Bank Attorneys Section Seminar:

State, Federal and Insolvency

Law Updates

Andrew R. Biehl Walentine O’Toole LLP

Bob Hallstrom

Brandt Horan Hallstrom & Stilmock

Jerry Stilmock Brandt Horan Hallstrom & Stilmock

Jonathan J. Wegner

Baird Holm LLP

Thursday, October 18, 2018

Embassy Suites Hotel – La Vista Conference Center

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BANKING LAW UPDATE

ROBERT J. HALLSTROM, ESQ. GERALD M. STILMOCK, ESQ. Brandt, Horan, Hallstrom & Stilmock PO Box 186 Syracuse, NE 68446-0186 402-269-2081 Bob.Hallstrom@nebankers.org Jerry.Stilmock@nebankers.org

2018 One Hundred Fifth Legislature

Second Session

Richard J. Baier President & CEO

Robert J. Hallstrom

Chief Lobbyist & General Counsel

Gerald M. Stilmock Associate General Counsel

For more information, contact Robert J. Hallstrom or Gerald M. Stilmock

at the Nebraska Bankers Association, (402) 474-1555

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2018 NBA LEGISLATIVE UPDATE

WRAP-UP EDITION The second session of the 105th Nebraska Legislature is now history, as the Legislature adjourned sine die on April 18, 2018. As always, the Legislature dealt with a number of contentious issues in the waning days of the session. The next regular session is scheduled to convene in early January 2019. Over 95 bills, amendments to those bills and amendments to other proposals were actively monitored by the NBA this session. We have summarized only the major bills of direct interest to the banking industry, according to subject. Most of the other numerous non-banking legislative measures were disposed of early in the session and were previously covered in the weekly NBA Legislative Update narratives or Bill Summary emails. During this session, many of the bills on the NBA’s affirmative legislative agenda or supported by the NBA were enacted into law. The Legislature also took no final action on any of the bills on which the NBA had established a position of opposition. The success of this session is in large part attributable to the excellent grassroots support provided by Nebraska bankers. When called upon to make contacts with legislators, Nebraska bankers responded promptly and effectively in communicating the NBA’s position on issues of importance to the banking industry. Thank you to each and every Nebraska banker who took time to visit with their state senator during the 2018 legislative session. In addition to the newly enacted legislation, we have also summarized a number of bills, which indefinitely postponed at the end of the 2018 legislative session. The summary also includes the effective dates of the enacted legislation and any necessary compliance information. Members of the NBA Government Relations Committee put in many hours reviewing potential legislation for introduction on behalf of the NBA and in analyzing other legislation introduced each session. The Committee makes recommendations regarding positions to be established by the NBA on legislation of interest to the banking industry which are forwarded to the NBA Board of Directors for final action. A special thanks to Doug Weiss, West Plains Bank, Ainsworth, who served as Chairman of the NBA Government Relations Committee this year along with all of the members of the Government Relations Committee for their efforts on behalf of the banking industry. A listing of the 2017-18 members of the NBA Government Relations Committee is included in this NBA Legislative Update Wrap-Up edition. If you have any questions regarding any of the bills highlighted below, please feel free to contact the NBA. This NBA Legislative Update Wrap-Up Edition has been prepared as a summary and it does not necessarily constitute a complete or definitive analysis of each bill discussed. The NBA staff is prepared to provide you with further information or to send you copies of bills in which you are interested.

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The NBA legislative program is member-driven. Members submit ideas for legislation during the interim and in response to solicitations

by NBA. The Government Relations Committee meets at least six times over a biennium to consider those ideas, make

recommendations to the NBA Board of Directors regarding bills to be sponsored on behalf of the NBA, and to determine positions to be taken by the NBA on legislation introduced before the Nebraska

Legislature which affects the banking industry.

2017-2018 Government Relations Committee

CHAIRMAN Douglas Weiss, Chairman West Plains Bank, Ainsworth Kristie Holoch, NBA Chairman Cornerstone Bank, York David Dannehl, NBA Chairman-Elect First State Bank of Loomis, Loomis Jared Baker Community Bank, Alma Aaron Bell Security First Bank, Lincoln Craig Brewster, ABA Grassroots & GR Council Butte state Bank, Butte Anna Castner Wightman First National of Nebraska, Inc., Omaha Timothy Clark Bank of Bennington, Bennington Justin Douglas Farmers Bank of Cook, Cook Christopher Gray Farmers State Bank, Dodge Patrick Green Wells Fargo Bank, Des Moines, IA Michael Hall American National Bank, Omaha Stacie Holden US Bank, NM Mike Jacobson, ABA GR Representative NebraskaLand National Bank, North Platte

Jeffrey Kanger First State Bank Nebraska, Lincoln Zac Karpf, BankPAC Chairman Platte Valley Bank, North Bend Matthew Ley State Nebraska Bank & Trust, Wayne Steven Mitchell Mutual of Omaha Bank, Omaha Todd Rischling Farmers & Merchants Bank, Milford Renea Rush Equitable Bank, Grand Island Ryan Steffensmeier First Community Bank, Beemer Daryl Wilton Cornerstone Bank, York

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NBA AFFIRMATIVE LEGISLATIVE AGENDA

A number of bills were requested to be introduced on behalf of the NBA during the 2017-2018 Legislative Session. Actions taken on bills that were a part of the NBA’s affirmative legislative agenda were as follows:

GARNISHMENT FEES LB 229 – Sponsor: Senator Matt Williams NBA POSITION: SUPPORT BILL STATUS: IPP LB 229 would have required payment by a judgment creditor of a $15 fee upon service of a garnishment summons and interrogatories on a financial institution. If the financial institution was authorized to collect a garnishment fee from its customer, the $15 fee would have been deducted from the customer’s garnishment fee.

WORKFORCE HOUSING – COMMUNITY DEVELOPMENT LAW LB 496 – Sponsor: Senator John Stinner NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 496 will authorize cities of the first and second class and villages to include the construction of single-family or multi-family housing as part of a redevelopment project eligible for tax increment financing. The legislation will also require a municipality to conduct a housing study, prepare an incentive plan for the construction of housing meant for new or existing workers, and hold a public hearing on the plan. The public hearing on a workforce housing incentive plan will be separate from a public hearing on a TIF redevelopment plan. After the hearing, the municipality will be required to determine that the plan is necessary to prevent the spread of blight and substandard conditions within the municipality, will promote additional safe and suitable housing for people employed in the municipality and will not result in the unjust enrichment of any individual or company. The legislation will be restricted to “rural communities,” defined as any municipality in a county with fewer than 100,000 inhabitants and to “extremely blighted areas” areas within a municipality (areas in municipalities with high unemployment and poverty rates). Workforce housing is defined as owner-occupied housing units that cost no more than $275,000 to build or rental housing units that cost no more than $200,000 to build. (Effective Date: July 19, 2018)

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RELEASE OF TRUST DEEDS AND MORTGAGES LB 750 – Sponsor: Senator Matt Williams NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 750 clarifies that the transfer of any debt secured by a mortgage shall operate as a transfer of the security of such debt, which currently applies to transfers of debt secured by a trust deed. The bill also provides uniformity within various statutes relating to the obligation of a lender to record a release of lien or deed of reconveyance following a written request and satisfaction of the underlying obligation, as well as addressing the consequences for failing to timely record a release or deed of reconveyance. (Effective Date: July 19, 2018)

DIRECT BORROWING OF CITIES AND VILLAGES LB 1020 – Sponsor: Senator Sue Crawford NBA POSITION: SUPPORT BILL STATUS: IPP LB 1020 would have clarified provisions relating to direct borrowing from financial institutions by cities and villages to a) allow installment loans to be repaid over a term not to exceed seven years; b) extend the limitation on total amount of indebtedness from direct borrowing by a city of the second class to twenty percent of the municipal budget of the city; and c) provide that the amount of any loan attributable to any limitation on the total amount of outstanding indebtedness from direct borrowing is the total amount of the outstanding loan balance divided by the number of years over which the loan is to be repaid.

