The Tennessee Bankers Association is pleased to present this review of 2018 Tennessee legislation affecting the banking industry. With each entry are included a public chapter summary, link to the full text, and the effective date.
Please contact Amy Heaslet if you would like more information about these new laws and the impact they may have on your bank.
Table of Contents
Renewal Fee for Inactive Accountants’ Licenses
Public Chapter 551 (SB 2471 / HB 1724)
Lowers the age of inactive accountant licensees who may not have to pay a renewal fee pursuant to rules from over 70 years of age to 65 years of age and older.
Revisions to the Uniform Limited Partnership Act
Public Chapter 575 (SB 1942 / HB 1916)
Makes various revisions to the Uniform Limited Partnership Act, including: requiring the secretary of state to file an application with a certificate of existence showing a date not less than one month prior to the date of filling the application; reducing the fee from $25 to $20 for filing a withdrawal statement with the secretary of state; creating transfer of registration requirements for a limited liability company that elects to be registered as an obligated member entity; creating new contents of a certificate of cancelation; and creating guidelines for foreign limited partnerships with revoked registrations who wish to cancel registration without reinstating.
Revisions to Provisions Relative to Surplus Lines Insurance
Public Chapter 580 (SB 2510 / HB 2094)
Makes various revisions to provisions relative to surplus lines insurance, including requiring an individual to carry a surplus lines license to engage in an insurance transaction for an insurance company and requiring licensed agents the right to not pay the full amount of the commission on surplus lines insurance to any person.
Maintaining Reserves for Unearned Risk Rates on Contract of Title Insurance
Public Chapter 582 (SB 2529 / HB 2261)
Removes the requirement that a domestic insurer maintain reserve for unearned risk rates on contract of title insurance.
Requirements of Insurance Policies
Public Chapter 588 (SB 1862 / HB 1977)
Imposes certain rules of construction when interpreting an insurer's responsibilities under a policy of insurance; and limits an insurer's duty to defend based on the allegations in the underlying complaint.
Use of Blockchain Technology and Smart Contracts
Public Chapter 591 (SB 1662 / HB 1507)
Recognizes the legal authority to use distributed ledger technology and smart contracts in conducting electronic transactions and protects ownership rights of certain information secured by distributed ledger technology.
Prohibition on Charging for Adding or Removing Credit Freezes
Public Chapter 595 (SB 2470 / HB 1486)
Prohibits a consumer report agency from charging a Tennessee consumer to place, temporarily lift, or permanently remove a security freeze and removes all such fees authorized by state law.
Reattempting Examinations for Insurance Licensure
Public Chapter 639 (SB 2530 / HB 2282)
Requires an individual who fails to pass the examination required for an insurance producer license to wait at least 10 days before reapplying to take the examination a second time and 30 days before reapplying to take the examination for any subsequent attempt.
Requirements for Workers’ Compensation Insurers – Claims Office in State
Public Chapter 709 (SB 1615 / HB 1714)
Removes the requirement that every workers' compensation insurer that provides insurance for Tennessee workers' compensation claims be required to maintain a claims office or to contract with a claims adjuster located within this state.
Powers of a Series LLC
Public Chapter 759 (SB 2435 / HB 2524)
Specifies certain powers of a series of an LLC, including that it may, in its own name, contract; hold title to assets; grant liens and security interests; and sue and be sued.
Definition of Certified Counselor for Debt Counseling Services
Public Chapter 763 (SB 2197 / HB 1671)
Requires, under the Uniform Debt-Management Services Act, counselors to present evidence of accreditation or certification by an independent accrediting or certifying organization upon registering to provide debt management services.
