Thursday, December 7, 2023

December 2016 Legal Briefs

  • DOL’s Overtime Rule Blocked
  • Reg Z, Reg M Thresholds
  • Form W-9
  • Questions & Answers
    • Who can release a mortgage
    • Must the spouse sign the mortgage secured by commercial real estate?
    • Waiver of homestead
    • Recitation of marital statuts
    • Purchase, non-borrowing spouse not in title
    • Name discrepancy

DOL’s Overtime Rule Blocked

By Pauli D. Loeffler

On November 22, 2016, Federal Judge Amos Mazzant granted the plaintiffs’ motion for Emergency Preliminary Injunction in State of Nevada, et al. v. United States Department of Labor, et al., a case pending in the U.S. District Court for the Eastern District of Texas. The court enjoined implementation of the DOL’s Final Rule published May 23, 2016, effective on December 1, 2016. Plaintiffs include 21 States and numerous business groups. The injunction is effective on a nationwide basis. This means that employers do not have to do anything and may continue following the current Fair Labor Standards Act’s rules for exempt/non-exeempt employees pending a final decision.

Reg Z, Reg M Thresholds

By Pauli D. Loeffler

Certain dollar amount thresholds in Reg Z (TILA) and Reg M (Consumer Lease Act) are subject to annual adjustment. If the amount of the loan or credit sale does not exceed the threshold amount, it is subject to Reg Z. If the loan or credit sale DOES exceed the threshold amount under § 1026.3(b), as long as it is: a) NOT secured by real estate or personal property used or expected to be used as the principal dwelling, and b) NOT a private education loans, it is exempt from coverage under Reg Z. The Reg M threshold for consumer leases found in Sec. 1013.2(3)(1) remains at $54,600 for another year. The dollar threshold for higher priced-mortgages subject to special appraisal requirements under Section 1026.35(c)(2)(ii) is also unchanged at $25,500.

Form W-9

By Pauli D. Loeffler

Purposes of the W-9. The official IRS Form W-9 can be accessed here from this link: It is used for U.S. citizens, resident aliens (individuals with a “Green Card” or who meet the “substantial presence” test). The IRS requires a U.S.-issued Taxpayer Identification Number (“TIN”) be provided to a third-party (known as the “requester”), when the third-party is required to do information reporting to the IRS. For example, the 1099-INT (interest), 1099-C (debt cancellation — charge-offs), 1098 (mortgage interest paid), as well as to report contributions to IRAs, and proceeds of a sale are some the information reports required to be submitted.

Honestly, there is no requirement the W-9 be obtained unless the bank is required to report to the IRS. Most software platforms produce a form “ substantially similar to… Form W-9” per the Instructions to Form W-9. An informed customer may give the bank some push-back when all he is doing is opening a non-interest bearing deposit account or is leasing a safe deposit box. However, obtaining the customer’s TIN through use of the W-9 is generally bank policy for CIP compliance as well as other AML/BSA purposes such as CTRs. Advising customers who challenge this by stating it is bank policy for all accounts required by the USA PATRIOT Act will probably take care of the objection. If a W-9 has been obtained for an existing customer who is savvy enough to know of the “existing customer” exemption, you may explain that obtaining a W-9 serves the purpose of updating any information that has changed — name, tax classification, and withholding status. It also avoids searching for a prior one W-9 that is no longer on the core since the account closed several years ago.

The signed W-9 certifies (Part II of the form): 1) the Taxpayer Identification Number (the “TIN”) provided by the customer (Part I of the form) is correct (or an application for a TIN has been requested), 2) the customer is not subject to back-up withholding, 3) the customer is a U.S. citizen or resident alien, a partnership, corporation, company, or association created or organized in the United States or under its laws, or a domestic estate or trust, and 4) the FATCA codes are correct, if any are entered for exemption from FATCA reporting.