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BILLS SUPPORTED BY THE NBA A number of bills on which the NBA took a “support” position were considered during the 2017-2018 Legislative Session. Actions taken on the bills supported by the NBA were as follows:

FIRST-TIME HOMEBUYER SAVINGS ACCOUNT ACT LB 15 – Sponsor: Senator Joni Craighead NBA POSITION: SUPPORT BILL STATUS: IPP LB 15 would have allowed a first-time homebuyer to establish an account with a financial institution for the purpose of paying or reimbursing eligible costs for the purchase of a single-family residence. The bill also would have required the account holder, rather than the financial institution, to be responsible for the use or application of funds in an account for which the account holder claims first-time homebuyer savings account status.

REAL PROPERTY APPRAISER ACT/APPRAISAL MANAGEMENT COMPANY REGISTRATION ACT

LB 17 – Sponsor: Senator Steve Erdman NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 17 clarifies that a certified real property appraiser credentialed in Nebraska or a person holding its equivalent in another jurisdiction for a minimum of three years immediately preceding the date of a request for approval as a supervisory appraiser, may supervise a trainee real property appraiser. The bill also modifies the Appraisal Management Company Act to conform to federal laws and regulations. (Effective Date: July 19, 2018)

GARNISHMENTS

LB 136 – Sponsor: Senator Laura Ebke NBA POSITION: SUPPORT BILL STATUS: IPP LB 136 would have allowed a garnishee to release funds that have been attached pursuant to an order of garnishment if no order to pay the judgment creditor has been received by the garnishee within 60 days following the receipt, by the judgment creditor, of the garnishee’s answer. The measure would also have, in any case involving service of garnishment summons on a financial institution, if the judgment debtor is an employee of the financial institution, deemed a garnishment summons to only apply to earnings of the judgment debtor.

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INCOME TAXATION – SOCIAL SECURITY BENEFITS

LB 738 – Sponsor: Senator Brett Lindstrom NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 738 will utilize an index for inflation for taxation of social security benefits – similar to the system in place for Nebraska’s state income tax brackets. (Effective Date: July 19, 2018)

NEBRASKA REAL PROPERTY APPRAISER ACT

LB 741 – Sponsor: Senator Brett Lindstrom NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 741 will update the Nebraska Real Property Appraiser Act for compliance with Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Uniform Standards Professional Appraisal Practice and the Policy Statements of the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. (Effective Date: July 19, 2018)

ATM SKIMMING DEVICES

LB 773 – Sponsor: Senator Robert Clements NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 773 will, in part, expand the types of scanning devices for which use or possession for the purpose of obtaining information encoded on a payment card constitutes a criminal offense. (Effective Date: July 19, 2018)

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STATE BANK AND S&L WILDCARD

LB 812 – Sponsor: Senator Brett Lindstrom NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 812 will revise powers of state-chartered banks and building and loan associations. (Effective Date: July 19, 2018)

NEBRASKA PROPERTY TAX CUTS AND OPPORTUNITIES ACT

LB 947 – Sponsor: Senator Jim Smith NBA POSITION: SUPPORT BILL STATUS: IPP LB 947 would have provided increased property tax relief by restructuring the state’s current Property Tax Credit Cash Fund into a new, refundable income tax credit available only to owner-occupied households in Nebraska and agricultural land owners who reside in the state. The income tax credit would have been equal to 10 percent of the property tax bill on taxpayers’ homes or farms, with the credit for homeowners capped at $230. The bill would also have provided property tax relief in future years that would result when state revenue exceeds revenue forecasts. Individual and corporate income taxes would also be reduced, with the top individual income tax rate dropping from 6.84 percent to 6.75 percent in 2019 and to 6.69 percent in 2020. The maximum corporate tax rate (paid on income of more than $100,000), would have been reduced from 7.81 percent to 6.75 percent in 2019, and to 6.69 percent in 2020. An additional $10 million in funding over the next two years for workforce development would have been provided and the exemption of the first $10,000 from personal property taxation would have been repealed.

INCOME TAXATION – PERSONAL PROPERTY EXEMPTIONS

LB 1089 – Sponsor: Senator Jim Smith NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 1089 will, in part, restore the state’s personal property tax exemption for purchases of agricultural and business equipment when using trade-ins. The exemption had been eliminated by the 2017 federal tax bill. LB 1089 will prevent valuation increases on personal property that would otherwise be subject to taxation at the local level. (Effective Date: April 12, 2018)

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INCOME TAXATION

LB 1090 – Sponsor: Senator Jim Smith NBA POSITION: SUPPORT BILL STATUS: PASSED AND SIGNED LB 1090 will make adjustments to state tax laws to neutralize effects resulting from federal tax reform. The measure will a) retain the personal exemption credit against Nebraska income taxes; b) increase the Nebraska standard deduction; and c) continue indexing the standard deduction, personal exemption, and tax brackets based on the Consumer Price Index. (Effective Date: July 19, 2018)

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BILLS OPPOSED BY THE NBA A number of bills affecting the banking industry were indefinitely postponed during the course of the 2017 legislative session or were “carried over” for further consideration during the 2018 legislative session. The NBA was “opposed” to the following bills:

TAXATION - MODERN TAX ACT

LB 52 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 52 would have imposed a tax of 5.5 percent on the amount of interest paid by a qualified debtor (resident of Nebraska, trust created under Nebraska law or business entity organized under Nebraska law or which has its principal office located in Nebraska) on any eligible loan (loan secured by real estate located in Nebraska, loan secured by Uniform Commercial Code filing, loan secured by a security or commercial paper held in or delivered to a creditor in Nebraska, loan secured by a vehicle titled in Nebraska, or loan over which Nebraska courts have jurisdiction and venue in any action for default in payment). The bill would have required the lender to collect the tax from the qualified debtor at the time any regularly scheduled payment on the eligible loan is due and to remit the taxes collected to the Tax Commissioner on a monthly basis. The measure would also have exempted loans to governmental entities, publicly traded bonds and loans the proceeds of which are used by a licensed financial institution or insurance company to make loans subject to the tax.

ECONOMIC DEVELOPMENT – NEBRASKA ADVANTAGE ACT

LB 126 – Sponsor: Senator Mike Groene NBA POSITION: OPPOSE BILL STATUS: IPP

LB 126 would have changed sunset dates under the Nebraska Job Creation and Mainstreet Revitalization Act and the Nebraska Advantage Act from December 31, 2020 to December 31, 2018.

REAL ESTATE BROKER TRUST ACCOUNTS

LB 208 – Sponsor: Senator Brett Lindstrom NBA POSITION: OPPOSE BILL STATUS: IPP LB 208 would have authorized credit unions to maintain real estate broker trust accounts.

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PAID FAMILY MEDICAL LEAVE INSURANCE ACT

LB 305 – Sponsor: Senator Sue Crawford NBA POSITION: OPPOSE BILL STATUS: IPP LB 305 would have established a statewide paid family medical leave insurance program similar to Nebraska's unemployment insurance system and managed by the state Department of Labor. The bill would have applied to all employers’ subject to the Employment Security Act (one or more employees), with self-employed individuals eligible to participate. The measure would have also provided employees with two-thirds of their regular pay for up to three months of leave for their own health, or the birth or adoption of a child, and up to six weeks leave for the care of a family member.

TAXATION – SALES TAX ON SERVICES

LB 312 – Sponsor: Senator Tom Briese NBA POSITION: OPPOSE BILL STATUS: IPP LB 312 would have, effective January 1, 2018, subjected the following to a sales tax on services: cleaning of tangible personal property; storage and moving services; investment advice; personal care services, including haircare, massages, nail services, spa services, and tattoo services; maintenance, painting, repair, and interior decoration services for single-family housing; limousine, taxi and other transportation services; travel agents and tour operators; lawncare, gardening and landscaping services; parking lot services; swimming pool cleaning and maintenance services; dating and escort services; instruction in music, dance, golf, and other recreational activities; custom meat slaughtering services; legal services, excluding legal services performed in the furtherance of a for-profit business enterprise; accounting services, excluding accounting services performed in the furtherance of a for-profit enterprise; real estate services relating to the sale of single-family housing; architectural services for single-family housing; tele-floral delivery services; and labor of a contractor for any major addition, remodeling, restoration, repair or renovation of owner-occupied residential housing. The measure would have also imposed a sales tax on soda, candy and bottled water and credit any net increase in tax revenue resulting from the legislation to the excess Revenue Property Tax Credit Fund to provide a property tax credit to owners of real property.

