I 
110TH CONGRESS 
1ST SESSION H. R. 1869 
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 
APRIL 17, 2007 
Ms. VELA´ZQUEZ introduced the following bill; which was referred to the Com-
mittee on Financial Services, and in addition to the Committees on Ways 
and Means and Small Business, 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. Community bank protection under the Securities Investor Protection 
Act of 1970. 
Sec. 105. Updating the amount of small bank exception for cap on aggregate 
loans to officers. 
Sec. 106. Consideration of community bank impact. 
Sec. 107. Increase in shareholder registration threshold. 
TITLE II—ADDITIONAL REGULATORY RELIEF FOR COMMUNITY 
BANKS AND THEIR CUSTOMERS 
Sec. 201. Enhance customer capital access. 
Sec. 202. Seasoned customer CTR exemption. 
Sec. 203. Exception to annual privacy notice requirement under the Gramm- 
Leach-Bliley Act. 
Sec. 204. Privacy protection of consumer reports during loan application. 
Sec. 205. Update in the special regulatory lending limit on loans to executive 
officers. 
Sec. 206. Reimbursement for production of mandated records. 
Sec. 207. Study by the Comptroller General on implementation of commercial 
real estate guidance. 
TITLE III—TAX RELIEF FOR BANK DEPOSITORS, RURAL BANKS, 
MUNICIPALITIES, BANKS ORGANIZED AS LIMITED LIABILITY 
COMPANIES, INDIVIDUAL SAVERS, AND SMALL BUSINESSES 
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. Repeal of individual alternative minimum tax. 
Sec. 306. Young savers accounts. 
Sec. 307. Section 179 expensing for small business. 
TITLE IV—TAX RELIEF FOR COMMUNITY BANKS AND HOLDING 
COMPANIES 
Sec. 401. Limited tax credit. 
Sec. 402. Community bank relief from minimum tax. 
TITLE V—SMALL BUSINESS SUBCHAPTER S REFORMS 
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Sec. 501. Increasing Shareholder Limit for Subchapter S to 150. 
Sec. 502. Treatment of qualifying director shares. 
Sec. 503. Recapture of bad debt reserves. 
Sec. 504. Issuance of preferred stock permitted for subchapter S corporations. 
TITLE VI—SMALL BUSINESS LENDING ENHANCEMENTS 
Sec. 601. Reduced fees for section 7(a) loans. 
Sec. 602. Low documentation loan program made mandatory. 
Sec. 603. Effective date. 
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) SHORT FORM DEFINED.—The term 
‘short form’, when used in connection with any 
report of condition required under paragraph 
(3), means a report of condition in a format es-
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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. 
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: 
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‘‘(c) 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.— 
(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-
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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. 
(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-
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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. COMMUNITY BANK PROTECTION UNDER THE SE-
CURITIES INVESTOR PROTECTION ACT OF 
1970. 
Section 9 of the Securities Investor Protection Act 
of 1970 (15 U.S.C. 78fff–3) is amended by adding the 
following new subsection: 
‘‘(d) COMMUNITY BANK PROTECTION.— 
‘‘(1) IN
GENERAL.—The prohibition on ad-
vances in subsection (a)(5) of this section shall not 
apply to a bank with total assets, on a consolidated 
basis, of less than $1,000,000,000. 
‘‘(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.’’. 
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SEC. 105. UPDATING THE AMOUNT OF SMALL BANK EXCEP-
TION FOR CAP ON AGGREGATE LOANS TO OF-
FICERS. 
Subparagraph (C) of section 22(h)(5) of the Federal 
Reserve Act (12 U.S.C. 375b(5)(C)) is amended— 
(1) by striking ‘‘$100,000,000 of deposits’’ and 
inserting ‘‘$1,000,000,000 of total assets (on a con-
solidated basis)’’; 
(2) by striking ‘‘2 times’’ and inserting ‘‘4 
times’’; and 
(3) by adding at the end the following new sen-
tence: ‘‘The Board shall annually adjust the dollar 
amount in the 1st sentence of this subparagraph by 
an amount equal to the percentage increase, for the 
most recent year, in total assets held by all deposi-
tory institutions, as reported by the Federal Deposit 
Insurance Corporation.’’. 
SEC. 106. CONSIDERATION OF COMMUNITY BANK IMPACT. 
Before establishing or making any revision in any 
regulation, requirement, or guideline applicable to insured 
depository institutions (as defined in section 3 of the Fed-
eral Deposit Insurance Act), the appropriate Federal 
banking agency (as defined in such section) shall take into 
account the effect of the establishment of the regulation, 
requirement, or guideline on community banks and sav-
ings associations. 
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SEC. 107. INCREASE IN SHAREHOLDER REGISTRATION 
THRESHOLD. 
Subsection (g) of section 12 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78l(g)) is amended by 
striking ‘‘instrumentality of interstate commerce shall— 
’’ and all that follows through ‘‘register such security by 
filing’’ and inserting ‘‘instrumentality of interstate com-
merce and which has total assets exceeding $1,000,000 
and a class of equity security (other than an exempted 
security) held of record by more than 1,000 persons shall 
register such security by filing’’. 
TITLE 
II—ADDITIONAL 
REGU-
LATORY RELIEF FOR COMMU-
NITY BANKS AND THEIR CUS-
TOMERS 
SEC. 201. ENHANCE CUSTOMER CAPITAL ACCESS. 
(a) OPTIONAL CONSUMER WAIVERS OF RIGHT OF 
RESCISSION.—Section 125(d) of the Truth in Lending Act 
(15 U.S.C. 1635(d)) is amended— 
(1) by striking ‘‘The Board may’’ and inserting 
‘‘WAIVERS OF RESCISSION RIGHTS.— 
‘‘(1) PERSONAL
FINANCIAL
EMERGENCIES.— 
The board may’’; and 
(2) by adding at the end the following new 
paragraph: 
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