Karen Tucker, National Bank Examiner and Acting Director for Compliance Policy

Loans and investments financing “green” buildings, energy-efficiency improvements, solar panels, or other renewable energy systems do not in and of themselves qualify for positive consideration under the Community Reinvestment Act (CRA). Neither the CRA nor its implementing regulations specifically address these types of activities. If, however, the activity has a primary purpose of community development as defined in the regulation, the activity would receive positive consideration—as long as the geographic requirements are also met. Bankers should consult with their OCC supervisory offices to discuss the facts and circumstances of specific activities for which CRA consideration is desired.

Qualified investments and community development loans must have community development as their primary purpose. CRA defines community development as:

(1) Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;

(2) Community services targeted to low- or moderate-income individuals;

(3) Activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration’s Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less;

(4) Activities that revitalize or stabilize

(i) Low- or moderate-income geographies;

(ii) Designated disaster areas; or

(iii) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and the OCC.

(5) Loans, investments, and services that

(i) Support, enable or facilitate projects or activities that meet the “eligible uses” criteria described in Section 2301(c) of the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110-289, 122 Stat. 2654, as amended, and are conducted in designated target areas identified in plans approved by the U.S. Department of Housing and Urban Development in accordance with the Neighborhood Stabilization Program (NSP);

(ii) Are provided no later than two years after the last date funds appropriated for NSP are required to be spent by grantees; and

(iii) Benefit low-, moderate-, and middle-income individuals and geographies in the bank’s assessment area(s) or areas outside the bank’s assessment area(s) provided the bank has adequately addressed the community development needs of its assessment areas.

Examples of activities for which banks may receive positive CRA consideration as community development activities include loans to:

• Borrowers for affordable housing rehabilitation and construction, including construction and permanent financing of multifamily rental property serving low- and moderate-income persons;
• Not-for-profit organizations serving primarily low- and moderate-income housing or other community development needs; and
• Borrowers to construct or rehabilitate community facilities that are located in low- and moderate-income areas or that serve primarily low- and moderate-income individuals.

The loan or investment’s primary purpose remains the key consideration for determining if an activity meets the requirements of the CRA regulation and whether the loan or investment may receive positive CRA consideration. Thus, the installation of energy-efficient equipment is not a qualified activity—it does not provide affordable housing; is not a community service; does not revitalize or stabilize low- or moderate-income geographies or other specially designated areas; does not promote economic development through the financing of small businesses/farms; and does not support, enable, or facilitate “eligible uses” projects conducted in designated NSP target areas.

Loans and investments used to construct or rehabilitate affordable housing for low- or moderate-income individuals are qualified CRA activities. A construction or rehabilitation project might also include the installation of energy-efficient heating and cooling systems or other “green” components. The inclusion of the “green” components in a project that meets the primary purpose of community development would not affect CRA consideration. While examiners are required to evaluate activities based on their primary purpose, they would not give additional consideration for or discount a loan or investment because it also funded a “green” component.

Small loans to businesses that manufacture, install, or maintain solar equipment may receive positive CRA consideration under the review of a bank’s retail lending activities, particularly if they are made to businesses that have gross annual revenues of $1 million or less. To the extent that loans to such businesses also meet the definition of community development, examiners may discuss the community development aspects of the loans in the narrative portion of the bank’s public performance evaluation.¹²

Bankers should refer to the Interagency Questions and Answers Regarding Community Reinvestment ¹³ for more examples of qualifying community development activities.