I 
112TH CONGRESS 
1ST SESSION H. R. 1697 
To enhance the ability of community banks to foster economic growth and 
serve their communities, boost small businesses, increase individual sav-
ings, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 3, 2011 
Mr. LUETKEMEYER introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committees on 
Financial Services and Agriculture, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions 
as fall within the jurisdiction of the committee concerned 
A BILL 
To enhance the ability of community banks to foster eco-
nomic growth and serve their communities, boost small 
businesses, increase individual savings, and for other pur-
poses. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Community Banks Serving Their Communities First 
Act’’ or the ‘‘Communities First Act’’. 
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(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; table of contents. 
TITLE I—TARGETED REGULATORY RELIEF FOR COMMUNITY 
BANKS 
Sec. 101. Short form reports of condition for certain community banks. 
Sec. 102. Community bank exemption from annual management assessment of 
internal controls requirement of the Sarbanes-Oxley Act of 
2002. 
Sec. 103. Changes required to small bank holding company policy statement on 
assessment of financial and managerial factors. 
Sec. 104. Accounting principles shall reflect business models. 
Sec. 105. Accounting principles cost-benefit requirements. 
Sec. 106. Increase in shareholder registration threshold. 
Sec. 107. FSOC review of Bureau regulations. 
Sec. 108. Federal Reserve examination authority. 
TITLE II—REGULATORY RELIEF FOR COMMUNITY BANKS AND 
THEIR CUSTOMERS 
Sec. 201. Escrow requirements. 
Sec. 202. Exception to annual privacy notice requirement under the Gramm- 
Leach-Bliley Act. 
Sec. 203. Fees for agriculture loans. 
Sec. 204. Reimbursement for production of mandated records. 
Sec. 205. Loan amortization. 
Sec. 206. Loan appraisals. 
Sec. 207. Credit ratings. 
Sec. 208. Small business data collection exclusion. 
TITLE III—TAX RELIEF FOR BANK DEPOSITORS, RURAL BANKS, 
MUNICIPALITIES, BANKS ORGANIZED AS LIMITED LIABILITY 
COMPANIES, AND YOUNG SAVERS 
Sec. 301. Reduced rate and deferral of income recognition on long-term certifi-
cates of deposit. 
Sec. 302. Exclusion for interest on loans secured by agricultural real property. 
Sec. 303. Update in cap on qualified small issue bonds. 
Sec. 304. Limited liability company tax treatment for FDIC-insured limited li-
ability companies. 
Sec. 305. Young savers’ accounts. 
TITLE IV—TAX RELIEF FOR COMMUNITY BANKS AND HOLDING 
COMPANIES 
Sec. 401. Limited tax credit. 
Sec. 402. Qualifying investments in small bank issuers. 
Sec. 403. 5-year NOL carryback for certain banks. 
TITLE V—SMALL BUSINESS SUBCHAPTER S REFORMS 
Sec. 501. Increasing shareholder limit for subchapter S to 200. 
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Sec. 502. Issuance of preferred stock permitted for subchapter S corporations. 
Sec. 503. IRA shareholders. 
TITLE 
I—TARGETED 
REGU-
LATORY RELIEF FOR COMMU-
NITY BANKS 
SEC. 101. SHORT FORM REPORTS OF CONDITION FOR CER-
TAIN COMMUNITY BANKS. 
(a) IN GENERAL.—Section 7(a) of the Federal De-
posit Insurance Act (12 U.S.C. 1817(a)) is amended by 
inserting at the end the following new paragraph: 
‘‘(12) SHORT
FORM
REPORTS
OF
CONDITION 
FOR COMMUNITY BANKS.— 
‘‘(A) IN
GENERAL.—With respect to re-
ports of condition required under paragraph (3) 
for each calendar quarter, an insured depository 
institution described in subparagraphs (A), (B), 
(C), and (D) of section 10(d)(4) may submit a 
short form of any such report of condition in 2 
nonsequential quarters of any calendar year. 
‘‘(B) ASSET ADJUSTMENTS.—For purposes 
of this paragraph, the asset levels for section 
10(d)(4) shall be $10,000,000,000 in the case 
of subparagraph (A) and $1,000,000,000 in the 
case of subparagraph (C). 
‘‘(C) SHORT FORM DEFINED.—The term 
‘short form’, when used in connection with any 
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report of condition required under paragraph 
(3), means a report of condition in a format es-
tablished by the appropriate Federal banking 
agency, after notice and opportunity for com-
ment, that— 
‘‘(i) is significantly and materially less 
burdensome for the insured depository in-
stitution to prepare than the format of the 
report of condition required under para-
graph (3); and 
‘‘(ii) provides sufficient material infor-
mation for the appropriate Federal bank-
ing agency to assure the maintenance of 
the safe and sound condition of the deposi-
tory institution and safe and sound prac-
tices.’’. 
(b) REGULATIONS.—Any regulation required to carry 
out the amendment made by subsection (a) shall be pub-
lished in final form before the end of the 6-month period 
beginning on the date of the enactment of this Act. 
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SEC. 102. COMMUNITY BANK EXEMPTION FROM ANNUAL 
MANAGEMENT ASSESSMENT OF INTERNAL 
CONTROLS 
REQUIREMENT 
OF 
THE 
SAR-
BANES-OXLEY ACT OF 2002. 