Prohibiting Concealed Carry of Handguns on Certain Property
Public Chapter 823 (SB 2369 / HB 2370)
Current law generally authorizes an individual, corporation, business entity, or government entity to prohibit the possession of weapons by any person who is at a meeting conducted by, or on property owned, operated, or managed or under the control of the individual, business or government entity by posting signage to provide notice that firearms are prohibited on the premises. This bill creates a second option whereby an individual, business or government entity can restrict the possession of weapons on their premises to the carrying of concealed firearms by handgun carry permit holders. The full text of this legislation describes a unique sign that must be posted to restrict the possession of weapons, and specifies that an individual, business, or government entity that, as of January 1, 2018, uses signs to provide notice of a prohibition against possession of firearms on the premises will have until January 1, 2019, to replace existing signs with signs that meet the requirements of this legislation. However, this bill does not appear to change the signage requirement for a prohibition against all firearms and the new sign to restrict weapons possession to permit holders with a concealed firearm appears to be optional.
Non-disclosure Agreement Regarding Sexual Harassment in the Workplace
Public Chapter 965 (SB 2328 / HB 2613)
Prohibits public and private employers from requiring an employee or prospective employee to execute a non-disclosure agreement with respect to sexual harassment in the workplace as a condition of employment.
Private Trust Companies
Public Chapter 632 (SB 2242 / HB 1818)
Expands the persons to whom a private trust company may do business with and limits the ability of the commissioner of financial institutions to modify or revoke certain exemptions granted to a private trust company.
Total Return Unitrusts
Public Chapter 887 (SB 2172 / HB 2052)
Clarifies circumstances under which a trust may be construed as a total return unitrust.
Organizing of Credit Card State Banks
Public Chapter 550 (SB 2157 / HB 1900)
Extends the provisions permitting a domestic holding company to organize a credit card state bank from July 1, 2018, to July 1, 2020. State law defines "domestic holding company" to mean a company, itself or through its parent company, subsidiary, or other affiliate, that: (1) controls a domestic or foreign lender and has its principal place of business in Tennessee; (2) controls a company, or is a company, that is licensed under the Tennessee Money Transmitter Act; has a net worth of not less than $25 million; and has had its principal place of business in this state for at least five consecutive years, including the company's predecessor by merger; or (3) is controlled by, or has no less than 50 percent common ownership with, a company described in (2).
Lending – Industrial Loan and Thrift Companies
Public Chapter 600 (SB 2462 / HB 1944)
Changes the application of interest rates on loans made to industrial loan and thrift companies from the total amount of the loan to the amount financed on the loan.
Conversion of Financial Institutions
Public Chapter 741 (SB 2243 / HB 1819)
Broadens the definition of financial institution to include a trust company and institutions that are organized under the laws of other states for purposes of conversion of charter and resulting institutions; and requires a financial institution that results from a conversion to have its principal place of business in this state.
Pledging Out-of-State Bonds as Collateral for Public Deposits
Public Chapter 752 (SB 2684 / HB 1707)
Allows banks to pledge bonds issued by other states or other states’ municipalities as collateral for public deposits if the bond: (1) meets the definition of “qualified tax-exempt obligation” as defined in the Internal Revenue Code; (2) is rated AA-, Aa3, or a higher rating by a nationally recognized bond rating service; (3) is not a structured debt instrument; and (4) if downgraded below the minimum rating, is substituted with other eligible collateral within two working days.
Requirements for Form Garnishment Notice
Public Chapter 597 (SB 1716 / HB 1784)
Requires that the form garnishment notice be changed to conform to existing law that specifies a garnishment creates a lien on earnings until the judgment is satisfied, or for six months, whichever occurs first.
Uniform Commercial Real Estate Receivership Act
Public Chapter 731 (SB 1921 / HB 1792)
Enacts the Uniform Commercial Real Estate Receivership Act, which establishes requirements regarding a receivership for an interest in real property and any personal property related to or used in operating the real property.
Attorneys Fees in Workers Comp Cases
Public Chapter 757 (SB 2475 HB 2304)
Revises provisions governing attorneys' fees and costs in certain workers' compensation claims cases.
