The U.S. Securities and Exchange Commission says its staff has determined that the IOUs being issued by cash-strapped California are securities under federal law. Tom Dresslar, spokesman for state Treasurer Bill Lockyer, says that’s a good thing.
“The SEC has sent a pretty clear warning to folks who plan to profit by buying and reselling IOUs: If you’re not registered as a municipal securities broker-dealer, you run the risk of violating federal law,” Dresslar said in an e-mailed statement. “The recipients of IOUs also should understand that if they sell their IOU to anyone who is not a licensed broker-dealer, they could well have no remedy under federal law if they get victimized by a con artist. So, they should check before selling.”
Dresslar said the SEC’s action might somewhat “reduce the shark factor and potential for taxpayers to get defrauded.” Or, he said, it could just make it harder for recipients of the IOUs to convert them into money if they can’t cash or deposit them with their banks.
“Our office will contact officials of banks that have set a July 10 cutoff date for accepting IOUs and urge them to extend that deadline,” Dresslar said. “We believe such action by the banks will help avoid hardship for IOU recipients, and help reduce taxpayers’ exposure to fraud.”
Oh, but hey – great news if you owe the state personal or corporate taxes: You can give your state-issued IOU back to the state! Yippee!
The Franchise Tax Board announced earlier this week that you can endorse the back of the IOU with the phrase “Pay to the order of Franchise Tax Board” and your signature, then mail it in with your tax bill or estimated tax voucher. Although – just like you – the FTB can’t deposit the IOU until it’s payable, the FTB will credit your account on the day it receives the IOU to stop the accrual of interest. If you owe more than the IOU, then either send the rest in real money or you’ll be billed for the difference.
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