Information required on the W-9. Line 1 is the name used on the income tax return filed by the customer. Line 1 CANNOT be left blank. Page 4 of the IRS Form W-9 provides a lovely chart, but most banks use a substitute form which does not have this. For a natural person, it is the name on the individual’s Social Security card. For an entity, it is entity’s name associated with the EIN used for reporting if the entity is not “disregarded” for tax purposes.

For an individual, it will usually match the name on the driver’s license, but not always. For example, while Oklahoma requires names and addresses to be updated with the Oklahoma Department of Public Safety within 10 days of a change, there is no requirement that the license itself be updated, and many people simply wait until a current license is due for renewal. More importantly, they need to contact Social Security with evidence of a name change, and should be reminded to do this if they haven’t already. If they haven’t done this yet, they should enter the first and last name used on the last tax return followed by the new last name per the instructions.

Line 2 is the business name/disregarded entity name (discussed, below) if it is different from Line 1. While Line 1 must be filled in, there is no requirement that Line 2 contain anything. Bank employees opening accounts need to understand this since customers may need some explanation, particularly if a substitute form without instructions is used. Line 3 is tax classification, which may cause both the customer and the banker some consternation in determining which box should be checked.

Sole proprietorship. A sole proprietorship is NOT an entity. It is merely a NAME the individual (or spouses that have not formed a partnership) use in doing business, having no separate legal existence. The General Instructions for Certain Information Returns which can be found at, states:

You must show the individual’s name on the first name line; on the second name line, you may enter the “doing business as (DBA)” name. You may not enter only the DBA name. For the TIN, enter either the individual’s SSN or the EIN of the business (sole proprietorship). The IRS prefers that you enter the SSN. [Emphasis added]

The last sentence is also contained in the W-9 Instructions on page 3 in the section titled “Taxpayer Identification Number.” This is the reason that when Sally Doe, the sole proprietor of Simply Scrumptious Extraordinary Eats, has been issued an EIN because Sally has to pay employment or excise taxes, the account should still use Sally’s SSN rather than the EIN. The EIN is intended to be used only for payment of certain. Line 1 of the W-9 should be filled in “Sally Doe,” and Line 2 may, but is not required to show “Simply Scrumptious Extraordinary Eats.” The box next to “Individual/sole proprietor or single-member LLC” will be checked. Sally’s SSN should be in Part I.

Disregarded Entity – Grantor Trust not filing Form 1041 or optional Form 1099. John Doe is the settlor of the John Doe Revocable Trust. John is alive. The John Doe Revocable Trust is a “disregarded entity” meaning that income from the Trust will be reported on John Doe’s personal income tax form rather than a separate return for the Trust or optional Form 1099. “John Doe” is entered on Line 1, “John Doe Revocable Trust” may, but is not required to be entered on Line 2 as the disregarded entity, and the “Individual/sole proprietor or single-member LLC” box is checked for Line 3. John Doe’s SSN is used in Part I. This would also be the case for a joint trust where the spouses are the grantors and file a joint tax return. Once the grantor(s) is (are) deceased, the Trust will require an EIN even though the name of the Trust will NOT change. A new W-9 will have “John Doe Revocable Trust” on Line 1, nothing on Line 2, the “trust/estate” box checked for Line 3, and the EIN in Part I.

Disregarded Entity – Sole member LLC. When Sally Doe is the sole member of Simply Scrumptious Extraordinary Eats, LLC, if the LLC has no employees nor excise taxes, Sally does not need to obtain an EIN for the LLC but may do so. As with the prior example, Sally Doe is entered on Line 1 and Simply Scrumptious Extraordinary Eats, LLC goes on Line 2. The account itself is styled using Sally’s SSN, Sally Doe, sole member with name of the LLC either on that line or on the second line. The box next to “Individual/sole proprietor or single-member LLC” is checked for Line 3 rather than “Limited liability company,” and Sally’s SSN is entered in Part I.

