News of the Day

Each December, the Wisconsin Policy Forum examines preliminary state data on property tax levies from school districts, counties, technical colleges, and special districts. (Figures for municipalities are not available until early next year.) The data give a crucial early look at collections from Wisconsin’s largest single tax, which serves as a key source of funding for local services such as education, public safety, and local roads.

Property tax bills being mailed out this month for 2022 show an increase in gross property taxes for Wisconsin’s K-12 school districts of just 0.3%, from $5.38 to $5.40 billion. This is the smallest percentage increase in school district levies since a 0.1% increase in 2016.

Property tax levies for counties will rise by 2.3% statewide, similar to the increase from last year. Levies for Wisconsin’s 16 technical colleges will fall by 3.4% – just their second decline of the 21^st century – due to additional state aid dollars.

Notably, this analysis looks at gross property tax levies before state credits are used to lower the net bills for property taxpayers. While two of the state credits essentially will stay the same, the state lottery credit is budgeted to rise by $85 million this year, which should help to hold overall property taxes for home and business owners to one of the smallest increases in recent years.

The Internal Revenue Service today issued guidance for employers regarding the retroactive termination of the Employee Retention Credit. The Infrastructure Investment and Jobs Act, which was enacted on November 15, 2021, amended the law so that the Employee Retention Credit applies only to wages paid before October 1, 2021, unless the employer is a recovery startup business.

Notice 2021-65 applies to employers that paid wages after September 30, 2021 and received an advance payment of the Employee Retention Credit for those wages or reduced employment tax deposits in anticipation of the credit for the fourth quarter of 2021 but are now ineligible for the credit due to the change in the law. The notice also provides guidance regarding how the rules apply to recovery startup businesses during the fourth quarter of 2021.

Employers who Received Advance Payments

Generally, employers that are not recovery startup businesses and received advance payments for fourth quarter wages of 2021 will avoid failure to pay penalties if they repay those amounts by the due date of their applicable employment tax returns.

Employers who Reduced Employment Tax Deposits

Employers that reduced deposits on or before December 20, 2021, for wages paid during the fourth calendar quarter of 2021 in anticipation of the Employee Retention Credit and that are not recovery startup businesses will not be subject to a failure to deposit penalty with respect to the retained deposits if—

1. The employer reduced deposits in anticipation of the Employee Retention Credit, consistent with the rules in Notice 2021-24 ,
2. The employer deposits the amounts initially retained in anticipation of the Employee Retention Credit on or before the relevant due date for wages paid on December 31, 2021 (regardless of whether the employer actually pays wages on that date). Deposit due dates will vary based on the deposit schedule of the employer, and
3. The employer reports the tax liability resulting from the termination of the employer’s Employee Retention Credit on the applicable employment tax return or schedule that includes the period from October 1, 2021, through December 31, 2021. Employers should refer to the instructions to the applicable employment tax return or schedule for additional information on how to report the tax liability.

Due to the termination of the Employee Retention Credit for wages paid in the fourth quarter of 2021 for employers that are not recovery startup businesses, failure to deposit penalties are not waived for these employers if they reduce deposits after December 20, 2021.

If an employer does not qualify for relief under this Notice, it may reply to a notice about a penalty with an explanation and the IRS will consider reasonable cause relief.

For a brief moment, large swaths of the U.S. employment law community have their eyes glued to one particularly lengthy court docket: BST Holdings, LLC, et al v. OSHA, et al, the consolidated proceedings on the Occupational Safety and Health Administration’s COVID-19 vaccination Emergency Temporary Standard now before the 6th U.S. Circuit Court of Appeals.

Since the case’s assignment, the 6th Circuit has established a timeline for parties to file motions to modify, revoke or extend the stay on the ETS placed by the 5th Circuit. As expected, multiple parties have filed motions in the suit, creating a situation that is rarely seen in the circuit court context. “It’s kind of all over the place,” said Andrew MacDonald, partner at Fox Rothschild, “and the court doesn’t have any power to stop the parties from filing motions.”

