recent filing with the Securities and Exchange
Commission, to have a debt-to-gross domestic product ratio of 49.1%
-less than the ratios of Canada, the United Kingdom, France, Germany,
and a variety of other European countries - and a budget surplus in
each year from 2004 to 2008.

Dozens of lawsuits have been filed in the united States District Court
for the Southern District of New York as a result of the Argentina
debt default. The two largest creditors alone have claims and
judgments of over $3 billion. Judge Thomas P. Griesa, the most senior
judge in the Southern District, has repeatedly observed that Argentina
has never offered to pay the judgments rendered against it and instead
focused all of its efforts on protecting its assets from creditors. In
May 2009, Judge Griesa held that Argentina was in civil contempt of
court for failing to comply with court orders and drew an adverse
inference that Argentina had removed assets from New York in violation
of court orders.

The economic impact of this debt repudiation has been substantial. The
direct net costs to New York holders of defaulted Argentina debt
currently total $902 million, including $452 million in capital
losses, $382 million in foregone interest payments, and $180 million
in foregone investment returns, less nearly $112 million in tax
benefits created by the losses or foregone income. From December 2001
to December 200B, the indirect costs of the Argentina debt default,
through lost tax revenue, total approximately $329 million.

This bill creates a tax to offset a portion of the adverse effect that
DEFS have on New York. tax revenue. It does so by imposing a sales and
compensating use tax on the provision of paying agent services, fiscal
agent services or other similar services by a financial institution to
a debt evading foreign state. The financial institution providing the
service must collect the amount of the tax from the debt evading
foreign state and remit the funds to New York..  This bill ensures
that the tax does not adversely effect the payees of the funds since
the tax is collected from the DEFS.

 LEGISLATIVE HISTORY :
New bill.

 FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS :
At present, at least one debt evading foreign state, the Republic of
Argentina, is using the Bank of New York as its paying agent.
Argentina deposits funds with the Bank of New York to service
currently outstanding debt of Argentina and the Bank of New York
disperses those funds to the appropriate payees. This bill seeks to
impose a tax on Argentina equal to 4% of the gross amount of such
funds deposited with and dispersed by the Bank of New York for the
financial institution providing such paying agent or any other similar
service. This bill would raise revenue of at least $80 million per
year.

 EFFECTIVE DATE :
This act shall take effect immediately.

                                BILL NUMBER:S7766B

TITLE OF BILL:
An act to amend the tax law, in relation to tax on certain financial
services to debt evading foreign states

PURPOSE OF BILL:
This bill will amend the New York Tax Law to impose an excise tax on
the provision of paying agent services or fiscal agent services by a
financial institution to (1) a foreign state that (i) has had one or
more final judgments in an aggregate amount exceeding $100,000,000
entered against it by any state or federal court located in New York,
including any final judgment originally issued in a foreign court that
is filed or registered in New York; (ii) fails to satisfy any such
judgment for a period of more than 2 years after it becomes effective;
and (iii) is not a foreign state eligible for (a) financing through
the International Development Association (unless such state is
eligible for financing from the International Bank for Reconstruction
and Development), (b) debt relief under the Enhanced HIPC Initiative
(as defined in section 1625(e)(3) of the United States International
Financial Institutions Act), or (c) debt relief under the Multilateral
Debt Relief Initiative of the International Monetary Fund, or (2) a
political subdivision of such a foreign state (any such foreign state
or political subdivision, a "debt evading foreign state"). This tax
will recover a portion of the costs, in the form of capital losses,
lost interest, lost investment returns, and accompanying losses of tax
              

revenue, imposed on New York taxpayers by foreign states through their
evasion of valid judgments rendered against them.

SUMMARY OF PROVISIONS:
Section 1 - The New York Tax Law is amended to add a new Article 15
containing sections numbered 330 to 332. It defines the terms "agency
or instrumentality of a foreign state", "final judgment", "financial
institution", "paying agent and fiscal agent services", "foreign
state", "debt evading foreign state", "state-owned Corporation of a
debt evading foreign state" and "state".  It defines debt-evading
foreign states ("DEFS") as foreign sovereigns that have had judgments
rendered against them in New York, if the judgments in the aggregate
total $100 million and any of the judgments have been outstanding for
at least two years. The poorest developing countries are excluded from
this definition and would not be affected by this tax. Foreign
sovereigns that qualify as DEFS, and their agencies and
instrumentalities, would be subject to a tax: on certain types of
paying agent and fiscal agent services provided by financial
institutions. The rate of tax would be four percent of the gross
amount disbursed by the financial institution in relation to and at
the time of each provision of such service. The financial institution
providing such service is responsible for collecting the tax from the
DEFS and remitting the t ax to the tax commission. Any financial
institution that fails to collect and remit the tax to the tax
commission shall be liable for the full amount of the tax. The
Department of Taxation would determine and publish a list of DEFS, and
the Attorney General would be empowered to investigate and take any
appropriate enforcement action.


Section 2 - The New York Tax Law is amended by adding a new Section
1816 to Part III of Article 37. Any financial institution that
willfully attempts to evade or defeat the tax shall, in addition to
other penalties provided by law, be guilty of a misdemeanor punishable
by a fine of not more than $10,000 per occurrence.

Section 3 - Provides that the act will take effect thirty days after
enactment and shall apply to any disbursement of funds in connection
with the provision of a paying agent service or fiscal agent service
occurring on or after the effective date.

JUSTIFICATION:
New York taxpayers have invested billions of dollars in debt issued by
foreign sovereigns. To facilitate the issuance of their debt to New
York citizens and other individuals through New York's capital
markets, many foreign sovereigns designate New York as the place of
payment and the venue where the foreign sovereign waives sovereign
immunity and consents to jurisdiction to be sued in the case of a
default.  As a result, actions to enforce defaulted debt are
frequently brought in state and federal courts located in New York.
Although many foreign sovereigns pay their debts responsibly, some
foreign sovereigns that are capable of making payments to their
creditors instead choose to repudiate their debts and to refuse to pay
judgments rendered against them. Because of the difficulties
associated with enforcing judgments against foreign sovereigns, New
York taxpayers suffer significant losses, and have little legal
recourse, when foreign sovereigns choose not to pay their debts. The
losses incurred by taxpayers significantly affect New York tax
revenue, not only because New York cannot tax interest and other gains
that are not paid, but also because investors' losses can be offset
against other taxable gains.

The most egregious example of a foreign sovereign that is capable of
paying its debt, but that chooses not to, is the Republic of
Argentina. In 2001, Argentina defaulted on $81.2 billion of debt,
which is the largest sovereign debt default in history. Argentina
refused to negotiate with its bondholders until 2005, and then offered
the bondholders an exchange worth about 25-cents on the dollar on a
take-it-or-leave-it basis.  Approximately 76 percent of bondholders
accepted the exchange offer, and Argentina repudiated the remaining
portion of its debt. Argentina has repudiated these debts while
claiming, in a recent filing with the Securities and Exchange
Commission, to have a debt-to-gross domestic product ratio of 49.1 %
-less than the ratios of Canada, the United Kingdom, France, Germany,
and a variety of other European countries - and a budget surplus in
each year from 2004 to 2008.

Dozens of lawsuits have been filed in the United States District Court
for the Southern District of New York as a result of the Argentine
debt default. The two largest creditors alone have claims and
judgments of over $3 billion. Judge Thomas P. Oriesa, the most senior
judge in the Southern District, has repeatedly observed that Argentina
has never offered to pay the judgments rendered against it and instead
focused all of its efforts on protecting its assets from creditors. In
May 2009, Judge Oriesa held that Argentina was in civil contempt of
court for failing to comply with court orders and drew an adverse


inference that Argentina had removed assets from New York in violation
of court orders.

The economic impact of this debt repudiation has been substantial. The
direct net costs to New York holders of defaulted Argentine debt
currently total $902 million, including $452 million in capital
losses, $382 million in foregone interest payments, and $180 million
in foregone investment returns, less nearly $112 million in tax
benefits created by the losses or foregone income. From December 2001
to December 2008, the indirect costs of the Argentine debt default,
through lost tax revenue, total approximately $329 million.

This bill creates a tax to offset a portion of the adverse effect that
DEFS have on New York tax revenue. It does so by imposing a sales and
compensating use tax on the provision of paying agent services, fiscal
agent services or other similar services by a financial institution to
a debt evading foreign state. The financial institution providing the
service must collect the amount of the tax from the debt evading
foreign state and remit the funds to New York.  This bill ensures that
the tax does not adversely effect the payees of the funds since the
tax is collected from the DEFS.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
At present, at least one debt evading foreign state, the Republic of
Argentina, is using the Bank of New York as its paying agent.
Argentina deposits funds with the Bank of New York to service
currently outstanding debt of Argentina and the Bank of New York
disperses those funds to the appropriate payees. This bill seeks to
impose a tax on Argentina equal to 4% of the gross amount of such
funds deposited with and dispersed by the Bank of New York for the
financial institution providing such paying agent or any other similar
service. This bill would raise revenue of at least $80 million per
year.

EFFECTIVE DATE:
This act shall take effect thirty days after enactment and shall apply
to any disbursement of funds in connection with the provision of a
paying agent service or fiscal agent service occurring on or after the
effective date.