If Sally obtained an EIN for the entity (because the LLC must pay employment or excise tax or did so voluntarily), the LLC is still considered a “disregarded entity.” The EIN is associate with Sally’s SSN, and Sally will not file a separate income tax return for the LLC. She will to file a Form 1040 with required schedule(s) instead. Sally’s name goes on Line 1, and Simply Scrumptious Extraordinary Eats, LLC may be entered on Line 2. The box next to “Individual/sole proprietor or single-member LLC” will be checked for Line 3. The EIN should be used in Part II. The account is styled using the EIN and the name of the LLC, e.g., XX-XXXXXXX Simply Scrumptious Extraordinary Eats, LLC. (CAVEAT: If there has been an election filed with the IRS for the LLC to be treated as a Subchapter C or Subchapter S corporation, the “Limited liability company” box WILL need to be checked and C or S entered in the blank.)

If the sole member is another entity (e.g., a corporation, LLC, partnership, etc.), the LLC is still a considered a “disregarded entity” and the same rules stated above apply. For example, XYZ, Inc. is the sole member of Uquackmeup, LLC. Line 1 will be XYZ, Inc. and Line 2 Uquackmeup, LLC is entered on Line 2. The corporation will report the LLC as a division on its corporate income tax form. Either the “C Corporation” or “S Corporation” box will be checked for Line 3. The corporation’s EIN will be entered in Part I. If the LLC has employees or pays excise taxes and has its own EIN, it will be styled as indicated for an individual who has obtained an EIN as in the paragraph immediately above. It must use the EIN assigned for payment of employment or excise tax, but any interest, dividends, mortgage interest paid, etc. is reported under the EIN of the sole member.

The name of the sole member goes on Line 1, the name of the LLC goes on Line 2, the tax classification of the sole member is the box checked for Line 3, and the EIN of the sole member is entered in Part I. Styling of the account will depend on whether the LLC has been issued its own EIN for employment or excise tax purposes, but again, any interest, dividends, mortgage interest paid, etc. will be reported under the EIN of the sole member.

Note if the sole owner is itself a disregarded entity, Line 1 will use the name of the first person (natural or entity) that is not a disregarded entity. If ABC LLC’s sole member is DEF LLC, and DEF LLC’s sole member is Richard Roe, Richard Roe will be entered on Line 1, and ABC LLC on Line 2, etc. This example also applies when revocable trust (disregarded entity) is the sole member when the grantor is alive, i.e., you would use the grantor’s SSN. See this link regarding disregarded single member LLCs:

Multi-member LLCs. The “default” tax classification for an LLC with 2 or more members is as a partnership (it may elect to be treated as C or S Corp for taxes, but we will get to that below). An EIN will always be required. This is true for LLCs where spouses are the only members UNLESS the spouses live in a community property state — Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin. The name of the LLC will be on Line 1, if it has a fictitious or trade name, it may be entered on Line 2, and “Limited liability company” is checked in Line 3. C, S or P will be written in the blank to indicate how it is taxed. The EIN for the LLC will be entered in Part I.

Corporations. The name the corporation uses for filing its income tax return is on Line 1. If the corporation has a trade name or is required to use a fictitious name (this generally happens when a corporation formed in one state must file in another state and the name is already taken by another corporation or other legal entity in that state) may be entered on Line 2. Either “C Corp” or “S Corp” box will be checked for Line 3, and the EIN issued to corporation when it formed is entered in Part I. If the corporation has a fictitious name or trade name, the account styling will use the EIN, the name of the corporation tied to that EIN and then the trade or fictitious name. Note that this is also how it is done when a division of a corporation is permitted to use the EIN of the corporation.

Tax treatment election. A corporation or an LLC may choose to be taxed either as a Subchapter C Corporation (“C Corp”) or a Subchapter S Corporation (“S Corp”). The “default” for a corporation is as a “C Corp.” Different IRS forms are used for elections, and there are time restrictions with regard to formation and election not discussed in this article.

