Magazine article American Banker

Mass. Weighs Law to Allow Tax-Free Trust Conversions

Magazine article American Banker

Mass. Weighs Law to Allow Tax-Free Trust Conversions

Article excerpt

Massachusetts bankers want the state to pass a law allowing for conversions of personal common trust funds to mutual funds without triggering taxes for clients.

Congress amended the tax laws in 1996 to exempt conversions of personal common trust funds from federal capital gains taxes, but the Massachusetts state tax code has not followed.

A bill to allow tax-free conversions is "under review" for the first time in the Massachusetts Senate, which will end its session July 31, a spokesman for its Ways and Means Committee said. The bill passed in the state's House in November.

The majority of states have followed the federal resolution and last year alone $18.1 billion of assets flowed into mutual funds from common trust fund portfolios, according to the Investment Company Institute, a Washington-based trade group. Several banks have converted more personal trust assets or have plans to do so this year.

"We're the only major state left," said David E. Floreen, senior vice president of the Massachusetts Bankers Association. "We're hopeful. I give it a fifty-fifty shot."

Bankers are hopeful too, but they are not holding their breath.

"We've been thinking this might happen for a while and it didn't," said Allen W. Croessmann, managing director of investment products and services at BankBoston Corp. "We would be very interested in having this legislation passed."

BankBoston could roll about $1 billion of assets under management in personal common trust funds into its proprietary mutual fund family, the Boston 1784 Funds, which manages about $9 billion. …

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