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National banks and federal savings associations (collectively, banks) can help economically distressed communities, such as those suffering negative effects of the COVID-19 pandemic, by investing in low- and moderate-income (LMI) areas in designated opportunity zones. This edition of the Office of the Comptroller of the Currency’s (OCC) Community Developments Investments explains how banks can support distressed communities and receive Community Reinvestment Act (CRA) credit by making investments in tax-advantaged qualified opportunity funds (QOF) part of their community development strategies.
This article highlights tax, legal, and regulatory issues for banks to consider when investing in QOFs.
Opportunity zone communities often experience economic distress on a variety of measures including a persistently high poverty rate, high unemployment, high housing vacancy rates, low home values, and many others.
PNC Bank explains how its CRA-defined community development mission guides project selection for the QOFs that the bank has sponsored, including those used to build workforce housing and a community health center. The structure of these deals offers a helpful case study for QOF financing for projects.
Some banks and other sponsors of QOFs are using the Opportunity Zones Reporting Framework developed by the U.S. Impact Investing Alliance, the Beeck Center for Social Impact and Innovation at Georgetown University, and the Federal Reserve Bank of New York to evaluate the social and economic impacts of their investments in QOFs.
Woodforest National Bank has partnered with CEI-Boulos Capital Management to develop a QOF to invest in high-impact commercial real estate projects in opportunity zones in the bank’s 17-state CRA assessment area. All projects are measured against the Opportunity Zone Reporting Framework.
Banks do not have to sponsor their own QOFs. They can invest in third-party funds sponsored by intermediaries such as Local Initiatives Support Corporation (LISC) and Enterprise Community Partners, which seek to deliver measurable returns to banks and other investors interested in making sustainable positive economic impacts with community projects in opportunity zones.
Collection: Community Developments Investments
Photos show the Stonewall Building in downtown Birmingham, Ala. The photo in the middle shows Alex Flachsbart, chief executive officer of Opportunity Alabama, and Ed Ticheli, a developer, discussing the renovation of the Stonewall Building, previously known as the American Life Building. The background image shows the renovated Stonewall Building, which is located in an opportunity zone and will contain 140 affordable housing units. (Photos: Opportunity Alabama and LMS Real Estate Investment Management)
Call (202) 649-6420 or email communityaffairs@occ.treas.gov. This and previous editions are available on the OCC's website at www.occ.gov/communityaffairs.
Articles by non-OCC authors represent the authors’ own views and not necessarily the views of the OCC.