US Attorney General Edwin Meese Civil Asset Forfeiture Reform Act
Public Chapter 772 (SB 1987 / HB 2021)
Effective 10/1/2018; 1/1/2019
Enacts the U.S. Attorney General Edwin Meese Civil Asset Forfeiture Reform Act. Requires a notice entitled "Notice of Forfeiture Warrant Hearing" to be mailed to the owner within five business days of the date of the seizure of any personal property at the time of seizure of the property regardless of whether an arrest has been made, and requires that the owner of the property must be given reasonable notice of the forfeiture warrant hearing. Requires the court at the hearing to review the application for a forfeiture warrant and the affidavit in support and take testimony from the seizing officer regarding probable cause to issue a forfeiture warrant.
Filing Documents Electronically in General Sessions Court
Public Chapter 809 (SB 1789 / HB 2199)
Authorizes general sessions courts, by local rule, to allow papers to be filed, signed, or verified by electronic means that comply with technological standards promulgated by the supreme court; and specifies that pleadings and other papers filed electronically under such local rules will be considered the same as written papers.
Public Official Contesting Lien on Real Property
Public Chapter 905 (SB 2120 / HB 2526)
Effective 5/1/2018; 7/1/2018
Creates a streamlined process for certain public officials to contest liens on real property that they believe to lack any legal basis, but does not apply to liens, encumbrances, or other documents if the originator, owner, or holder of any debt is a state or national bank or other type of listed financial institution.
Venue for Appeals of Contested Case Hearing
Public Chapter 1021 (SB 2603 / HB 2386)
Revises present law regarding venue for review of contested cases under the Uniform Administrative Procedures Act such that venue must be in the chancery court nearest to the place of residence of the person contesting the action, or alternatively, at the person's discretion, in the chancery court nearest to the place where the cause of action arose or in the chancery court of Davidson County; and petitions for appeals of contested case hearings involving TennCare determinations must be in the chancery court of Davidson County.
Damages Awarded in Successful Challenge of a Lien
Public Chapter 1042 (SB 2204 / HB 1926)
Provides that a real property owner who prevails in an action challenging the validity of a lien, including in a slander of title proceeding, will recover the person's reasonable attorney's fees, reasonable costs, liquidated damages in an amount equal to 10 percent of the fair market value of the property not to exceed $100,000, and actual damages incurred by the owner; and excludes actions brought to challenge a lien based on a loan agreement for which the encumbered property was listed as collateral to secure the repayment of a loan.
Extend Sunset of Collateral Pool Board
Public Chapter 501 (SB 1522 /HB 1616)
Extends the collateral pool board for eight years to June 30, 2026.
Extend Sunset of Housing Development Agency Board of Directors
Public Chapter 508 (SB 1539 / HB 1647)
Extends the housing development agency board of directors for four years to June 30, 2022.
Filing Requirements with the State Board of Equalization
Public Chapter 527 (SB 1485 / HB 1502)
Removes the requirement that a property owner seeking exemption of certain property from ad valorem taxation from the state board of equalization file an application for each parcel for which exemption is sought; and deletes the requirement that the county assessor of property submit a record of the county board of equalization's changes to the state board of equalization.
Reporting Fraud, Waste or Abuse to the Comptroller of the Treasury
Public Chapter 540 (SB 1486 / HB 1536)
Adds debit card fraud to the definition of unlawful conduct that must be reported to the comptroller of the treasury; adds certain certified public accountants and firms to those with a duty to report unlawful conduct to the comptroller; and removes immunity from those reporters who knowingly provide false information. These provisions only apply to circumstances involving public funds.
Goodlettsville – Residential Rental Inspections
Public Chapter 627 (SB 2096 / HB 2010)
Adds Goodlettsville to the list of governing bodies authorized to adopt ordinances to inspect residential rental dwelling units that are either deteriorated or in the process of deteriorating for compliance with applicable codes.
Inclusionary Housing Requirements Clarified
Public Chapter 685 (SB 363 / HB 1143)
Clarifies that no local government has the authority to enact a law that would place requirements regarding inclusionary, affordable, or below market value housing when entitlements, variances, or any other form of permit or authorization is sought from the local government; and prohibits a local governmental unit from conditioning development entitlements through amendment to the zoning map on the allocation of existing or newly constructed private residential or commercial rental units to be sold or rented at below market rates.