S Corps pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S Corps to avoid double taxation on the corporate income. To qualify as an S Corp, the corporation must: 1) Be a domestic corporation, 2) Have only allowable shareholders (individuals, certain trusts and estates, and may not be partnerships, corporations or non-resident aliens, 3) Have no more than 100 shareholders, 4) Have one class of stock and 5) Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

If the LLC has an operating agreement (optional under Oklahoma statutes), it may state how the LLC will be taxed. If there is no operating agreement, or it is silent, if the customer is unsure of the tax classification, s/he should contact her/his accountant for clarification. If s/he does not have an accountant, then the “default” classification as indicated above should be used for Line 3.

Since the election may be made within a limited time after formation or the tax classification can change if a sole member adds another member or transfers his/her membership to another, it is important to advise the customer that s/he needs to contact the bank and provide a new W-9 (and obtain an EIN or new EIN) if the current W-9 becomes inaccurate in that respect. The IRS can fine both the customer and the bank if there is inaccurate information on the W-9.

Questions & Answers

The OBA Compliance Team answers questions for regarding Oklahoma law. Here are some questions and answers from bankers regarding Oklahoma real estate title requirements.

Who can release a mortgage

Question: Under Oklahoma Law, is there a “minimum” officer level requirement to sign a mortgage release? Can an AVP or simple “banking officer” do it?

Answer: Sec. 414 of the Banking Code provides:

G. Every conveyance of real estate and every lease thereof made by a bank or trust company shall have the name of such bank or trust company subscribed thereto, either by an attorney-in-fact, president, vice-president, chairperson or vice-chairperson of the board of directors of such corporation.
Unless the AVP is appointed attorney-in-fact for the bank, s/he cannot sign deeds, mortgages, releases, etc.

The Oklahoma Title Examination Standards provides:
Title 16 Oklahoma Statutes
Title Examination Standards
§12.2. Rebuttable Presumptions Concerning Corporate Instruments Executed in Proper Form.

If a recorded instrument from a corporation is executed and acknowledged in proper form, the title examiner may presume that:

A. the persons executing the instrument were the officers they purported to be,

B. the officers were authorized to execute the instrument on behalf of the corporation,

C. the corporation was authorized to acquire and sell the property affected by the recorded instrument, and

D. the corporation was legally in existence when the instrument was executed.

From and after September 1, 1994, recorded instruments must be signed on behalf of a domestic corporation by a president, vice president, chairman or vice chairman of the board of directors. A corporate instrument executed in another state may be accepted if it is executed either by the proper officers under Oklahoma law or by the proper officers under the laws of the state where the instrument was executed.

Before September 1, 1994, corporate instruments were required to be executed by a corporate president or vice president, attested by a corporate secretary or assistant secretary, and impressed with the corporate seal. Instruments from banks could be attested by a cashier or assistant cashier.

Title 16 Oklahoma Statutes
Title Examination Standards
§12.5. Powers of Attorney By Legal Entities.

A. If a recorded instrument has been executed by an attorney in fact on behalf of a legal entity, the examiner should accept the instrument if:

1. the power of attorney authorizing the attorney in fact to act on behalf of the legal entity is executed in the same manner as a conveyance by a legal entity,

2. the power of attorney is recorded in the office of the county clerk,

3. the power of attorney shows that the attorney in fact had the authority to execute the recorded instrument, and

4. the power of attorney was executed before the recorded instrument was executed.

B. Notwithstanding paragraph A above, if a recorded instrument has been executed by an attorney in fact on behalf of a legal entity, the examiner should accept the instrument if the instrument has been of record for at least five (5) years even though power of attorney has not been recorded in the office of the county clerk of the county in which the property is located.

Must the spouse sign the mortgage secure by commercial real estate?

Question: We are refinancing a loan to Jack Flash secured by commercial real estate. We are being told that his wife Jill must sign the mortgage. This doesn’t make sense since this isn’t a dwelling.