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TAXATION – SALES TAX

LB 313 – Sponsor: Senator Tom Briese NBA POSITION: OPPOSE BILL STATUS: IPP LB 313 would have, effective January 1, 2018, increased the state sales and use tax rate to 6.5 percent and credit any net increase in tax revenue resulting from the legislation to the excess Revenue Property Tax Credit Fund to provide a property tax credit to owners of real property.

WAGE DISCLOSURE ACT

LB 354 – Sponsor: Senator Rick Kolowski NBA POSITION: OPPOSE BILL STATUS: IPP LB 354 would have prohibited an employer (private employer with four or more employees) from (1) screening job applicants based on their current or prior wages, including any requirement that a job applicant’s current or prior wage satisfy minimum or maximum criteria; (2) requesting or requiring as a condition of being interviewed, or as a condition of continuing to be considered for an offer of employment, that a job applicant disclose his or her current or prior wages; or (3) seeking information regarding a job applicant’s current or prior wages from the current or former employer of the job applicant, except that an employer may confirm a job applicant’s wages if the job applicant provides written authorization to do so and the confirmation is done after the employer has made an offer of employment to the job applicant. The measure would also have established a Class IV misdemeanor penalty for violations.

NEBRASKA FAIR EMPLOYMENT PRACTICES ACT

LB 372 – Sponsor: Senator Sue Crawford NBA POSITION: OPPOSE BILL STATUS: IPP LB 372 would have expanded the Nebraska Fair Employment Practices Act to prohibit discrimination on the basis of family care responsibilities (providing direct and ongoing care for a person’s spouse, child, parent, sibling, grandchild, or grandparent or a child or parent of such person’s spouse).

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TAXATION – INCOME TAXES

LB 373 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 373 would have eliminated or revised various existing revenue and taxation provisions, including (a) delaying the alternative minimum tax and bracket index adjustments to January 1, 2018; (b) repealing the Build Nebraska Act and the Personal Property Tax Relief Act; (c) eliminating imposition of sales and use taxes on the gross receipts from the labor of a contractor; (d) reducing personal exemption credits; (e) reducing loss carry-forward; (f) eliminating the S Corporation exclusion for revenue derived from other states; (g) repealing market-base sourcing rules for services; (h) sunsetting the Mainstreet Tax Credit Act, and (i) amending the property tax credit percentages and no longer accept applications for the Sports Arena Facility Financing Assistance Act.

TAXATION – CORPORATE INCOME TAX/ECONOMIC DEVELOPMENT TAX INCENTIVES

LB 374 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 374 would have provided a tax credit equal to 100 percent of corporate income taxes paid by a corporate taxpayer, commencing January 1, 2018, with such credits to be distributed 50 percent to all shareholders of the corporate taxpayer and 50 percent to all employees of the corporate taxpayer (corporate taxpayers receiving tax credits or other incentives under specified economic development tax incentive acts would not be eligible for the tax credit). The measure would have also “sunset” the Nebraska Advantage Act as of the effective date of the act.

FAIR CHANCE HIRING ACT

LB 420 – Sponsor: Senator John McCollister NBA POSITION: OPPOSE BILL STATUS: IPP LB 420 would have prohibited public and private employers and employment agencies from asking an applicant to disclose, orally or in writing, information concerning the applicant’s criminal record or history, including any inquiries on any employment application, until the employer or employment agency has determined the applicant meets the minimum employment qualifications. The bill would have also applied to employers with 15 or more employees and exclude applications for a position for which a criminal history record information check is required by federal or state law or for which federal or state law specifically disqualifies an applicant with a criminal background.

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ECONOMIC DEVELOPMENT – NEBRASKA ADVANTAGE ACT

LB 467 – Sponsor: Senator Bob Krist NBA POSITION: OPPOSE BILL STATUS: IPP LB 467 would have prohibited new applications from being filed under various economic tax incentive programs from July 1, 2017 through June 30, 2019.

TAXATION – PERSONAL PROPERTY TAX AND INCOME TAX

LB 468 – Sponsor: Senator Bob Krist NBA POSITION: OPPOSE BILL STATUS: IPP LB 468 would have repealed the limited exemption from personal property tax for tax years 2018 and 2019; would have suspended the adjustment of income tax brackets for inflation for tax years 2018 and 2019; and would also have suspended the reduction of federal adjusted gross income for extraordinary dividends paid on and capital gain from the sale or exchange of capital stock of a corporation for tax years 2018 and 2019.

MANDATED EMPLOYEE REST PERIODS

LB 473 – Sponsor: Senator Lynne Walz NBA POSITION: OPPOSE BILL STATUS: IIP LB 473 would have required employers employing six or more individuals to allow employees a rest period of at least 15 minutes during each four hours worked, in additional to the regularly scheduled lunch period for the employees.

ECONOMIC DEVELOPMENT – NEBRASKA JOB CREATION AND MAIN STREET REVITALIZATION ACT

LB 475 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 475 would have prohibited new applications under the Nebraska Job Creation and Main Street Revitalization Act after the effective date of the Act (scheduled to expire on December 31, 2022).

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CREDIT/DEBIT CARD INTERCHANGE FEES/SALES TAX

LB 559 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 559 would have prohibited the imposition of a debit or credit card interchange fee against any state or local sales taxes or motor vehicle taxes associated with a purchase. The measure would have required payment card networks to either deduct the amount of any tax or fee from the calculation of interchange fees at the time of settlement or rebate an amount of interchange fee proportionate to the amount attributable to the tax or fee to the merchant or seller.

TAXATION – TAXPAYER INVESTMENT PROGRAM/INCOME TAXATION

LB 561 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 561 would have allowed taxpayers to make advance tax payments not to exceed $10,000 per year; would have entitled the taxpayer, within five years of the making the tax investment, becoming 62 years of age, or dying, to receive a tax credit equal to the tax investment multiplied by the program rate (lesser of the treasury yield curve rate for a 10-year maturity United States Government Note or 5 percent per annum for the number of years between the making of the tax investment and the claiming of the tax credit); and would have credited funds received under the program to the State Highway Capital Improvement Fund.

TAXATION – SALES TAX ON SERVICES/ELIMINATION OF CERTAIN SALES AND

USE TAX EXEMPTIONS

LB 563 – Sponsor: Senator John McCollister NBA POSITION: OPPOSE BILL STATUS: IPP LB 563 would have, imposed a sales tax on services including newspapers, laundromats; telefloral deliveries; sale of Nebraska lottery tickets; maintenance and repair services; personal care services; lawn care; gardening services; storage and moving services; taxi; limousine and other transportation services; coin-operated machines used for dry-cleaning or other laundry services; weight loss services; bail bonding series; wedding planning services; shoe shine services; social escort services; personal instruction services; parking services and docking fees; investment advice; interior design services; custom meat slaughtering; cutting and wrapping; hunting or fishing guide services; swimming pool cleaning and maintenance services; debt counseling services; and tax return preparation services.

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CREDIT UNIONS/COMMON BOND

LB 582 – Sponsor: Senator Mike McDonnell NBA POSITION: OPPOSE BILL STATUS: IPP LB 582 would have authorized membership in a credit union to any person within a defined geographic boundary.

INCOME TAXATION – RATE INCREASE

LB 728 – Sponsor: Senator Justin Wayne NBA POSITION: OPPOSE BILL STATUS: IPP LB 728 would have changed the state’s individual income tax brackets and rates by adding a fifth bracket of 7.84 percent for high income earners.

