Financial Advice

The chairman of the Senate Finance Committee is proposing a series of agricultural tax credits, bonds and a trust fund as part of a farm bill that would give billions in aid to farmers and pay for the nation's nutrition programs.

Montana Sen. Max Baucus, a Democrat, said Tuesday that his committee will find an extra $8 billion to $10 billion through new agriculture-related tax proposals. That would be added to the bill's baseline spending, estimated to be more than $280 billion over five years.

Money has been tight for the farm bill, a politically popular piece of legislation that expires this year. Farm-state lawmakers have scrambled to find a way to pay for it as the Sept. 30 deadline looms.

The finance panel's proposals include a trust fund that would pay for weather-related disaster assistance-a priority in Baucus's home state. That could set up a fight with Agriculture Committee Chairman Tom Harkin, D-Iowa, who would rather use extra money for conservation programs that protect environmentally sensitive farmland, nutrition programs and other agricultural needs.

The disaster trust fund would help reimburse farmers who have lost crops or ranchland because of weather. That assistance has been paid through emergency dollars in recent years, and has occasionally threatened to stall spending bills as Western and Midwestern members have made recovering those losses a priority.

Under the proposal, farmers who receive subsidies for conserving farmland would be able to choose whether they want tax credits or federal cash. The plan also includes tax credit bonds for projects such as rural electric and telemedicine, rural broadband and other rural economic development.

Senator Barack Obama proposed a plan on Tuesday to provide at least $80 billion a year in tax cuts to middle-class workers, homeowners and retirees, saying if he was elected president he would "end the preferential treatment that's built into our tax code."

Mr. Obama said he would give a $500 tax credit to more than 150 million workers, create a tax credit for homeowners who do not itemize their deductions and eliminate income taxes for older taxpayers who make less than $50,000 a year. To pay for the plan, he said he would raise capital gains taxes on the wealthy, close corporate loopholes and abolish tax breaks that have saved hedge fund and private equity managers billions of dollars.

"If you talk about this in polite company, sooner or later you'll get accused of waging class warfare," Mr. Obama said. "As if it's distasteful to point out that some C.E.O.'s make more in 10 minutes than a worker makes in 10 months."

As he pursues the Democratic presidential nomination, Mr. Obama, of Illinois, is seeking to cast himself as an advocate for working Americans, arguing against special interests that he says have contributed to a widening gap between the rich and the middle class and poor. He said the nation's "social compact is starting to crumble."

In an address to the nonpartisan Tax Policy Center, Mr. Obama also proposed major simplifications to the tax system, with a goal of making basic tax filing a five-minute exercise. For about 40 million Americans without complex taxes, he said, the government would essentially send a bill based on electronic information from employers and banks.

Canada and the United States are expected to sign a new tax treaty this month that could increase Canadian companies' access to U.S. financing.

The two governments will eliminate the 10 percent withholding tax on interest payments made by borrowers in one country to lenders in the other.

The long-awaited measure would mainly benefit Canadian companies that borrow from U.S. banks. The Conservative government estimates it will cost it an estimated C$250 million ($246 million) in the two fiscal years to 2009.

While the Liberal opposition supports the change, it warned that it should be accompanied by steps to plug a loophole that allows foreigners to load up on debt in Canada and avoid taxes.

Finance Minister Jim Flaherty said in a speech on Sunday that the signing of a revised Canada-U.S. tax treaty would be "soon." Finance officials would not give details.

Tax lawyers who consulted with the Department of Finance said they had been told the revised treaty would be signed by the end of September.

Nancy Hughes Anthony, president of the Canadian Bankers Association, also believes an announcement is imminent.

The withholding tax is applied to the interest income of nonresident lenders. Canadian law obliges the Canadian borrower to withhold the tax from its interest payment to a U.S. lender and remit it directly to Ottawa.

In practice, the tax becomes a premium on capital because most sophisticated U.S. lenders require clients to "gross up" their payment so that they pay the full interest plus the tax.

Is a landlord of commercial property required to place a tenant's security deposit in a segregated interest-bearing account?

A landlord of commercial property in New Jersey is not required to place a tenant's security deposit in a segregated interest-bearing account. In fact, commercial landlords sometimes commingle security deposits with their own funds or even "spend" such money by, for example, paying real estate brokerage commissions or attorneys' fees. They may also pay the contractors who are preparing a tenant's premises for occupancy.

The New Jersey Security Deposit Act only requires residential landlords to place a tenant's security deposit in a segregated interest-bearing account.

Therefore, if a commercial tenant wants to try to "protect" its security deposit, it can either request that the landlord place the deposit in a segregated interest-bearing account (such agreement to be contained in the lease between the landlord and the tenant), or it can offer the landlord some type of security other than cash, such as an irrevocable and negotiable letter of credit issued by a bank with whom the tenant has a relationship.

The ultimate form a security deposit takes, and the degree to which it is protected, will depend upon prevailing market conditions, square footage of the premises to be leased by the tenant, the term of the proposed lease and the negotiating skills of the attorneys, as well as other factors.

In conclusion, because commercial landlords and commercial tenants are presumed to be sophisticated parties of equal bargaining power, the parties must resolve the issue regarding the treatment of the tenant's security deposit by negotiation.