Below, please find three recent updates regarding the Community Reinvestment Act (CRA), Opportunity Zones, and Income-Averaging in the LIHTC program.
Community Reinvestment Act (CRA)
Last week, the Treasury Department released recommendations to modernize the Community Reinvestment Act (CRA). The recommendations were issued to the Comptroller of the Currency, the Federal Reserve Board, and the FDIC. The CRA’s investment criteria incentivize banks to invest in the communities they serve, and affordable housing is a core component of community development under CRA regulations.
The Treasury Department’s review of the CRA began last year; the review aimed to reflect developments in the banking industry and reduce burdens on banks and regulators. Recommendations included changes to the program’s administrative framework, eligible activities, and criteria for eligibility and ratings. More information is available here.
Yesterday, the Treasury Department designated the first qualified Opportunity Zones in 15 states and three territories. The new Opportunity Zones program, which was enacted as part of tax reform legislation late last year, leverages private infrastructure and housing investment through tax-preferred treatment of capital gains that are reinvested in certain low-income census tracts.
The states with designations so far include Arizona, California, Colorado, Georgia, Idaho, Kentucky, Michigan, Mississippi, Nebraska, New Jersey, Oklahoma, South Carolina, South Dakota, Vermont and Wisconsin, and the territories are American Samoa, Puerto Rico and the U.S. Virgin Islands. The IRS published guidance earlier this year on the process for Governors to designate the “Opportunity Zones” and plans to issue additional information on “Opportunity Funds.”
FAQs in Income-Averaging
The National Council of State Housing Agencies (NCSHA) recently released a set of FAQs regarding the new Income-Averaging option, which was permanently authorized for the Housing Credit program by the Fiscal Year 2018 Appropriations Act. This third minimum set-aside election for new Housing Credit developments allows owners to elect to serve households earning up to 80% of Area Median Income (AMI), as long as the average for the property is 60% or less, providing more flexibility while offsetting a deeper level of affordability.
The document will continue to be refined as updates become available. The FAQs are available online here.