PROPERTY TAX RELIEF ACT

LB 829 – Sponsor: Senator Steve Erdman NBA POSITION: OPPOSE BILL STATUS: IPP LB 829 would have authorized, for taxable years beginning on or after January 1, 2019, a refundable credit against the state income tax for each taxpayer in the amount of 50 percent of the school district taxes levied on the taxpayer's property and paid by the taxpayer during such taxable year.

NEBRASKA WAGE PAYMENT AND COLLECTION ACT

LB 843 – Sponsor: Senator Patty Pansing Brooks NBA POSITION: OPPOSE BILL STATUS: IPP LB 843 would have prohibited an employer from requiring non-disclosure of wages as a condition of employment and prevent an employer from requiring an employee to sign a waiver or other document purporting to deny an employee the right to disclose the employees wages; prohibited an employer from taking any adverse employment action against an employee for disclosing an employee's own wages or discussing another employee's wages that have been disclosed voluntarily; and established a cause of action under the Nebraska Wage and Payment and Collection Act for violations by an employer with the employee entitled to receive

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reinstatement, back pay, restoration of loss service credit, money damages and costs and reasonable attorney's fees.

HEALTHY AND SAFE FAMILIES AND WORKPLACE ACT

LB 844 – Sponsor: Senator Sue Crawford NBA POSITION: OPPOSE BILL STATUS: IPP LB 844 would have allowed employees to accrue a minimum of one hour of paid sick time for every 30 hours worked, with a maximum of 40 hours of paid sick time accrued in a calendar year. Under the measure, employees would have been entitled to use accrued paid sick time beginning on the 60th calendar day following commencement of employment. Paid sick leave would have been authorized for a) an employee's mental or physical illness, injury, or health condition; b) an employee's need for medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition; c) an employee's need for preventative medical care; d) care of a family member with a mental or physical illness, injury, or health condition; e) care of a family member who needs medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition; f) care of a family member who needs preventative medical care; or g) absence necessary due to domestic assault, sexual assault, or stalking.

NEBRASKA WAGE PAYMENT COLLECTION ACT/WAGE AND HOUR ACT

LB 916 – Sponsor: Senator Matt Hansen NBA POSITION: OPPOSE BILL STATUS: IPP LB 916 would have prohibited an employer from retaliating or discriminating against an employee or applicant for employment because the employee or applicant a) files a compliant under either the Wage and Hour Act or the Nebraska Wage Payment and Collection Act or b) testifies, assists, or participates in an investigation, proceeding, or action concerning a violation of either Act. The bill also would have authorized the court to grant such legal or equitable relief as it deems appropriate to effectuate the purposes of the Wage and Hour Act, including temporary or permanent injunctive relief and general and special damages.

TAX INCENTIVE PERFORMANCE AUDITS

LB 935 – Sponsor: Legislative Performance Audit Committee Executive Board NBA POSITION: OPPOSE BILL STATUS: IPP LB 935 would have allowed the Department of Economic Development and the Department of Revenue to exchange identification information (names, addresses and identification numbers) regarding taxpayers participating in tax incentive programs. The bill would have required

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information received by the Departments’ to be considered confidential and any employee disclosing such information would be subject to penalties normally imposed on employees who improperly disclose information. The measure also would have allowed the Department of Revenue to maintain all relevant administrative records and data under the New Markets Job Growth Investment Act for as long as there are tax credits that may be claimed under the Act plus an additional five years. The bill also would have required the submission of extensive information by taxpayers qualifying for tax incentives under various tax incentive Acts to facilitate accurate and thorough tax incentive performance audits.

MONEY TRANSMISSION FEE ACT

LB 1016 – Sponsor: Senator Tom Briese NBA POSITION: OPPOSE BILL STATUS: IPP LB 1016 would have required financial institutions to collect a fee on each money transmission transaction (transmitting money or monetary value to a location in another state or a location outside of the united states by any and all means) completed for an individual; required the fee for each money transmission transaction in the amount of $5 if the transaction is no more than $166.66 or 3 percent of the amount transacted if the amount of the transaction is more than $166.66; allowed financial institutions collecting and reporting money transmission fees to deduct and retain 2 percent of the total amount of fees collected each quarter, not to exceed $500 and require the financial institution to provide a receipt reflecting the fee assessed to each individual for whom a money transmission transaction is made and a notice stating that the individual may be entitled to an income tax credit for the amount of the fee paid, containing information on how the individual may obtain the income tax credit and stating that the receipt should be retained for the individual’s Nebraska income tax records. The measure also would not have required fees for any financial institution transmitting money or monetary value from an account or on behalf of the depositor and would have required financial institutions to remit fees collected to the Department of Revenue on a quarterly basis, along with a report summarizing the money transmission transactions occurring during such quarter.

SALES TAXATION-AGRICULTURAL SERVICES

LB 1021 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 1021 would have repealed a series of sales and use taxes related to agriculture, including a) semen and insemination services; b) feed water veterinary medicines and agricultural chemicals; c) animal life and seeds and annual plants, the products of which ordinarily constitute food for human consumption, agricultural chemicals for use in commercial agriculture and oxygen for use in aquaculture; d) agricultural machinery and equipment mineral oil applied to grain as dust suppressant, repair or replacement parts for agricultural machinery and equipment used in commercial agriculture and depreciable repairs or parts for agriculture machinery or equipment.

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IRRIGATION TAX ACT

LB 1022 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 1022 would have imposed a tax upon the use of water to irrigate agricultural land in an amount equal to one cent for every 10 gallons of water pumped from a covered water well (any water well used to irrigate agricultural land and capable of producing at least 5,000 gallons of water per day). The measure would have also disregarded for purposes of determining agricultural land tax valuation for land that is irrigated, the added value associated with such irrigation and would have directed revenues from the irrigation tax to the school aid fund to provide payments to school districts that do not receive equalization aid under the Tax Equity and Educational Opportunity Support Act.

TAX INCENTIVE SUNSET DATES

LB 1023 – Sponsor: Senator Paul Schumacher NBA POSITION: OPPOSE BILL STATUS: IPP LB 1023 would have sunset a series of tax incentive programs as of December 31, 2018, including the Nebraska Advantage Rural Development Act; the Nebraska Job Creation and Mainstreet Revitalization Act; and the Beginning Farmer Tax Credit Act.

UNIFORM POWER OF ATTORNEY ACT

LB 1029 – Sponsor: Senator Matt Hansen NBA POSITION: OPPOSE BILL STATUS: IPP LB 1029 would have reduced the time period for a person to either accept and acknowledge power of attorney or request a certification, a translation, or an opinion of counsel to no later than three (was seven) business days after presentation of the power of attorney for acceptance and would reduce the period of time for a person requesting a certification, a translation, or an opinion of counsel to no later than three (was five) business days after receipt of the certification, translation or an opinion of counsel. The bill would have also expanded the damages associated with refusal to accept and acknowledge a power of attorney to include economic damages proximity caused by the refusal to comply with the instructions of the agent designated in the power of attorney; reasonable attorney fees and costs incurred by the prevailing party and prejudgment interest on actual damages from the date the person refused to accept the authority of the attorney in fact (under current law, only reasonable attorney fees and costs are allowed).

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INCOME TAXATION

LB 1074 – Sponsor: Senator Tony Vargas NBA POSITION: OPPOSE BILL STATUS: IPP LB 1074 would have, effective for taxable years beginning on or after January 1, 2018, established an additional individual income tax rate bracket of 7.84 percent for incomes over $100,000 for single individuals and over $200,000 for married filing jointly. The measure would have also imposed an additional tax of one percent on that portion of the taxpayers Nebraska taxable income in excess of $1 million and an additional tax of two percent on that portion of the taxpayers Nebraska taxable income in excess of $2 million.

REAL ESTATE TRANSFER TAX

LB 1075 – Sponsor: Senator Curt Friesen NBA POSITION: OPPOSE BILL STATUS: IPP LB 1075 would have imposed a fee on the grantor executing a deed upon the transfer of a beneficial interest in or legal title to real estate equal to one percent of the value of the real estate (full actual consideration paid for the transfer), including the amount of any lien or liens assumed or, in the case of a gift, or any deed (every instrument in writing by which any real estate or an interest therein is created, aliened, mortgaged, or assigned) with nominal consideration or without stated consideration, the current market value of the property transferred.

