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OCC, FDIC, Fed Publish Final CRA Rule: Equal Weight Given to Community Development Activities

Tuesday, October 24, 2023 - 7:00AM

The Federal Reserve, Office of Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) today released their final rule concerning Community Reinvestment Act (CRA) regulations. The Federal Reserve also released a fact sheet, overview of key objectives and a Board memo on the final rule. The final rule gives equal weight to retail activities and community development (CD) activities, a change from a 60-40 split in the proposed rule and one that affordable housing and community development stakeholders sought. The rule includes four tests: retail lending, retail services and products, CD financing and CD services. The regulations also give added weight for large banks that invest in low-income housing tax credit (LIHTC) and new markets tax credit (NMTC) equity. More than 75% of annual LIHTC equity investment and virtually all annual NMTC equity investments are from CRA-motivated financial institutions. The final rule will be effective April 1, 2024, except for certain amendments, which are delayed indefinitely. A later announcement will be made for their implementation.

The CRA requires that financial institutions sufficiently address the banking needs of all the communities they serve, particularly low- and moderate-income (LMI) communities–and investment in affordable housing and community development plays a role in whether financial institutions meet their CRA requirements. This is the first significant interagency revision to the CRA since 1995. The OCC issued a proposed update to CRA regulations in June 2020, but rescinded that rule in December 2021. In May 2022, the three major federal bank regulatory agencies issued a joint notice of proposed rulemaking to strengthen and modernize the CRA regulations.

Novogradac will provide further insight in the Notes from Novogradac blog and the proposal will be the focus of the Nov. 14 Tax Credit Tuesday podcast.

The effect of the proposed CRA regulations will also be discussed at the Novogradac 2023 Fall New Markets Tax Credit Conference this week in New Orleans, the Novogradac 2023 Fall Opportunity Zones Summit Nov. 1 in Washington, D.C., the Novogradac 2023 Fall Renewable Energy and Environmental Tax Credits Conference Nov. 2-3 in Washington, D.C., and the Novogradac 2023 Housing Tax Credit Finance Conference, Nov. 30-Dec. 1 in Las Vegas.

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