NEW YORK, N.Y.—Representative Gregory Meeks (D-Queens) introduced a bill January 16, to exempt debt relief for taxi drivers from federal taxes.
The measure, cosponsored by all of the city’s House members plus Long Island Republican Peter King, is a second front in the struggle to win relief for yellow-cab owner-drivers who owe hundreds of thousands of dollars on medallions they bought at inflated prices before the arrival of Uber and Lyft burst the bubble and decimated their value. It’s necessary, a group of city, state, and federal legislators said at a City Hall press conference January 17, to protect a driver who gets $500,000 in debt forgiven against being whacked with a $150,000 tax bill.
Almost 1,000 of the city’s 6,000 medallion owner-drivers have filed for bankruptcy, Meeks said. The average amount they owe on their medallions is $600,000, said Bhairavi Desai of the New York Taxi Workers Alliance. The medallion’s value, which peaked at $1.3 million in 2014, had fallen to between $120,000 and $150,000 by last year.
Three of the nine cab drivers who have committed suicide since November 2017 were yellow-cab owners who owed more than the medallions were worth.
“I have a loan. $915,000,” driver Mohammed Hoque of Queens, who bought his medallion in 2014, told LaborPress.
Rep. Nydia Velázquez (D-Brooklyn) said it would be “sadly ironic” if drivers had to pay taxes on forgiven debt, which the Internal Revenue Service generally counts as income. (On Jan. 15, it announced that it would expand the exemption it gives people whose fraudulent student loans were forgiven.) Regulators were “sleeping at the switch” instead of going after predatory-lending techniques, Velázquez said, and the city made $850 million in revenue selling medallions aggressively as prices inflated.
Meeks said he hopes to get the legislation enacted before the April 15 tax deadline. “We’re going to attach it to a bill we know will pass the Senate,” he told LaborPress, such as a budget appropriation. Rep. King’s support is crucial, he added, to show Senate Republicans that it’s a bipartisan effort.
The City Council plans to introduce a resolution supporting the Meeks bill, the Taxi Medallion Loan Forgiveness Act, Councilmember Ydanis Rodriguez (D-Manhattan) told the press conference. In Albany, state Sen. Jessica Ramos (D-Queens) has introduced the Taxi Medallion Guarantee Act, which would give banks $175,000 to forgive loans from drivers who can’t pay them.
Rep. Velázquez is sponsoring the Small Business Lending Fairness Act, which would restrict the use of loan-contract clauses called “confessions of judgment,” which are common in taxi-medallion loans. In them, the borrower agrees that if they can’t pay, the lender can seize their assets without taking them to court. The House Financial Services Committee approved it in November, on a 31-23 party-line vote.
Before drivers with underwater loans worry about being taxed on money they don’t have to pay back, however, they first have to get the loans forgiven. So far, only one bank has: Signature Bank. It has directly forgiven $70 million in loans to about 250 drivers who are still working, chair Scott Shay said, and decided not to pursue judgments against “hundreds” of drivers who quit the industry and gave up their medallions.
Shay estimates the bank lost a total of $500 million by doing that. It was a costly blow, he said, but “we had the wherewithal to take the hit. We recognized the pain and the hardship for families who are no longer financially viable.”
Meanwhile, legislators and the Taxi Workers Alliance are pressuring banks and the National Credit Union Association to forgive loans—and not foreclose on them or sell them at a discount to investors. The NCUA, a federal agency that regulates credit unions, has taken over loans from credit unions that went bankrupt, including some from taxi-industry lenders such as the LOMTO Federal Credit Union, which was liquidated in September 2018. Councilmember Mark Levine (D-Manhattan) called NCUA “the most inflexible lender” about not renegotiating loans.
Desai, speaking to more than 100 drivers who rallied on the steps of City Hall after the press conference, described the agency as “kind of the TLC”—the Taxi and Limousine Commission—for credit unions. NYTWA is planning a trip to the agency’s headquarters in Alexandria, Virginia Jan. 23 to urge it to hold onto the loans.
But to get them all forgiven, she said, it would take $500 million from investors willing to buy them and convert them into loans with low or no interest.
“We’re not giving up. We’re going to make it happen,” Desai told a group of drivers afterwards.