PROPERTY TAX REQUEST LIMITATIONS ACT

LB 1084 – Sponsor: Senator Tom Briese NBA POSITION: OPPOSE BILL STATUS: IPP LB 1084 would have a) eliminated the personal property tax exemption (first $10,000) for tax years beginning on or after January 1, 2019; b) repealed a series of sales tax exemptions, including, motor vehicles and motor boat trade-ins; newspapers; Laundromats; tele floral deliveries; school lunches; admissions to school events; fine art purchases by a museum; motor vehicle cleaning services; cleaning and repair of clothing; cleaning, maintenance and repair of other tangible personal property; maintenance, painting and repair of real property; entertainment admissions; personal care services; lawn care, gardening, and landscaping services; pet-related services; storage and moving services; other personal services, taxi, limousine, and other transportation services; other real estate services; and prepaid calling arrangements; c) sunsetted a series of tax incentives including the New Markets Job Growth Investment Act effective January 1, 2019; d) increased the cigarette tax by $1 per pack, with funding from the cigarette tax increase to go to the Property Tax Credit Cash Fund; e) would have imposed a surtax on high

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income individuals (2.5 percent on incomes between $500,000 and $1 million and 5 percent on incomes of at least $1 million); f) increased the state sales tax from 5.5 percent to 6 percent effective October 1, 2018; g) reinstated the state income tax on premature or lump-sum distributions from qualified retirement plans; h) repealed the exclusion of capital gains on the sale of employee-owned stocks from Nebraska taxable income; and i) repealed the resident apportionment of multi-state, pass-through income from S Corporations and limited liability companies.

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OTHER BILLS OF INTEREST

The NBA monitored other bills of interest to the banking industry, as set forth below:

BANKRUPTCY EXEMPTIONS LB 105 – Sponsor: Senator Lydia Brasch NBA POSITION: WATCH BILL STATUS: PASSED AND SIGNED LB 105 will provide for an increase in exemptions a) for household furnishings, household goods, household computers, household appliances, books, or musical instruments held primarily for personal, family, or household use of the debtor from $1,500 to $3,000; and b) for implements, tools, or professional books or supplies, other than a motor vehicle, held for use in the principal trade or business of the debtor from $2,400 to $5,000. The bill will also create a new exemption for the debtor's interest in a motor vehicle in an amount not to exceed $5,000. The exemption limits will be adjusted by the Department of Revenue every fifth year beginning in 2023 to reflect changes in the Consumer Price Index for All Urban Consumers over such time periods. (Effective Date: July 19, 2018)

VACANT PROPERTY REGISTRATION ACT LB 256 – Sponsor: Senator Tom Briese NBA POSITION: WATCH BILL STATUS: PASSED AND SIGNED LB 256 will authorize local vacant property registration ordinances to allow communities to identify and register vacant properties, collect fees to compensate for the public costs of vacant properties, plan for the rehabilitation of vacant properties and encourage the occupancy of vacant properties. The bill will not authorize the imposition of any requirements or responsibilities upon mortgagees or beneficiaries under a trust deed. (Effective Date: July 19, 2018)

ABANDONED VEHICLES LB 275 – Sponsor: Senator Dan Hughes NBA POSITION: WATCH BILL STATUS: PASSED AND SIGNED LB 272 will authorize law enforcement officers or private property owners to remove or cause removal of an abandoned vehicle from private property and to contact a private towing service

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for its removal. The bill will also subject an abandoned vehicle towed in this manner to existing provisions of law granting the towing company a lien in the property, subject to requirements to provide notice to the owner and any lienholders and to apply proceeds of sale, after satisfaction of the towing lien, to the lien of any security interest holder. (Effective Date: July 19, 2018)

REMOTE ELECTRONIC NOTARIAL ACT LB 388 – Sponsor: Senator Brett Lindstrom NBA POSITION: WATCH BILL STATUS: IPP LB 388 would have authorized the performance of an electronic notarial act if the signer of the electronic document is not in the physical presence of the electronic notary public at the time of notarization, provided the signer and electronic notary use video and audio conference technology meeting specified requirements and permitting the electronic notary to communicate and identify the signer at the time of the electronic notarial act. The measure would have required identification to be confirmed by (a) personal knowledge; (b) an antecedent in-person identity proofing process in accordance with the specifications of the Federal Bridge Certification Authority; or (c) a valid digital certificate accessed by biometric data or by use of an interoperable personal identity verification card.

JUDICIAL EMANCIPATION LB 714 – Sponsor: Senator Sara Howard NBA POSITION: WATCH & SEEK AMENDMENTS BILL STATUS: PASSED AND SIGNED LB 714 will provide a procedure for the judicial emancipation of a minor, and authorize proceedings to void a judgment of emancipation. The bill also contains provisions clarifying that the voiding of a judgment of emancipation does not affect an obligation, responsibility, right, or interest that arose during the period of time that the judgment of emancipation was in effect. (Effective Date: July 19, 2018)

DATA SECURITY BREACH ACT/CREDIT REPORT PROTECTION ACT LB 757 – Sponsor: Senator Adam Morfeld NBA POSITION: WATCH AND SEEK AMENDMENTS BILL STATUS: PASSED AND SIGNED LB 757 will eliminate the ability of a Consumer Reporting Agency to charge a fee for placing or removing or for placing, temporarily lifting, or removing any other substantially similar type of

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security product or a security freeze for a protected consumer; require any individual or commercial entity that conducts business in Nebraska and owns, licenses, or maintains data including personal information about a resident in Nebraska to implement and maintain reasonable security procedures and practices that are appropriate to the nature of personal information owned, licensed, or maintained and the nature and size of its business and its operations, including safeguards that protect the personal information when the individual or commercial entity disposes of the personal information. The bill will also deem an individual or commercial entity to be in compliance with the data protection requirements if it a) complies with a state or federal law that provides greater protection to personal information than the protections provided under this legislation; or b) complies with regulations promulgated under the Gramm Leach Bliley Act, if the individual or commercial entity is subject to the Act. The measure will require an individual or commercial entity disclosing personal information about a Nebraska resident to a non-affiliated third party service provider to require by contract that the third party implement and maintain reasonable security procedures and practices that a) are appropriate to the nature of the personal information disclosed to the nonaffiliated third party; and b) are reasonably designed to help protect the personal information from unauthorized access, acquisition, destruction, use, modification or disclosure. (Effective Date: July 19, 2018)

MOTOR VEHICLE CERTIFICATES OF TITLE/LIENS LB 909 – Sponsor: Senator Bruce Bostelman NBA POSITION: WATCH AND SEEK AMENDMENTS BILL STATUS: PASSED AND SIGNED LB 909 will, in part, authorize the Department of Motor Vehicles (DMV) to remove a lien on a certificate of title when the lien was improperly noted. The bill will require evidence of the improperly noted lien to be submitted to the Department and for the Department to find sufficient evidence to support removal of the lien. The Department will be required to send notification prior to removal of the lien to the last-known address of the lienholder, with the lienholder to respond within 30 days after notice to provide sufficient evidence to support non-removal of the lien. The Department will only be authorized to remove a lien if the lienholder fails to timely respond to the notice. LB 909 also contains provisions to allow an auto auction dealer to get new titles for vehicles that have been purchased as salvaged vehicles, either through normal purchase or through payment of a total loss settlement, or when vehicles are donated to 501(c)(3) organizations and become the property of the auto auction dealer. Prior to taking title to the vehicle, the auction dealer will be required to submit an affidavit with the application for a new certificate of title certifying that (a) it has made at least two written attempts and has been unable to obtain the properly endorsed certificate of title from the owner; and (b) 30-days have expired after the mailing of the written notice regarding the intended disposition of the property by certified mail, return receipt requested, to the last-known address of the owner and any lien or security interest holder of record of the property.

