Monthly Archives:' September 2015

Karen Neeley Receives IBAT Chairman's Award

Kennedy Sutherland LLP is pleased to announce that attorney Karen Neeley was awarded the Independent Bankers Association Texas (IBAT) Chairman’s Award during their Annual Conference. This special award is selected at the discretion of the IBAT Chairman. It is based on the Chairman’s observation of a member who serves the association over and beyond the call of duty. Neeley currently serves as the general counsel for IBAT.

Past recipients of the IBAT Chairman’s award include:

  • 2014Charles G. Cooper, Banking Commissioner
  • 2013 – Charles (Mack) Neff, Integrity Bank, ssb, Houston
  • 2012 Al Jones, American Bank, NA, Corpus Christi
  • 2011 Cliff McCauley, Frost, San Antonio
  • 2010 J. Pat Hickman, Happy State Bank, Amarillo
  • 2009 Chuck Doyle, Texas Independent Bancshares, Inc. Texas City
  • 2008 Ed Krei, The Baker Group, Oklahoma City
  • 2007 Darrell Brown, Town & Country Bank, Stephenville
  • 2006 David Seim, Plains Capital Bank, Lubbock
  • 2005 Ervan Zouzalik, State Bank, La Grange
  • 2004 D. Kenneth Greer, First National Bank of Mount Vernon
  • 2004 Kenneth Irwin, Gruver State Bank
  • 2003 Cynthia L. Blankenship, Bank of the West, Irving
  • 2003 H. Gary Blankenship, Bank of the West, Irving
  • 2002 Gayle M. Earls, TIB-The Independent BankersBank, Dallas
  • 2002 James D. Lindsey, First State Bank, Mesquite
  • 2001 Dale R. Terry, The Genesis Group
  • 1999 Stan Paur, Pulse EFT Association
  • 1994 William J. Kacal, Deloitte & Touche, LLP
  • 1994 John D. Collado, IBAT Bond Trust

Neeley Named 2015 Texas Super Lawyer in Banking

Kennedy Sutherland LLP is proud to announce that senior attorney Karen Neeley has been named a 2015 “Texas Super Lawyer in Banking.” . Neeley has been recognized in the field of banking by Super Lawyers since 2005.

Neeley is senior attorney and manages Kennedy Sutherland’s Austin office. Joining the firm in August 2015, Neeley provides legal services to community banks throughout Texas and has been a strong advocate for over 30 years. Routinely, she advises banks on regulatory compliance, examination preparation, policies and procedures and has special expertise in Bank Secrecy Act, fair lending and consumer compliance matters.

Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys. The Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country.Super Lawyers Magazines also feature editorial profiles of attorneys who embody excellence in the practice of law.

See the complete list of Texas Super Lawyers 

Kennedy Sutherland Attorney Quoted on Patent Trolls

Kennedy Sutherland’s Senior Attorney, Karen M. Neeley, was quoted on September 15 in an article that appeared in Bloomberg on “New Technologies Make Banks Magnet for Patent Trolls.”

Background: In recent years, companies have emerged with a business model of purchasing or licensing patents from inventors (often in the areas of software and technology) and then sending demand letters to businesses alleging patent infringement and threatening litigation unless the infringers pay a fee. Companies purchasing patents are known as patent assertion entities (PAEs) or “patent trolls.” Because of the complexity of patent law, the loose descriptions used in some patents, and the high cost of patent litigation, many businesses settle these claims even though the claims may be without merit. Financial institutions have increasingly been targeted.

In May, a letter from financial services organizations told the U.S. Senate Judiciary Committee in a letter that an increase of almost 290% in litigation by PAEs from 2009 to 2013 is a threat to financial institutions of all sizes. Legislation is currently being discussed in Washington to combat this issue.

On September 15, 2014, Neeley provided testimony on behalf of the Independent Bankers Association of Texas to the Senate State Affairs Committee on Patent Assertion Entities.

Hensarling Request GAO Study Reducing Dividends

With a provision in the Highway Trust Fund reauthorization bill that would reduce the dividends paid on Federal Reserve Bank stock to Federal member banks still being floated as a revenue-raising measure on Capitol Hill, House Financial Services Committee Chairman Jeb Hensarling (R-TX) has asked the Government Accountability Office (GAO) to study the implications of reducing the annual dividend rate that the Federal Reserve pays to member banks.