Answer: The Comments to Title Examination Standards §7.2 in Title 16 include case law citations for this seemingly absurd requirement:

1. There is no question that an instrument relating to the homestead is void unless husband and wife subscribe it. Grenard v. McMahan, 1968 OK 75, 441 P.2d 950, Atkinson v. Barr, 1967 OK 103, 428 P.2d 316, but also see Hill v. Discover Bank, 2008 OK CIV APP 111, 213 P.3d 835. It is also settled that husband and wife must execute the same instrument, as separately executed instruments will be void, Thomas v. James, 1921 OK 414, 202 P. 499.… It is essential to make the distinction between a valid conveyance and a conveyance vesting marketable title when consulting this standard. This distinction is important because the impossibility of determining from the record whether or not the land is homestead, requires the examiner, for marketable title purposes, to (1) assume that all real property is homestead, and (2) consequently, always require joinder of both spouses on all conveyances. Although a deed of non-homestead real property, signed by a title-holding married person without the joinder of their spouse, will be valid as between the parties to the deed, it cannot confer marketable record title.

2. While 16 O.S. § 13 states that “The husband or wife may convey, mortgage or make any contract relating to any real estate, other than the homestead, belonging to him or her, as the case may be, without being joined by the other in such conveyance, mortgage or contract,” joinder by husband and wife must be required in all cases due to the impossibility of ascertaining from the record whether the property was or was not homestead or whether the transaction is one of those specifically permitted by statute…A well-settled point is that one may not rely upon recitations, either in the instrument or in a separate affidavit, to the effect that property was not the homestead. Such recitation by the grantor may be strong evidence when the issue is litigated, but it cannot be relied upon for the purpose of establishing marketability. Hensley v. Fletcher, 172 Okla. 19, 44 P. 2d 63 (1935).

If the spouse does not sign the mortgage, the defect is cured under the Title Standards 10 years after the deed or mortgage is recorded.

Waiver of homestead

Question: I have an officer in Missouri wanting to use a marital waiver rather than have the husband sign on the deed. I am told this is a common practice, but I’ve not seen it in Oklahoma. Do you know anything about this document and its usage?

Answer: You cannot do this for Oklahoma real estate conveyances. When a conveyance is made by a married person, whether or not the spouse is an “owner” in the chain of title, she is a necessary party in order to convey any marital interest she may have in the subject property. Spouses must execute the same instrument, as separately executed instruments will be void, Thomas v. James, 1921 OK 414, 202 P. 499.

Recitation of marital status

Question: We just closed a loan for a single person, and he wanted title Insurance. The title insurance company is requiring that we refile the mortgage because it doesn’t have a marital status. Our software will include language such as “spouse of this person and spouse of that person” if they are married, but if the person is single, it is doesn’t specify, and we cannot change this. We want to know whether stating the person is single is required. I called our software vendor, but they won’t answer my question.

Answer: I am shocked your LOS does not provide some means to put “a single person” in a deed or mortgage since supplying marital status is definitely required.

Title 16 Oklahoma Statute
Title Examination Standards,
§7.2. Marital Interests and Marketable Title.

Except as otherwise provided in Standard 7.1, no deed, mortgage (other than a purchase money mortgage) or other conveyance by an individual grantor shall be approved as sufficient to vest marketable title in the grantee unless:

A. The body of the instrument contains the grantor’s recitation to the effect that the individual grantor is unmarried…

Re-recording is not required. The mortgagor can execute an Affidavit regarding his/her marital status referencing the deed or mortgage and legal description of the property per the following comment to the Title Standard:

3. If the individual grantor is unmarried and the grantor’s marital status is inadvertently omitted from an instrument, or if two grantors are married to each other and the grantors’ marital status is inadvertently omitted from an instrument, a title examiner may rely on an affidavit executed and recorded pursuant to 16 O.S. § 82 which recites that the individual grantor was unmarried or that the two grantors were married to each other at the date of such conveyance.

