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Making the Case for CRA Eligibility
MODERATOR PANELISTS
Renee Beaver Novogradac & Company LLP
Brad Calloway First NBC Bank
Sharon Canavan Office of the Comptroller of Currency
Kandi Jackson NTCIC
Tim Karp JP Morgan Chase
Historic Tax Credits
• Specific statutory banking authorities permit banks to provide
financing for a certified historic property rehabilitation project and gain
the related tax credits by taking interests in entities that hold such
properties for rehabilitation
• May be eligible for CRA consideration under certain circumstances
National Bank Legal Authority
• HTC investments permitted under national banking authorities:
– 12 U.S.C. § 24(Eleventh)
– 12 U.S.C. § 24(Seventh)
• A national bank can acquire an interest in an entity that holds HTC
properties for rehabilitation.
– Property owner/developer creates a limited partnership (LP) or limited
liability company (LLC)
– Bank typically holds substantial (e.g., 99%) interest
– Property owner/developer holds de minimis (e.g., 1%) interest
• Using this structure, national banks can provide the equity funding for
HTC projects in return for the associated tax credits
National Bank Legal Authority
• 12 U.S.C. § 24(Eleventh)— authorizes national banks to make loans
and investments designed primarily to promote the public welfare,
including the welfare of LMI communities or families (such as by
providing housing, service, or jobs).
– 12 CFR Part 24 (Part 24)
• Depending on safety and soundness profile, CRA performance, and
the nature of the project financing, the bank must either:
– Request prior OCC approval, or
– Submit an after-the-fact notice to the OCC
National Bank Legal Authority
• 12 U.S.C. § 24(Seventh)—Depending on the specifics of the
transaction, under § 24(Seventh), national banks may be authorized to
finance an HTC project by acquiring an interest in the entities that hold
the properties for rehabilitation.
• The substance of the transaction must remain the provision of
financing for the rehabilitation of historic property.
• National banks and federal thrifts should consult their supervisory
office contacts concerning investments that intend to use this
authority.
Federal Savings Associations (FSA)
Legal Authority
• FSA authorities to make community development investments:
– De Minimis Investments—12 CFR 160.36
– Community Development related equity investments in real estate—HOLA
5(c)(3)(A), 12 CFR 160.30, and May 10, 1995 letter
– Investments in Service Corporations and Lower-tier Entities for community
development investments—12 CFR 159
CRA Consideration For HTC
• HTC-related loan or investment must meet—
– Definition of community development
• Affordable housing for low- or moderate- income (LMI)
individuals
• Community services targeted to LMI individuals
• Economic development by financing small businesses or
small farms
• Revitalization or stabilization of underserved or distressed
nonmetropolitan middle-income areas, LMI areas, or
designated disaster areas
– Geographic restriction—must be located in:
• Bank’s Assessment Area or
• Broader Statewide or Regional Area
CRA Q&As
§ __.12(g) – 1
§ __.12(g)(2) – 1
§ __.12(g)(4) – 2
§ __.12(g)(4)(i) –
1, and
§ __.12(g)(4)(ii)
– 2 through – 4.
Greater weight on HTC-related activities that are most responsive to community
credit needs, including needs of LMI individuals or geographies
Interagency Questions and Answers Regarding Community Reinvestment
Federal Register, Vol. 81, No. 142, page 48509-48510, Monday, July 25, 2016
“Nonetheless, in instances in which loans to, or investments in, projects that receive
HTCs do meet the regulatory definition of community development, including the
geographic restrictions, the Agencies concur that CRA consideration should be
provided. For example, a loan to, or investment in, an HTC project that does, in fact,
relate to a facility that will house small businesses that support permanent job
creation, retention, or improvement for low- or moderate-income individuals, in low- or
moderate-income areas, or in areas targeted for redevelopment by Federal, state, local,
or tribal governments may receive CRA consideration as promoting economic
development. Further, a loan to or investment in an HTC project that will provide
affordable housing or community services for low- or moderate-income individuals
would meet the definition of community development as affordable housing or a
community service targeted to low- or moderate-income individuals, respectively.
Similarly, loans to or investments in HTC projects may also meet the definition of
community development when the project revitalizes or stabilizes a low- or moderate-
income geography, designated disaster area, or a designated distressed or
underserved nonmetropolitan middle-income geography. Greater weight will be given
to those HTC related activities that are most responsive to community credit needs,
including the needs of low- or moderate-income individuals or geographies. See Q&As
§ll.12(g)–1, §ll.12(g)(2)–1, §ll.12(g)(4)–2, §ll.12(g)(4)(i)–1, and §ll.12(g)(4)(ii)–2
through–4.”
CRA Consideration For HTC
HTC Investment in:
Affordable Housing for LMI individuals
Community Facility that targets services to
LMI individuals
Economic Development
• Economic development by financing small businesses or small farms
– Size test—Project must involve financing a business(es) with gross annual
revenues of $1 million or less, or meet the size eligibility requirements for
Small Business Administration Development Companies
– Purpose test—Must support permanent job creation, retention, and/or
improvement:
• For LMI individuals,
• In a low- or moderate-income census tract, or
• In an area targeted for redevelopment by federal, state, local, or tribal
government
Economic Development
Examples: Restoration of historic structure:
Occupied by small businesses with gross annual revenue of $1 million or less, which will provide 100 new permanent jobs for LMI individuals.
In LMI census tract and renovation will attract small businesses that meet size eligibility requirements for SBA Development Companies that will provide permanent jobs that improve employment opportunities.
In area targeted by federal, state, local, or tribal government and renovated structure will be occupied by existing small businesses with gross annual revenue of $1 million or less, and will retain permanent jobs.
HTC investment revitalizes or stabilizes area:
List of distressed or underserved nonmetropolitan middle-income areas
at www.ffiec.gov
Underserved nonmetropolitan middle-income areas
Activity must address essential community needs
• Distressed nonmetropolitan middle-income areas
• LMI areas, or
• Designated disaster areas
Activity must help retain existing or attract new businesses
or residents
HTC Investment Revitalizes or Stabilizes
Examples: Renovation of historic structure will:
• Provide community health center (meeting
essential community needs) in underserved
nonmetropolitan middle-income geography.
• Create mixed commercial/residential space
that will attract new residents and
businesses in distressed nonmetropolitan
middle-income geography.
• Provide commercial space in low- or
moderate- income area and will retain
existing businesses.
• Restore historic homes in a designated
disaster area, will retain residents, and is
related to disaster recovery.
Presumption
that activity
revitalizes or
stabilizes if in
government-
designated
area and
consistent with
plan
CD Activities—Broader Statewide or Regional Area
Q&A § __.12(h)–6
Always Considered
Direct benefit
to AAs Activities that do not
serve and will not
benefit the AA(s)
If the bank has been
responsive to needs
and opportunities in
its AA(s)
May Be Considered
Purpose, mandate
or function to serve
the AAs
OR
Broader Geographic Consideration
• CD activity with the purpose, mandate, or function to serve a bank’s AAs will be considered
• CD activities that do not serve and will not benefit the AA(s)—may be considered if the
bank has been responsive to needs and opportunities in its AA(s)
www.occ.gov
• Historic Tax Credits: Bringing New Life to Older Communities (PDF)
(May 2015)
This updated report describes how the Historic Tax Credit program
operates, outlines the risks and regulatory considerations of
participation in the program, and discusses how investments in these
transactions may be considered under the Community Reinvestment
Act.
• Historic Tax Credits, (PDF) Community Developments Fact Sheet.
• Historic Tax Credit Resource Directory
http://www.occ.gov/topics/community-affairs/resource-
directories/tax-credits/index-tax-historic.html
• Building history – former
46,000 sf navy ship boiler
manufacturing plant in
Washington Navy Yard
• Uses – restaurants, bars, retail
• Cost – $21.6 million
• Credits - $3.9 million
• LMI census tract data – 62.1%
AMI, unemployment 5.4x
national average
Case Study
BOILERMAKER SHOPS- Washington, DC
Economic
Development
District - Capitol
River Front Business
Improvement
District – master
plan development
that includes
housing, office
space
Case Study
BOILERMAKER SHOPS- Washington, DC
• Job creation - 217 total jobs, 92 FTEs 95% newly create jobs
– average wage $12/hour, 50% provide professional development
opportunities and 64% pay benefits.
– 90% of jobs taken by District of Columbia residents, 60% did not
require a college degree.
– Highly accessible via public transit (workers don’t need a car)
Case Study
BOILERMAKER SHOPS- Washington, DC
• Building history – circa 1909, 83,000
sf, 8-story office building, closed due to
damage from Hurricane Katrina in
2010
• Uses – 168-room Indigo Hotel
• Cost – $17.2 million
• Credits - $3.0 million
• LMI census tract data – 43.4% AMI,
1.57x national unemployment average
Case Study
SAINT HOTEL- New Orleans, LA
• Economic Districts - SBA HUB Zone, State and City
Economic Distress Zone, federal disaster area,
Downtown Development District
• Job creation – 38 new full and part-time positions
(hotel management, front office, housekeeping,
maintenance, food service), 3rd-party vendor
employs 15 housekeepers
• Professional development opportunities – bar
manager started as a cocktail waitress, 2 former
desk clerks are now front office managers
Case Study
SAINT HOTEL- New Orleans, LA
Case Study
SAINT HOTEL- New Orleans, LA
• Full-time positions - pay $35,000-55,000, part-time $10-15/hr
– 90-239% of local livable wage
– no job requires a college degree
– owner hires for personality, work ethic and intelligence
– will hire people with misdemeanor record, no high school degree
– does extensive on-the-job-training
HTC EXAMPLES (CRA)
• Marais Apartments - 1501 Canal Street New Orleans, LA
• Developed by HRI Properties
• Formerly known as the Texaco Building
• Designed in 1951 by the architect Claude H. Hooton
• Building is an early example of the "International" style of architecture
found in Louisiana.
• Features a steel structure and an enamel-coated steel curtain wall
exterior which allowed for open, flexible interior space with minimal
interior columns. The renovation of 1501 Canal Street is an initial
phase in the redevelopment of the Iberville Housing Project, which is
the last remaining traditional public housing project in the City of New
Orleans.
HTC EXAMPLES (CRA)
• Capital Sources:
– 4% tax credit equity
– Permanent loan (Chase tax exempt bond)
– Federal Historic Tax Credits
– State Historic Tax Credits
– Choice Neighborhood Funds from City of New Orleans
– Deferred developer fee
HTC EXAMPLES (CRA)
• CRA Qualification/Community Impacts:
– Financed the adaptive reuse of the historic former Texaco office
– 17-story, dilapidated and leaky building in deplorable condition, renovated
into a 112-unit, 4% LIHTC, senior apartment project in downtown New
Orleans.
– All units are subject to a Section 8 Project Based HAP contract for 15
years, and will primarily accommodate low-income senior citizens,
especially those who might be moved by the retooling of the nearby
Iberville Housing Development.
– Six (5%) units will be at 20% AMI and will be Permanent Supportive
Housing (PSH) units
– The remaining 106 (95%) units are at 60% AMI.
– The project has 12 (10%) efficiency units (632 sf) and 100 (90%)
1BED/1BATH units (650 sf).
HTC EXAMPLES (CRA)
• CRA Qualification/Community Impacts continued:
– The project will also have approximately 1,980 sf of commercial space on
the first floor to be used for small retailer or café to complement the
ongoing revitalization of Canal Street.
– The Louisiana Housing Corporation was established in 1980 pursuant to
the Louisiana Housing Finance Act contained in Chapter 3-A of Title 40 of
the Louisiana Revised Statutes of 1950, as amended. The enacting
legislation grants the Agency the authority to undertake various programs
to assist in the financing of housing needs in the state of Louisiana for
persons of low and moderate incomes.
www.occ.gov
• Historic Tax Credits: Bringing New Life to Older Communities (PDF)
(May 2015)
This updated report describes how the Historic Tax Credit program
operates, outlines the risks and regulatory considerations of
participation in the program, and discusses how investments in these
transactions may be considered under the Community Reinvestment
Act.
• Historic Tax Credits, (PDF) Community Developments Fact Sheet.
• Historic Tax Credit Resource Directory
http://www.occ.gov/topics/community-affairs/resource-
directories/tax-credits/index-tax-historic.html
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