Of all the motions filed, however, perhaps the most important is OSHA’s motion to dissolve the 5th Circuit’s stay on the ETS, according to Sean Marotta, partner at Hogan Lovells; “Keep an eye on the stay, because the stay will probably be the thing that determines whether this goes into effect at all.”

The 6th Circuit could make a decision on OSHA’s motion at any point after Dec. 10, MacDonald said, but the timing is such that the agency would not be able to enforce the ETS on time. “OSHA can’t enforce this until the court says otherwise,” he continued.

Even after that decision, many expect the losing side to appeal to the U.S. Supreme Court. Both Marotta and MacDonald said that the High Court could hear an appeal of the 6th Circuit’s decision as part of its so-called “shadow docket.” That would mean the Supreme Court would quickly render a decision on the issue without a full briefing or oral arguments, said MacDonald, but he added that the court may choose not to do so.

Furthermore, the Supreme Court would have to go “pedal to the metal” in its review if it were to issue a ruling on the ETS before the standard’s May 4, 2022, expiration date, Marotta said. At that point, the ETS would either no longer be in effect, or OSHA would institute a permanent standard.

But most, if not many, employers who want to implement a mandate have already done so regardless of the ETS, said MacDonald; “There is nothing in the law stopping most employers from issuing their own vaccine mandate through the authority of being an employer.” OSHA’s action also may further encourage employers to adopt mandates even if it never takes effect.

“Employers should just monitor the situation and not rush out any mandates without checking whether they need to or want to,” MacDonald said.

President Biden further detailed his winter plan to combat COVID-19 within the United States in an op-ed Thursday, reiterating his vow that there would not be “shutdowns or lockdowns.”

His plan largely calls for a doubling down on getting the COVID-19 vaccine and booster shots for Americans who are eligible. He said the nationwide booster campaign would be expanded to incorporate more walk-in appointments, longer hours and weekends.

The President also pledged that at-home COVID-19 test kits would be covered by insurance companies or provided free for people to pick up if they did not have private insurance coverage.

The President also suggested that the Centers of Disease Control and Prevention may weigh in on ways for schools to remain open amid the COVID-19 pandemic as the country sees more cases from the newly detected omicron variant.

Wisconsin’s 134 state-chartered banks continue to exhibit strong financial performance as of September 30, 2021, according to data released on Thursday by the Wisconsin Department of Financial Institutions (DFI).

Total assets of Wisconsin’s state-chartered banks stand at more than $67.8 billion through September 30, 2021, an increase of nearly $5.1 billion from September 30, 2020. Excess liquidity from the extension of the COVID-19 pandemic’s Paycheck Protection Program (PPP) loans combined with the low interest rate environment has put pressure on the net interest margin, decreasing it from 3.49% in September 2020 to 3.35% as of September 30, 2021. Net loans have decreased 2.16% from September 2020, down $949.6 million, due, in part, to PPP loans being forgiven or paid down.

In the twelve months ending on September 30, 2021:

• The capital ratio remained strong at 10.97% compared to 11.12% in September 2020;

• The past due ratio declined to 0.76% from mid-pandemic levels when the ratio was 1.17% in September 2020;

• Net operating income was over $679.3 million compared to $557.1 million in September 2020.

• Bank liquidity has been strong, putting pressure on the loans to assets ratio at 64.82% compared to mid-pandemic liquidity levels of 71.57% in September 2020.

Americans are applying for credit cards at a rate not seen since before the pandemic. Close to 27% of U.S. consumers said in October that they had applied for a credit card in the past 12 months, according to the Federal Reserve Bank of New York. That is the highest level since 2019 and well above the record low of 16% recorded a year ago.

Americans also want to borrow more on their existing cards. More than 11% of U.S. consumers said in October that they had applied for credit-limit increases in the past 12 months, up from about 7% a year ago.

“Many things are slowly returning to more normal times,” said Wilbert van der Klaauw, senior vice president at the New York Fed. “With that, you expect the demand for credit to come back to pre-pandemic levels and continue on the same growth path.”

Banks charge interest on balances that are carried month to month. Credit-card balances remain $123 billion lower than they were at the end of 2019, according to the New York Fed.

