Public Welfare Investments
National banks may make investments that are primarily designed to promote the public welfare under the investment authority in 12 USC 24(Eleventh) (PDF) and the implementing regulation, 12 CFR 24. This authority allows banks to make investments that primarily benefit low- and moderate-income individuals, low- and moderate-income areas, or other areas targeted by a government entity for redevelopment, or if the investment would receive consideration as a qualified community development investment under 12 CFR 25.23 of the Community Reinvestment Act. Examples of these investments include supporting affordable housing and other real estate development, providing equity for start-up and small business expansion, and revitalizing or stabilizing a government-designated area (see the Public Welfare Investments Fact Sheet for more information).
National banks seeking to provide financing to tax credit projects under the public welfare investment authority must either request prior OCC approval or submit an after-the-fact notice to the OCC, depending on the bank’s safety and soundness profile, CRA performance, and the nature of the project financing.
Federal savings associations may make similar public welfare investments under 12 CFR 560.36. They also have limited authority under 12 CFR 160.36, “De Minimus Investments,” to make investments of the type permitted for national banks under 12 CFR 24.11 Further, federal savings associations are authorized under 12 CFR 159 to make investments in service corporations engaged in broad range of preapproved activities, including certain community development related investments and activities that include “investments in low-income housing tax credit and new markets tax credit projects and entities authorized by statute (e.g., community development financial institutions) to promote community, inner city, and community development purposes.”
Tax Equity Finance Transactions
Under 12 USC 24(Seventh) and 12 USC 1464 lending authority and implementing regulation 12 CFR 7.1025 (effective on April 1, 2021), banks may engage in tax equity finance transactions. A tax equity finance is the functional equivalent of a loan, and the transaction satisfies applicable conditions. The authority to engage in tax equity finance transactions is separate from, and does not limit, other investment authorities available to banks under the National Bank Act, for example, public welfare investments pursuant to 12 USC 24(Eleventh) and 12 CFR 24. See OCC Bulletin 2021-15, “Commercial Lending: Tax Equity Finance Transactions Pursuant to 12 CFR 7.1025.”
For more information, refer to the Public Welfare Investments Resource Directory.
If you need assistance, please call the Community Affairs Department at (202) 649-6420 or contact your District Community Affairs Officer.