Section 404 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7262) is amended by adding the following new sub-
section: 
‘‘(d) COMMUNITY BANK EXEMPTION.— 
‘‘(1) IN GENERAL.—This section shall not apply 
in any year to any insured depository institution 
which, as of the close of the preceding year, had 
total assets, as determined on a consolidated basis, 
of $1,000,000,000 or less. 
‘‘(2) ADJUSTMENT OF AMOUNT.—The Commis-
sion shall annually adjust the dollar amount in para-
graph (1) by an amount equal to the percentage in-
crease, for the most recent year, in total assets held 
by all depository institutions, as reported by the 
Federal Deposit Insurance Corporation.’’. 
SEC. 103. CHANGES REQUIRED TO SMALL BANK HOLDING 
COMPANY POLICY STATEMENT ON ASSESS-
MENT OF FINANCIAL AND MANAGERIAL FAC-
TORS. 
(a) SMALL
BANK
HOLDING
COMPANY
POLICY 
STATEMENT ON ASSESSMENT OF FINANCIAL AND MANA-
GERIAL FACTORS.— 
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(1) IN GENERAL.—Before the end of the 6- 
month period beginning on the date of the enact-
ment of this Act, the Board of Governors of the 
Federal Reserve System shall publish in the Federal 
Register proposed revisions to the Small Bank Hold-
ing Company Policy Statement on Assessment of Fi-
nancial and Managerial Factors (12 C.F.R. part 
225—appendix C) that provide that the policy shall 
apply to a bank holding company which has pro 
forma 
consolidated 
assets 
of 
less 
than 
$1,000,000,000 and that— 
(A) is not engaged in any nonbanking ac-
tivities involving significant leverage; and 
(B) does not have a significant amount of 
outstanding debt that is held by the general 
public. 
(2) ADJUSTMENT OF AMOUNT.—The Board of 
Governors of the Federal Reserve System shall an-
nually adjust the dollar amount referred to in para-
graph (1) in the Small Bank Holding Company Pol-
icy Statement on Assessment of Financial and Man-
agerial Factors by an amount equal to the percent-
age increase, for the most recent year, in total assets 
held by all insured depository institutions, as deter-
mined by the Board. 
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(b) INCREASE IN DEBT-TO-EQUITY RATIO OF SMALL 
BANK HOLDING COMPANY.—Before the end of the 6- 
month period beginning on the date of the enactment of 
this Act, the Board of Governors of the Federal Reserve 
System shall publish in the Federal Register proposed re-
visions to the Small Bank Holding Company Policy State-
ment on Assessment of Financial and Managerial Factors 
(12 C.F.R. part 225—appendix C) such that the debt-to- 
equity ratio allowable for a small bank holding company 
in order to remain eligible to pay a corporate dividend and 
to remain eligible for expedited processing procedures 
under Regulation Y of the Board of Governors of the Fed-
eral Reserve System would increase from 1:1 to 3:1. 
SEC. 104. ACCOUNTING PRINCIPLES SHALL REFLECT BUSI-
NESS MODELS. 
(a) Section 13(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78m) is redesignated as paragraph (a)(1) 
and paragraphs (1) and (2) are redesignated as subpara-
graphs (A) and (B). 
(b) Section 13(a) is further amended by adding the 
following new paragraph— 
‘‘(2) The Commission shall ensure that information, 
documents, and reports accurately and appropriately re-
flect the business model of the issuer.’’. 
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SEC. 105. ACCOUNTING PRINCIPLES COST-BENEFIT RE-
QUIREMENTS. 
The Securities Exchange Act of 1934 is amended by 
inserting after section 13A the following new section: 
‘‘SEC. 13B. GENERALLY ACCEPTED ACCOUNTING PRIN-
CIPLES COST-BENEFIT REQUIREMENTS. 
‘‘The Commission shall conduct analyses of the costs 
and benefits (including economic benefits) of any new or 
amended generally accepted accounting principle and may 
not approve any new or amended generally accepted ac-
counting principle unless the Commission determines 
that— 
‘‘(1) the benefits of such principle significantly 
outweigh its costs; and 
‘‘(2) such principle would not have a negative 
economic impact on insured depository institutions 
with total assets of $10,000,000,000 or less.’’. 
SEC. 106. INCREASE IN SHAREHOLDER REGISTRATION 
THRESHOLD. 
(a) REGISTRATION.—Section 12(g) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78l(g)) is amended— 
(1) in paragraph (1), by striking subparagraphs 
(A) and (B) and inserting the following: 
‘‘(A) in the case of an issuer that is a bank or 
a bank holding company, as such term is defined in 
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section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841), 2000 persons or more; and 
‘‘(B) in the case of an issuer that is not a bank 
or bank holding company, 500 persons or more,’’; 
and 
(2) in paragraph (4), by striking ‘‘three hun-
dred’’ and inserting ‘‘300 persons, or, in the case of 
a bank or a bank holding company, as such term is 
defined in section 2 of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1841), 1700’’. 
(b) SUSPENSION.—Section 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o(d)) is amended, in 
the third sentence, by striking ‘‘three hundred’’ and in-
serting ‘‘300 persons, or, in the case of bank or a bank 
holding company, as such term is defined in section 2 of 
the Bank Holding Company Act of 1956 (12 U.S.C. 
1841), 1700’’. 
SEC. 107. FSOC REVIEW OF BUREAU REGULATIONS. 
Section 1023(a) of the Consumer Financial Protec-
tion Act of 2010 is amended— 
(1) by striking ‘‘provision would put the safety 
and soundness of the United States banking system 
or the stability of the financial system of the United 
States at risk.’’; and 
(2) by inserting the following: 
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