“Hensarling asked GAO to study the historical rationale for the arrangement, the historic rates of return on other government securities, the budget and policy ramifications of reducing the annual dividend or changing it to a floating reference rate and the impact of making the system voluntary instead of mandatory.”

“I ask that the GAO engage with all relevant public and private sectors stakeholders, including, but not limited to, relevant federal and state regulatory authorities and affected banking organizations of all sizes.” Hensarling wrote in a Sept. 10 letter to Comptroller General Gene Dodaro.


Associations Supporting Regulatory Relief

On September 8, four trade associations representing 14,000 financial institutions – the American Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, and the National Association of Federal Credit Unions – submitted a letter to Senate Banking Committee Chairman Richard Shelby and Ranking Member Sherrod Brown urging them to enact bipartisan legislation that would provide “regulatory relief to community financial institutions.” The letter describes the measures that community banks have been forced to make to address the “growing volume and complexity of regulations,” including cutting back on their loan officers ranks in favor of additional compliance staff and adjusting or eliminating financial products and services offered to consumers. The letter urges the Senate to pass the Financial Regulatory Improvement Act of 2015, S. 1484, which was approved by the Senate Banking Committee in May. This legislation, the letter claims, will “addresses statutory and regulatory obstacles that thwart the ability of community banks and credit unions to fully serve the diverse financial services needs of consumers.”


Streamline Reporting Requirements for Community Banks

On Tuesday, the Federal Financial Institutions Examinations Council (FFIEC) unveiled plans to simplify regulatory reporting requirements for community banks, as part of broader efforts to review rules and cut through red tape facing smaller institutions. The FFIEC will seek public feedback for 60 days on a plan to eliminate or revise certain items that banks must include in “call reports,” or quarterly filings that banks must submit to regulators. Regulators routinely use these reports to monitor banks’ risk profiles. The plan would apply to banks and savings associations, but not to credit unions. If adopted, it would take effect with call reports either for December 2015 or March 2016.

In addition to the reporting changes proposed, the FFIEC also is focusing on four other areas:

  • Accelerating the start of a statutorily required review of the continued appropriateness of the data items collected in the Call Report;
  • Evaluating the feasibility and merits of creating a streamlined version of the quarterly Call Report for community institutions;
  • Continuing dialogue with community institutions to identify additional opportunities to reduce reporting burden by revising or redefining Call Report data items;
  • Reaching out to banks and savings associations through teleconferences and webinars to explain upcoming reporting changes and clarify technical reporting requirements.

FFIEC Press ReleaseFederal Register Notice (PDF)

Federal Historic Tax Credits Stimulate Economy

The National Park Service (NPS) and Rutgers University today released the Annual Report on the Economic Impact of the Federal Historic Tax Credit for FY 2014. The report reveals that the historic tax credit (HTC) yields a net benefit to the Treasury Department, generating $28.6 billion in federal tax receipts since the program’s inception, compared to $22.6 billion in credits allocated. From fiscal years 1978 through 2014, those $22.6 billion in federal HTCs allocated spurred $117.6 billion (in inflation-adjusted 2014 dollars) in historic rehabilitation. Those investments generated about 2.5 million new jobs and billions of dollars in direct and secondary economic gains. In short, the federal HTC is a good investment for local communities, individual states, and the natioon. The cumulative impacts of the program to date (FY 1978 through FY 2014) as shown in the study support this conclusion.

OCC Host Workshop in Dallas

The Office of the Comptroller of the Currency will host two workshops in Dallas at the Wyndham Dallas Suites – Park Central on October 20-21,  2015 for directors of national community banks and federal savings associations. The workshop is limited to the first 35 registrants and cost $99 to attend.

The Compliance Risk workshop on October 20 combines lectures, discussion, and exercises on the critical elements of an effective compliance risk management program. The workshop also focuses on major compliance risks and critical regulations. Topics of discussion include the Bank Secrecy Act, Anti-Money Laundering and Qualified Mortgage Regulations. The instructors will also touch on the new Truth-in-Lending (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA) Integrated Disclosures Rule, also known as TRID.

Revised and updated for 2015, the Credit Risk workshop on October 21 focuses on credit risk within the loan portfolio, such as identifying trends and recognizing problems. The workshop also covers the roles of the board and management, how to stay informed of changes in credit risk, and how to effect change.

 The workshops are taught by experienced OCC staff and are two of the 35 offered nationwide to enhance and expand the skills of national community bank and federal savings association directors. For information, including a complete list of available workshops, or to register for a workshop, visit or call (240) 485-1700.

Historic Tax Credit Improvement Act Coming

The Historic Tax Credit Improvement Act (HTCIA) is scheduled for introduction in the House of Representatives in September.

The bill’s new Ways and Means champion is Rep. Mike Kelly, R-Pa. Rep. Earl Blumenauer, D-Ore., who represents Oregon’s 3rd district, will again serve as the Democratic original co-sponsor. Proponents of the measure also expect introduction in the U.S. Senate later this fall, with Sen. Ben Cardin, D-Md., as the lead Senate Finance Committee Democratic champion.

Bill Summary (By Novogradac)
The HTCIA is the successor bill to the CAPP Act that had been introduced in the last two Congresses. Some old provisions, notably the 2 percent energy-efficiency incentive, have been dropped and several new modifications have been added that would modernize the HTC and increase its economic impact.

  • Sections 2 and 3 modify the previously proposed 30 percent small-deal credit by lowering the maximum transaction size to $2.5 million in qualified rehabilitation expenditures (QREs), and making the credits transferable via a tax certificate, similar to many state HTC statutes. These changes should increase the use of the federal HTC on smaller transactions in Main Street communities across the country.
  • Section 4 creates a new substantial rehabilitation, or minimum property expenditure definition. The substantial rehab test would be reduced to 50 percent of adjusted basis rather than the current 100 percent. This provision would increase the use of the HTC on “moderate rehabilitation” projects and will hopefully increase the overall number of transactions completed each year. While QREs have returned to their pre-recession level of about $4.3 billion, the number of transactions, according to National Park Service (NPS) records, has remained relatively flat–between 750 and 850 buildings annually. The change should also increase the number of qualifying projects in areas where property values are the highest.
  • Section 5 reduces the current depreciable basis adjustment from 100 percent of the credit amount to 50 percent. This provision would put the HTC in line with new markets tax credits (NMTCs) and renewable energy credits. There is no basis adjustment for the low-income housing tax credit (LIHTC). The Tax Equity and Fiscal Responsibility Act of 1982 set the HTC basis adjustment at 50 percent. It was increased to 100 percent as part of changes to Section 47 made by the Tax Reform Act of 1986.
  • Section 6 would eliminate federal taxation of the proceeds of state HTCs. This change would end market uncertainty over federal tax treatment of state HTCs that began in 2011 with the U.S. Court of Appeals 4th Circuit decision in Virginia Historic Tax Credit Fund v. Commissioner. This provision would certainly be a fairer outcome for state tax payers whose incentives for historic rehabilitation are worth only 65 cents on the dollar after reductions for federal ordinary income tax.
  • Section 7 proposes to make nonprofit sponsorship of HTC transactions easier by eliminating 3 of 4 “disqualified lease rules” which apply when more than 50 percent of the leasable space is rented to tax-exempt organizations and the sponsoring nonprofit developer has used the building before the certified rehabilitation. Prohibitions on a future fixed sale price back to the nonprofit, use of tax exempt bonds and the 20-year nonprofit tenant lease limitations would be removed. Only the rule against a sale and lease back of the property to the original nonprofit owner would be retained.
  • Section 8 is drafted to end current NPS regulations related to Part 3 certification for buildings that are part of a functionally related site such as a mill complex. The current ability of the NPS to delay Part 3 approval on an initial phase of such projects until subsequent phases are reviewed and approved would be replaced by a rule that every building in a functionally related site would be approved individually without regard to the later treatment of other properties.

Advocates who want to urge their members of Congress to co-sponsor the HTCIA should go to to take action.