Purchase, non-borrowing spouse not in title

Question: If a borrower states he is married, but the non-borrower spouse will not be on the deed does the spouse need to sign the mortgage?

Answer: If it is a purchase money mortgage, the signature of a spouse who will not be in title on the deed is not required. The first sentence in Title Standard §7.2 states: “Except as otherwise provided in Standard §7.1, no deed, mortgage (other than a purchase money mortgage) or other conveyance by an individual grantor shall be approved as sufficient…” and §7.3 adopted several years ago reiterates this and cites the case law. This only applies to purchase money mortgages. If it is a refinance, the spouse would have to sign the mortgage.

Title 16 Oklahoma Statutes
Title Examination Standards
§7.3. Marital Interests Purchase Money Mortgages.

The homestead interest of a spouse who is not in title to homestead property is inferior to the lien of a purchase money mortgage. Therefore, the validity of a purchase money mortgage is not affected by the failure of a non-title-holding spouse to execute a purchase money mortgage on homestead property.

Authority: Cimarron Federal Savings Association v. Jones, 1991 OK CIV APP 67, 832 P.2d 426, approved for publication and given precedential effect, Cimarron Federal Savings Association v. Jones, 1992 OK 55, 832 P.2d 420.

Name discrepancy

Question: If there is a discrepancy in a name, say James Smith filed as Jim Smith, and this is caught after the mortgage is filed, we obtain a name affidavit. Does the name affidavit need to be filed of record, and if so, do we need to refile the mortgage with the name affidavit attached?

Answer: Depending on the name variance, an additional filing may not be needed under the Title Examination Standards. At most, an Affidavit reciting identity referencing the recordation information of the mortgage (date, book and page) and the legal description of the property can be use without refiling the mortgage can be recorded.

Title 16 Oklahoma Statutes
Title Examination Standards
§5.1. Abbreviations and Idem Sonans.

Identity of parties should be accepted as sufficiently established in the following cases, unless the examiner is otherwise put on inquiry:

A. Abbreviations of first or middle names: Where there are used commonly recognized abbreviations, derivatives or nicknames, such as “Geo.” for George, “Jon.” for John, “Chas.” for Charles, “Alex.” for Alexander, “Jos.” for Joseph, “Thos.” for Thomas, “Wm.” for William, “Lse.” for Louise; and

B. Nicknames of first or middle names: Where there are used commonly recognized nicknames, such as, “Susan” for Suzanna, “Ellen” for Eleanor, “Liz” for Elizabeth, “Katie” for “Katherine, “Jack” for John, “Rick” for Richard, “Bob” for Robert, “Bill” for William; and

C. Application of Doctrine of Idem Sonans to first, middle and last names or surnames: Where the names, although spelled differently, sound alike or phonetically similar or when their sounds cannot be distinguished, such first names as in “Sarah” and “Sara”, “Catherine” and “Katherine”, “Jeff” and “Geoff”, “Mohammed” and “Mohammad” , “Li” and “Lee”, and such last names as in “Fallin” and “Fallon”, “Green” and “Greene”, “McArthur” and “MacArthur”; and

D. In all instruments or court proceedings where (1) in one instance name or names of a person is or are used, and in another instance the initial letter or letters only of any such name or names is or are used but the surnames are the same or idem sonans; (2) in one instance a name or initial letter is used, and in another instance is omitted, but in both instances the other names or initial letters correspond and the surnames are the same or idem sonans; or (3) in one instance the middle name or initial is present and in another instance, the middle name or initial is absent, but the surnames are the same or idem sonans.

A greater degree of liberality should be indulged with the greater lapse of time and in the absence of circumstances appearing in the abstract to raise reasonable doubt as to the identity of the parties. Identity of parties should be accepted as sufficiently established in the following cases: