Uses for ‘opportunity zones’ – including CRA consideration under new rules – outlined in fact sheet

Aspects of “opportunity zone” investments, and how activities in those zones may support a bank’s community and economic development strategies (including anti-redlining consideration), are outlined in a paper published Friday by the federal regulator of national banks.

The “Fact Sheet” issued by the Office of the Comptroller of the Currency (OCC) provides a definition of an opportunity zone (that is, an economically distressed area designated by the Treasury Department to attract private investment from qualified opportunity funds [QOF]). A QOF, the papers states, is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property in an opportunity zone.

The paper also outlines how banks can participate in zone transactions; defines QOF investments under “public welfare investment authority” of national banks; and offers insight into how recent amendments to the Volcker rule clarifies that a covered fund of the rule does not include an issuer that is a QOF.

Finally, the paper explains how banks may receive Community Reinvestment Act (CRA) consideration for the zones under new rules that go into effect Oct. 1 for OCC-supervised banks and federal savings associations.

The paper notes that under the new CRA rules, “a community development loan, community development investment, or community development service that helps meet the credit needs of a bank’s entire community, including LMI [low to moderate-income] communities, is a qualifying activity if it meets the criteria in 12 CFR 25.04 (the OCC’s new CRA rules).”

The agency added that “these criteria also apply to activities of qualified opportunity funds that benefit LMI-qualified opportunity zones.”

OCC Fact Sheet: Opportunity Zones

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