Redefining Affordable and Workforce Housing
Public Chapter 791 (SB 2343 / HB 2561)
Redefines "affordable housing" and "workforce housing" for purposes of determining the types of housing for which funds may be appropriated by counties.
Authorized Instruments for Investments of State Funds
Public Chapter 909 (SB 2156 / HB 2688)
Authorizes obligations guaranteed as to principal and interest by Freddie Mac, Fannie Mae, Sallie Mae, and other similar organizations as instruments for investment to be made by the treasurer.
Annexation without a Referendum
Public Chapter 1047 (SB 2680 / HB 2125)
Provides that a referendum will not be required to effectuate annexation of a territory if: (1) all of the property owners within the territory proposed for annexation consent in writing; or (2)(A) two-thirds of the property owners within the territory proposed for annexation consent in writing; (B) the total area of the property owned by the owners consenting to annexation under (2)(A) is more than one-half of the territory proposed for annexation; and (C) the proposed annexation consists of nine or fewer parcels. These provisions will be repealed on January 1, 2023.
Appropriations for Fiscal Year 2017 - 2018
Public Chapter 1061 (SB 2552 / HB 2644)
Makes appropriations for the fiscal years beginning July 1, 2017, and July 1, 2018.
Issuance and Selling of Bonds by the State
Public Chapter 1062 (SB 2554 / HB 2645)
Authorizes the state to issue and sell bonds of up to $215,295,000, with $57,587,000 of proceeds allocated to the department of finance and administration to provide funds for state office buildings and support facilities revolving fund to be allocated and expended for the purposes of acquisition of equipment and sites, and erection, construction, and equipment of sites and buildings.
Apportionment of Income and Net Worth by Financial Asset Management Companies
Public Chapter 656 (SB 2256 / HB 2112)
Establishes a method of apportionment that may be elected by financial asset management companies for franchise and excise tax purposes.
Property Tax Relief for Disabled Veterans Temporarily in a Nursing Home
Public Chapter 710 (SB 1675 / HB 1496)
Provides continued eligibility for an elderly low-income, disabled, and disabled veteran's property tax relief during temporary periods of relocation for health care to the home of a friend or relative or to a hospital or skilled intermediate care facility if the homeowner intends to return to the residence once recovered.
Delinquent Tax Sale Provisions
Public Chapter 778 (SB 2495 / HB 2337)
Revises provisions regarding delinquent tax sales, including redefining “person entitled to redeem” with respect to a parcel to mean any interested person as of the date of the sale or the date the motion to redeem is filed, and requiring a copy of a motion requesting disbursement of any excess sale proceeds be served on all “interested persons” instead of all “parties.”
Property Tax Liens
Public Chapter 863 (SB 492 / HB 601)
Specifies that a property tax lien does not attach to an easement appurtenant upon property that is a servient estate or to an easement in gross that was assessed separately from the property by either the county assessor of property or the office of state assessed properties in the office of the comptroller of the treasury.
Angel Investor Tax Credit
Public Chapter 892 (SB 2647 / HB 2217)
Allows for the angel investor tax credit to be measured by the value of an indirect or direct cash investment by an angel investor against the Hall income tax liability of the angel investor. Under present law, there is allowed a credit of 33 percent of the value of a cash investment by an angel investor against the Hall income tax liability of such angel investor in the tax year in which the investment was made. This legislation adds that such cash investment may be indirect or direct.