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The required notice must contain a description of the property and a statement that title to the property shall vest with the auction dealer 30-days after the notice was mailed. The mailing of notice and the expiration of 30-days will extinguish any lien unless the lien holder or security interest holder claims the property within the 30-day period. The auction dealer will be required to transfer possession of the property to the lienholder or security interest holder if the property is claimed within the 30-day period. (Effective Date: July 19, 2018)

July 27, 2018 Vol. XXXV, No. 16

S. 2155 – DODD-FRANK ACT REVISIONS –

REGULATORY RELIEF

I. INTRODUCTION President Trump recently signed Senate Bill 2155, the “Economic Growth, Regulatory Relief and Consumer Protection Act,” into law. The Act reflects the first meaningful revisions to certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Set forth below is a brief description of key provisions of the act of interest to financial institutions. II. IMPROVING CONSUMER ACCESS TO MORTGAGE CREDIT (KEY

PROVISIONS OF S 2155)

A. Title I

1.. Section 101 – Minimum Standards for Access to Mortgage Credit The Act adds new language to the Truth in Lending Act to expand the definition of a “Qualified Mortgage” to also include any residential mortgage kept in a portfolio originated by a bank with less than $10B in total consolidated assets (covered institutions) that satisfies the following standards:

a) Complies with the limitations on prepayment penalties for a QM – limited to 3% in the first year, 2% in the second year and 1% in the third year, with an option available to the borrower to accept a loan without a prepayment penalty;

b) Total points and fees do not exceed 3% of the loan amount; c) No negative amortization or interest only loan features; and d) The financial institution considers and documents the debt, income and

financial resources of the consumer based on a fully amortizing payment schedule taking into account all taxes, insurance and assessments.

This “safe harbor” from the “ability to repay” requirements does not apply to a residential mortgage loan that is sold, assigned, or transferred unless the transfer is as a result of the bankruptcy of the covered institution, made to another covered institution, or pursuant to a merger.

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2. Section 103 – Exemptions from appraisals of real estate located in rural areas The Act creates an exemption from appraisal requirements under the Truth in Lending Act for loans that are under $400,000 and that are secured by real property located in certain rural areas, provided that not later than three (3) days after the date on which the Closing Disclosure Form, made in accordance with TRID is given to the customer:

a. the mortgage loan originator or its agent has, directly or indirectly, contacted at least three state certified or licensed appraisers from the mortgage originator’s approved appraiser list in the market area; and b. none of the appraisers “was available within 5 business days beyond customary and reasonable fee and timeliness standards for comparable appraisals assignments.”

For purposes of this exemption, a “rural area” refers to:

1. A county that is neither in a metropolitan statistical area nor a micropolitan statistical area that is adjacent to a metropolitan statistical area; or

2. A census block that is not in an “urban area,” as defined by the U.S. Census Bureau.

The mortgage loan originator must document the lack of available appraisers and loans made under this exemption (without an appraisal) generally must be retained in portfolio and can only be sold in the following limited circumstances: In addition, there are changes to sale, assignment and transfer requirements that also revolve around the appraisal exemptions. The additional amendments state that a mortgage loan originator that makes a loan without an appraisal under the exceptions shall not sell, assign, or otherwise transfer legal title to the loan unless:

• The loan is sold, assigned, or otherwise transferred to another person by reason of the bankruptcy or failure of the mortgage originator;

• The loan is sold, assigned, or otherwise transferred to another person regulated by a Federal financial institutions regulatory agency, so long as the loan is retained in portfolio by the person;

• The sale, assignment, or transfer is pursuant to a merger of the mortgage originator with another person or the acquisition of the mortgage originator by another person or of another person by the mortgage originator; or

• The sale, loan, or transfer is to a wholly owned subsidiary of the mortgage originator, provided that, after the sale, assignment, or transfer, the loan is considered to be an asset of the mortgage originator for regulatory accounting purposes.

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Note that the exception to the appraisal requirement does not apply when the loan is considered to be a “high-cost mortgage” under TILA, or when the appraisal is required separately by a federal financial institutions regulator. 3. Section 104 – HMDA Adjustment and Study. The Act exempts banks that have originated less than 500 closed-end mortgage loans or less than 500 open-end lines of credit in each of the two preceding calendar years, from having to report the new HMDA data points from 2018 on the LAR for closed-end loans. However, banks that have received a “needs to improve” CRA rating during each of the last two most recent exams or a “substantial non-compliance” rating on the most recent exam must still comply with the additional HMDA disclosures. The Act also provides for a study to be conducted of the effects of this change two years after its enactment. (NOTE: The Act does not eliminate all HMDA reporting requirements, only the requirements for additional information that went into effect on January 1, 2018.)

2018 Loan/Application Registers (LARs) Formatting and Submission For all institutions filing HMDA data collected in 2018, the Act will not affect the format of the LARs:

• LARs will be formatted according to the previously released Filing Instructions Guide for HMDA Data Collected in 2018 (2018 FIG).

• If an institution does not report information for a certain data field due to the Act’s partial exemptions, the institution will enter an exemption code for the field specified in a revised 2018 FIG that the CFPB expects to release later this summer.

• All LARs will be submitted to the same HMDA platform. A beta version of the HMDA platform for submission of data collected in 2018 will be available later this year for filers to test.

As announced in December 2017, the OCC does not intend to require data resubmission for HMDA data collected in 2018 and reported in 2019, unless data errors are material. Furthermore, the OCC does not intend to assess penalties with respect to errors in data collected in 2018 and reported in 2019. Collection and submission of the 2018 HMDA data will provide banks with an opportunity to identify any gaps in their implementation of the amended Regulation C and make improvements in their HMDA compliance management systems for future years. Any examinations of 2018 HMDA data will be diagnostic to help banks identify compliance weaknesses, and the OCC will credit good-faith compliance efforts.

4. Section 106 – Eliminating Barriers to Jobs for Loan Originators The Act also provides that an individual will be deemed to have temporary authority to act as a loan originator for 120 days under the S.A.F.E. Mortgage Licensing Act of 2008 if such person is (1) a registered loan originator who becomes employed by a state-licensed mortgage company or (2) a state-licensed loan originator who becomes employed by a state-licensed mortgage company in

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a different state. To qualify for the temporary authority, the loan originator (a) must not have had an application for a loan originator license denied, or a loan originator license which was revoked or suspended; (b) must not have been subject to a cease and desist order; (c) must not have been convicted of a misdemeanor or felony which would preclude licensure under the law of the state in which the new license is sought; and (d) must have been registered in the NMLS as a loan originator during the one-year period preceding the application. (NOTE: The temporary authority granted by the Act terminates either (a) when the new license application is approved or denied, or (b) 120-days after the new license application is filed.) This revision is effective 18 months after the effective date of the Act. 5. Section 108 – Escrow Requirements Relating to Certain Consumer Credit Transactions The Act provides an exemption from TILA Escrow requirements for banks with less than $10 billion in assets, and that have originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year, provided the bank makes loans in rural or underserved areas; and the bank does not otherwise establish and maintain escrows for such loans. 6. Section 109 – No Wait for Lower Mortgage Rates The Act removes the three-day wait period required for the combined TILA/RESPA mortgage disclosure if a creditor extends to a consumer a second offer of credit with a lower annual percentage rate. The disclosure must still be made in such a case, but they do not need to be made three business days before consummating the transaction. The exemption will not be effective until the CFPB adopts regulations for its implementation. These provisions of the Act also express the sense of Congress that the CFPB should endeavor to provide clearer, authoritative guidance with respect to (a) the applicability of the TRID rule to mortgage assumption transactions; (b) the applicability of the TRID rule to construction-to-permanent home loans, and the conditions under which those loans can be properly originated; and (c) the extent to which lenders can rely on model disclosures published by the CFPB without liability if recent changes to regulations are not reflected in the sample TRID rule forms published by the CFPB.

B. Title II – Regulatory Relief and Protecting Consumer Access to Credit

1. Section 201 – Capital Simplification for Qualifying Community Banks The Act requires that the federal banking agencies establish a community bank leverage ratio of tangible equity to average consolidated assets of not less than eight percent and not more than 10 percent. Banks with less than $10 billion in total consolidated assets that maintain tangible equity in an amount that exceeds the community bank leverage ratio will be deemed to be in compliance with the

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capital and leverage requirements. The federal banking agencies are also required to establish procedures for banks with a community bank leverage ratio that falls below these requirements. The “community bank leverage ratio” will not go into effect until the federal banking agencies adopt regulations for its implementation. 2. Section 202 – Limited Exception for Reciprocal Deposits The Act provides that certain reciprocal deposits will not be considered to be funds obtained, directly or indirectly, by or through a deposit broker under the Federal Deposit Insurance Act. A well-capitalized bank with a CAMELS rating of 1 or 2 will be permitted to hold reciprocal deposits up to the lesser of 20 percent of its total liabilities or $5 billion without those deposits being treated as “brokered” (reciprocal deposits at a bank above these amounts are permitted but remain “brokered”.) Section 29 of the Federal Deposit Insurance Act, as implemented by the FDIC’s regulations, places restrictions on the acceptance by insured depository institutions of deposits obtained through deposit brokers, which are deemed to be “brokered deposits." Section 202 amends Section 29 by excluding reciprocal deposits from the definition of “brokered” and permitting banks that have dropped from well-capitalized to adequately-capitalized to continue accepting reciprocal deposits without obtaining a waiver from the FDIC, as long as it does not accept an amount that would cause it’s total reciprocal deposits to exceed a previous four-quarter average. 3. Section 203-204 – Community Bank Relief – Removing Naming Restrictions – Volcker Rule The Act amends the Bank Holding Company Act to exempt certain banks from the Volcker Rule’s prohibition on certain speculative investments (i.e., “proprietary trading”). The new exemption applies to banks with (a) $10 billion or less in total consolidates assets; and (b) total trading assets and liabilities comprising not more than five percent of total consolidated assets. Additionally, the act also reduces Volcker Rule restrictions on banking entity names being used for hedge funds or private-equity funds. 4. Section 205 – Short Form Call Reports The Act requires the federal banking agencies to reduce reporting requirements for depository institutions with less than $5 billion in total consolidated assets that satisfy other criteria the federal banking agencies deem appropriate. The revisions would allow for streamlined first- and third-quarter call reports for such banks.

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5. Section 206 - Option for Federal Savings Associations to Operate as Covered Savings Associations. This Act permits federal savings associations with less than $20 billion in total consolidated assets to elect to operate with the same powers and duties as national banks without being required to convert their charters. 6. Section 207 - Small Bank Holding Company Policy Statement The Act raises the consolidated asset threshold of the Federal Reserve’s Small Bank Holding Company Policy Statement from $1 billion to $3 billion. The change will go into effect when the Federal Reserve amends the Policy Statement, with the Federal Reserve being required to act within 180-days. 7. Section 210 – Examination Cycle The Act raises the consolidated asset threshold from $1 billion to $3 billion for well-managed and well-capitalized banks to qualify for an 18-month examination cycle. 8. Section 213 – Making Online Banking Initiation Legal and Easy The Act provides that when an individual initiates a request through an online service to open an account with, or obtain a product or service from, a financial institution, the financial institution is authorized to record personal information from a scan of the person’s driver’s license or other state-issued identification, and store that information to: (a) verify the authenticity of the driver’s license or personal information card; (b) verify the identity of the individual; and (c) comply with a legal requirement to record, retain, or transmit personal information in connection with opening an account or obtaining a financial product or service. A financial institution can retain the scan, copy or image in furtherance of its AML obligations, but must delete it after those obligations have been fulfilled. The law will preempt any existing state laws that prohibit making scans, copies or images of driver’s licenses or state-issued identification cards. Financial institutions should consider Equal Credit Opportunity Act (Regulation B) issues in connection with establishing policies for the retention, access and use of customer identification cards, because the card scan, copy or image could indicate whether the customer is in a protected class by reflecting race, color, sex, etc. 9. Section 214 – Promoting Construction and Development on Mainstreet The Act creates a narrower definition applicable to acquisition, development, and construction (ADC) loans characterized as high volatility commercial real estate (HVCRE) exposures under Regulatory Capital Rules. Under existing rules, ADC loans considered HVCRE exposures must be risk weighted at 150 percent, as opposed to the 100 percent for other commercial loans. The Act provides that for

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an HVCRE ADC loan to trigger higher capital requirements, it must meet both the definition of an HVCRE exposure and an HVCRE ADC loan. An HVCRE exposure is defined as a “credit facility that, prior to conversion to permanent financing, finances, or has financed the acquisition, development, or construction of real property. The Act defines an HVCRE ADC loan as a real estate secured credit that (a) primarily finances, has financed, or refinanced the ADC of real property; (b) has the purpose of providing financing to acquire, develop, or improve such real property into income-producing real property; and (c) is dependent upon future income or sales proceeds from, or refinancing of, such real property for the repayment of such credit facilities. These provisions will take effect upon adoption of regulations for its implementation. The federal banking agencies have clarified that when reporting HVCRE exposures on Schedule RC-R, Part II of the Consolidated Reports of Condition and Income (Call Report), depository institutions may use available information to reasonably estimate and report only HVCRE ADC Loans. Depository institutions may refine these estimates in good faith as they obtain additional information but will not be required to amend previously filed regulatory reports as these estimates are adjusted. Alternatively, a depository institution may also continue to report and risk-weight HVCRE exposures in a manner consistent with the current instructions to the Call Report, until the agencies take further action. Furthermore, to avoid the regulatory burden associated with different definitions for HVCRE exposures within a single organization, the Board will not take action to require a BHC, savings and loan holding company, or intermediate holding company of a foreign bank to estimate and report HVCRE on Schedule HC-R, Part II of the FR Y-9C consistent with the existing regulatory requirements and reporting form instructions if the holding company reports HVCRE in a manner consistent with its subsidiary depository institution(s). A holding company may also continue to report and risk-weight HVCRE exposures in a manner consistent with the current instructions to Schedule HC-R, Part II of the FR Y-9C.

C. Title III – Protections for Veterans, Consumers and Homeowners

1. Section 301 – Protecting Consumers’ Credit The Act amends the Fair Credit Reporting Act (FCRA) to increase the required period for a fraud alert to remain on a credit report from 90 days to one year, and to provide for a national security freeze. The Act also requires a consumer reporting agency to provide a consumer with free credit freezes and to notify a consumer of their availability. 2. Section 302 – Protecting Veterans’ Credit The Act amends the FCRA to exclude from consumer report information: (a) certain medical debt incurred by a veteran if the hospital care or medical services relating to the debt predates the credit report by less than one year; and (b) a fully paid or settled veteran's medical debt that had been characterized as delinquent,

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charged off, or in collection. The Act also establishes a dispute process for consumer reporting agencies with respect to such veterans’ medical debt. 3. Section 303 – Immunity From Suit For Disclosure of Financial Exploitation of Senior Citizens The Act extends immunity to employees of a financial institution in any civil or administrative proceeding if the employee discloses a suspected exploitation of a senior citizen, and the individual made the disclosure in good faith and with reasonable care and has completed designated training requirements. 4. Section 304 – Restoration of the Protecting Tenants at Foreclosure Act of 2009 The Act permanently restores the Protecting Tenants at Foreclosure Act, which was repealed as a result of a sunset provision that took effect on December 31, 2014. This provision reinstates a requirement for a new owner of foreclosed property to give tenants 90 days’ notice to allow them time to move. 5. Section 313 – Foreclosure Relief and Extension for Servicemembers The Act amends the Honoring Americans Veterans and Caring for Camp Lejeune Families Act of 2012 to make permanent the one-year grace period during which a servicemember is protected from foreclosure after leaving military service.