Yesterday, Governor Tony Evers announced that $205.7 million has been directed to the 1,825 participating Wisconsin local governments under the American Rescue Plan Act’s (ARPA) State and Local Fiscal Recovery Funds (SLFRF) program.

Under the SLFRF program, counties, large municipalities, and tribal governments received their own allocation from the federal government. Non-entitlement units, those under 50,000 in population, received their distribution from the state. The amount allocated to each local government is based on a specific formula largely based on population.

According to United States Treasury guidance, examples of uses for these funds include, but are not limited to, supporting the public health response to COVID-19, addressing negative economic impacts of COVID-19, improving water, sewer, and broadband infrastructure, paying premiums for essential workers, and replacing public sector revenue losses.

Each non-entitlement community will make their own decisions in line with the Treasury guidance about how to spend these ARPA dollars. They have until 2024 to obligate the funds and until 2026 to spend the funds.

These same local governments will receive a second payment, equal to the payment being announced today in 2022, bringing the total funding made available to over $411 million.

A survey of Midwest farm bankers found Wisconsin farmland values are up 10 percent from the same period in 2020.

The Federal Reserve Bank of Chicago surveyed 151 bankers in their district, which includes Iowa and parts of Wisconsin, Illinois, Indiana and Michigan.

The bankers reported the value of good quality farmland across the region had increased by 6 percent from the second quarter to the third quarter of this year. Compared to the third quarter of 2020, bankers reported that land values were up 18 percent.

In Wisconsin, surveyed bankers reported land values were up 1 percent from the previous quarter and 10 percent from the same time last year.

David Oppedahl, senior business economist for the Federal Reserve Bank of Chicago, said the value of land started increasing last fall as the agriculture industry recovered from the initial shocks of the COVID-19 pandemic.

“Over the past year, there have been additional increases in income from both government support programs as well as higher prices for a lot of commodities. So it’s really helped to shore up the finances and provide extra income that’s being used, as well as low interest rates to help support farmland values,” Oppedahl said.

Wisconsin bankers reported a smaller increase in land values than neighboring states like Iowa, where survey respondents reported land values 28 percent higher than in 2020.

Oppedahl said the state’s farm industry includes a wider variety of commodities, meaning land values aren’t as closely tied to corn and soybean prices. He said that also means Wisconsin didn’t see as large of a decline in land values in recent years when those prices fell.

“The more diverse nature of agriculture in Wisconsin and the desirability of areas for rural living have made Wisconsin’s farmland retain its value a little more,” Oppedahl said. “Wisconsin hasn’t increased as rapidly because it’s already at a relatively high level compared to its historical averages.”

Federal Reserve officials at their meeting earlier this month expressed concern about inflation and said they would be willing to raise interest rates if prices keep rising.

The committee that sets interest rates for the Fed on Wednesday released the minutes from the November session where it first signaled that it could be dialing back all the economic help it’s been providing during the pandemic.

The meeting summary indicates a lively discussion about inflation, with members stressing the willingness to act if conditions continue to heat up.

“Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the Committee’s objectives,” the minutes stated.

Officials stressed a “patient” approach regarding incoming data, which has shown inflation running at its highest pace in more than 30, the years.

But they also said they would “not hesitate to take appropriate actions to address inflation pressures that posed risks to its longer-run price stability and employment objectives.”

New weekly claims for jobless aid plunged to the lowest level in more than 50 years last week, according to data released Wednesday by the Labor Department.

In the week ending Nov. 20, there were 199,000 initial applications for unemployment insurance, according to the seasonally adjusted figures, a decline of 71,000 from the previous week. Claims fell to the lowest level since November 1969 and are now well below the pre-pandemic trough of 225,000 applications received the week of March 14, 2020.

“Getting new claims below the 200,000 level for the first time since the pandemic began is truly significant, portraying further improvement,” said Mark Hamrick, chief economic analyst at Bankrate.com.

“The strains associated with higher prices, shortages of supplies and available job candidates are weighed against low levels of layoffs, wage gains and a falling unemployment rate,” he continued. “Growth will likely be above par for the foreseeable future, but within the context of historically high inflation which should relax its grip on the economy to some degree in the year ahead.”