Tax Law Revisions
Public Chapter 1011 (SB 2119 / HB 2310)
Adds to and revises present law governing taxes, as follows:
(1) In regard to computing net earnings and net loss under excise and franchise tax law, effective for tax years beginning on or after January 1, 2020, Section 163(j) of the Internal Revenue Code (concerning the limitation on business interest) must be applied as it was in effect immediately before the enactment of Public Law Number 115-97 (the "Tax Cuts and Jobs Act");
(2) There will be subtracted from net earnings and net losses any amount that the taxpayer would have excluded from federal taxable income as a result of applying Section 118 of the Internal Revenue Code (concerning contributions to the capital of a corporation) as it existed and applied immediately before enactment of the Tax Cuts and Jobs Acts;
(3) A unit of local government receiving tax information for the purpose of ascertaining whether proper local taxes or the business tax has been or may be disclosed to a contractor or consultant the name, address, and situs of one or more taxpayers for the purpose of ascertaining whether allocations of state and local taxes are being distributed to the correct unit of local government; and
(4) Extends from June 30, 2023 to June 30, 2028 the termination date for allocation of state sales tax revenue to municipalities under the former Courthouse Square Revitalization Pilot Project Act of 2005.
Perfection Period for Electronically Filing Tax Returns
Public Chapter 1048 (SB 2051 / HB 2132)
Authorizes the commissioner of revenue to require or permit that all returns required under the Hall income tax and excise and franchise tax be filed electronically and to establish validation criteria for electronically filed returns and reject returns that fail such criteria. If the commissioner rejects an electronic return, this legislation allows a perfection period of 10 days, beginning with the day after the date of the first transmission of an electronic return. During the perfection period, the taxpayer may correct any errors in the return or file a paper return postmarked on or before the end of the 10 days, if the commissioner authorizes the filing of a paper return.
Application of the Neighborhood Preservation Act
Public Chapter 779 (SB 2126 / HB 2423)
Extends application of the Neighborhood Preservation Act to include any county or municipality that has formed a land bank and adds other provisions to the Act and the Tennessee Local Land Bank Program.
New Driver License for Victim of Identity Theft
Public Chapter 800 (SB 912 / HB 836)
Allows a victim of identity theft to apply for and receive a new driver license with a new distinguishing number upon presenting proof of the crime, including a law enforcement report that lists the applicant as a victim of identity theft.
Carter County – Removal of Overgrown Vegetation
Public Chapter 815 (SB 2726 / HB 2695)
Allows removal of overgrown vegetation and accumulated debris on owner-occupied residential property.
Reporting Date for Unclaimed Property
Public Chapter 822 (SB 1859 / HB 2278)
Shifts from December 31 each year to May 1 in 2018 and to November 1 in 2019 and years thereafter the date by which the holder of abandoned property must file a report with the treasurer regarding the property.
Cleveland and Hardeman County to Participate in the TN Local Land Bank Program
Public Chapter 846 (SB 2347 / HB 2350)
Authorizes the City of Cleveland and Hardeman County to participate in the Tennessee local land bank program.
Condemned Property Offered for Sale to Former Owner
Public Chapter 871 (SB 1496 / HB 1727)
Revises provisions governing condemned property taken by eminent dominant being offered for sale to the former owner.
Authorization of Electronic Notarizations
Public Chapter 931 (SB 1758 / HB 1794)
Effective 5/15/2018; 7/1/2019
Allows for remote online notarization of most documents and requires Tennessee online notaries to first be commissioned as a traditional notary public; requires personal appearance by an interactive two-way audio and video communication that meets requirements established by rules promulgated by the secretary of state; and requires an online notary to be physically located in Tennessee when the notarization occurs.
Criminal Offenses for Elderly and Vulnerable Adult Abuse
Public Chapter 1050 (SB 2621 / HB 2159)
Effective 5/21/2018; 1/1/2019
Revises existing provisions and creates new offenses regarding the abuse of elderly and vulnerable adults. Among other provisions, this legislation requires a person having reasonable suspicion that an elderly or vulnerable adult is suffering or has suffered abuse, neglect, financial exploitation, or sexual exploitation to report such abuse, neglect, financial exploitation, or sexual exploitation to adult protective services or to a local law enforcement agency and that any person who fails to make a report will commit a Class A misdemeanor. However, the offense of failure to report suspected neglect, financial exploitation, or a sexual offense against an elderly or vulnerable adult to adult protective services will not apply to a financial service provider or to an employee of a financial service provider acting within the scope of the employee's employment.