D. Title IV – Tailoring Regulations for Certain Bank Holding Companies

1. Section 401 – Enhanced Supervision and Prudential Standards for Certain Bank Holding Companies The Act raises the threshold for applying enhanced prudential standards from $50 billion to $250 billion. Bank holding companies with total consolidated assets between $50 billion and $100 billion will be exempt from enhanced prudential standards immediately, and bank holding companies with total consolidated assets between $100 billion and $250 billion will be exempt 18 months after the date of enactment (“effective date”). For bank holding companies with total consolidated assets between $100 billion and $250 billion, the Federal Reserve will (1) have the authority to apply enhanced prudential standards after the effective date, (2) be required to conduct a periodic supervisory stress test after the effective date, and (3) have the authority to exempt firms from enhanced prudential standards prior to the effective date. The Act also increases the Consolidated Asset threshold for bank holding companies required to have mandatory risk committees from $10 billion to $50 billion. The federal banking agencies have also clarified that company-run stress tests are not applicable to banks with less than $100 billion in assets. Banks with less than $250 billion in assets will receive stress test relief under the Act no later than 18 months after its adoption.

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2. Section 402 – Supplementary Leverage Ratio for Custodial Banks The Act requires the federal banking agencies to amend the supplementary leverage ratio final rule (SLR) to specify that funds of a custodial bank that are deposited with a central bank will not be taken into account when calculating the SLR, subject to limitations. 3. Section 403 – Treatment of Certain Municipal Obligations The Act directs the federal banking agencies to classify qualifying investment-grade, liquid and readily-marketable municipal securities as level 2B liquid assets under the agencies’ Liquidity Coverage Ratio final rule. Municipal bonds were not previously considered as high-quality liquid assets and were thus not eligible for use in the calculation of a bank ‘s Liquidity Coverage Ratio. The reclassification of municipal bonds as high-quality liquid assets should provide additional incentives for banks to invest in municipal bonds. The federal banking agencies are required to amend their liquidity regulations to implement these changes no later than 90 days after the enactment of the Act. Accordingly, the agencies will not take action to require an institution subject to the liquidity regulations to exclude from the definition of high-quality liquid assets municipal obligations that it believes meet the statutory criteria for inclusion in high-quality liquid assets.

E. Title VI – Protections for Student Borrowers

1. Section 601 - Protections in the event of death or bankruptcy The Act amends TILA to protect student loan borrowers by prohibiting a private education loan creditor from declaring a default or accelerating the debt of a student borrower solely on the basis of a death or bankruptcy of a co-signer. In the event of death of a student borrower, the holder of a private education loan must release any co-signer within a “reasonable timeframe” after receiving notice of the borrower’s death. 2. Section 602 – Rehabilitation of Private Education Loans The Act amends the Fair Credit Reporting Act to allow a borrower to request that a financial institution remove a reported default on a private education loan from a consumer credit report if the institution offers and the borrower successfully completes a loan rehabilitation program. The loan rehabilitation program, which must be approved by the institution’s federal regulator, must require that the borrower make consecutive on-time monthly payments in a number that, in the institution’s assessment, demonstrates a renewed ability and willingness to repay the loan.

The foregoing Compliance Update is for informational purposes only and does not constitute legal advice. As a reminder, the NBA general counsel is the attorney for the Nebraska Bankers Association, not its member banks. The general counsel is available to assist members with finding resources to help answer their questions. However, for specific legal advice about specific situations, members must consult and retain their own attorney.

September 21, 2018 Vol. XXXV, No. 20

HMDA REPORTING – PARTIAL EXEMPTIONS

I. INTRODUCTION The Consumer Financial Protection Bureau (CFPB) has issued a final rule to implement and clarify changes made by the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), relating to the HMDA reporting requirements. S. 2155 established partial exemptions for some insured depository institutions from certain HMDA requirements. The following partial exemptions are generally available to ensure depository institutions:

• For closed-end mortgage loans, if the institution originated fewer than 500 closed-end

mortgage loans in each of the two preceding calendar years; • For open-end lines of credit, if the institution originated fewer than 500 open-end lines of

credit in each of the two preceding calendar years. Institutions qualifying for the partial exemptions are exempt from the collection, recording, and reporting requirements for some, but not all, of the data points specified in current Regulation C. II. HMDA REPORTING REQUIREMENTS

A. Partial Exemptions The 2018 HMDA Final Rule specifies the data points that do not need to be collected and reported if a transaction qualifies for a partial exemption, as well as those data points that must be collected and reported even if a transaction qualifies for a partial exemption. There are a total of 48 data points currently required by Regulation C. Under S. 2155, 26 of the 48 data points do not need to be collected and reported if the transaction qualifies for a partial exemption. The final rule clarifies that, for purposes of the partial exemptions, “closed-end mortgage loan” and “open-end line of credit” mean only those loans or lines of credit that would otherwise be reportable under HMDA. The final rule specifically delineates which data points are covered by the partial exemption which may be found at https://files.consumerfinance.gov/f/documents/bcfp_hmda_interpretive-procedural-rule_2018-08_executive-summary.pdf (pages 6-8).

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B. CRA Exception The final rule also clarifies that, for purposes of determining whether the CRA exception applies to an insured depository that would otherwise qualify for a partial exemption, the CRA examination assessment must be made as of December 31 of the proceeding calendar year. For example, an insured depository institution that received a rating of “substantial non-compliance” on its most recent CRA examination, which occurred on or before December 31, 2019, would not be eligible for the partial exemptions in 2020. Likewise, an insured depository institution that received a rating of “needs to improve record of meeting community credit needs” on each of its two most recent CRA examinations that occurred on or before December 31, 2019, would not be eligible for the partial exemptions in 2020. C. Non-Universal Identifier The final rule provides that, if a transaction qualifies for a partial exemption and the insured depository institution opts not to report a universal loan identifier, the institution must report a non-universal loan identifier for the loan or application that complies with requirements specified in the final rule so that each loan and application reported for HMDA purposes is identifiable. A non-universal loan identifier does not need to be unique within the industry, but it still must be unique within the insured depository institution and meet other requirements specified in the 2018 final rule. It does not need to include a Legal Entity Identifier or a check digit. D. Voluntary Reporting An insured depository institution has the option to voluntarily report exempt data points for transactions that qualify for a partial exemption. An insured depository institution that opts to voluntarily report an exempt data point must report all data fields that the specific data point comprises. E. Transition Issues The final rule applies to data collected or reported under HMDA on or after May 24, 2018. An insured depository institution that is eligible for a partial exemption for a transaction does not need to collect exempt data points on or after May 24, 2018. In addition, such institutions are not required to report certain data that may have been collected on or before May 24, 2018. For example, if an insured depository institution is eligible for a partial exemption for its closed-end mortgage loans and the institution collected data for its closed-end mortgage loans prior to May 24, 2018, the institution is not required to report in 2019 any data covered by the partial exemption for its closed-end mortgage loans.

The foregoing Compliance Update is for informational purposes only and does not constitute legal advice. As a reminder, the NBA general counsel is the attorney for the Nebraska Bankers Association, not its member banks. The general counsel is available to assist members with finding resources to help answer their questions. However, for specific legal advice about specific situations, members must consult and retain their own attorney.

August 10, 2018 Vol. XXXV, No. 17

FINCEN EXTENDS EXCEPTIVE RELIEF FOR

RENEWALS/ROLLOVERS

On August 8, 2018, the Financial Crimes Enforcement Network (FinCEN) issued a 30-day extension through September 8, 2018, from the obligations of the Beneficial Ownership Rule for renewal or rollover products and services (loans and certificate of deposits) that were established before May 11, 2018. The extension has been granted to allow FinCEN further time to consider the issue. NOTE: On May 16, 2018, FinCEN issued a 90-day limited exceptive relief to covered financial institutions from the obligations of the Beneficial Ownership Rule for Legal Entity Customers for certain financial products and services that were established before May 11, 2018. The exception was set to expire on August 9, 2018. The foregoing Compliance Update is for informational purposes only and does not constitute legal advice. As a reminder, the NBA general counsel is the attorney for the Nebraska Bankers Association, not its member banks. The general counsel is available to assist members with finding resources to help answer their questions. However, for specific legal advice about specific situations, members must consult and retain their own attorney.