summer 2005

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Contents

A Look Inside...

Investing in Low-Income Housing Tax Credits

How LIHTC Funds Can Help Banks Invest in Affordable Housing

LIHTC Internet Resources

LIHTC Investment Performance

NASLEF Contact Information

Side by Side Investing

Helpful Hints for First-Time Bank Investors in LIHTC

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This Just In... OCC's Districts Report on New Investment Opportunities for Banks
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Investment Resources for Part 24 Authority

Part 24 Resources on the Web

Common Part 24 Questions

CD Investment Precedent Letters

Investments in National/Regional Funds

Fourth Quarter 2005
Part 24 Investments

Regulation and CD-1 Form

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OCC's Community Affairs Department

(202) 874-5556

CommunityAffairs
@occ.treas.gov

Articles by non-OCC authors represent their own views and are not necessarily the views of the OCC.

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A Look Inside...

A photo of Camden Commons, in Preble County, Ohio

Camden Commons, in Preble County, Ohio, is an old schoolhouse rehabilitated into 14 units of housing for the elderly. Camden Commons was a LIHTC investment project of Ohio Capital Corporation, a member of National Association of State and Local Equity Funds.

Every year, for nearly the past two decades, low-income housing tax credits (LIHTCs) have been directly responsible for the construction or rehabilitation of more than 100,000 new affordable rental units for families in need. This popular federal program - which was created by the Tax Reform Act of 1986 -leveraged approximately $7.5 billion in private equity capital in 2005 and has been the driving force behind much of the new affordable housing being produced today. Banks are important contributors to this success through their investments in LIHTCs. These transactions are typically organized as limited partnerships or limited liability companies, and banks make their investments through those entities.

Despite the effectiveness of this program, we have observed that many banks may be unfamiliar with the mechanics of investing in LIHTCs. This issue of Community Developments Investments focuses on how banks can earn a solid economic return on their capital and receive positive consideration toward their rating under the Community Reinvestment Act (CRA).

In this edition of Investments, Michael J. Novogradac of Novogradac & Company LLP describes the fundamentals of LIHTCs in an article geared toward community banks new to this type of an investment. In a separate article, James Logue of the Great Lakes Capital Fund explains how state and local equity funds can help community banks spread the risk of investing in LIHTC projects in their state among many investors. These funds provide multiple services including loan underwriting and investment management.

An important incentive for community banks investing in LIHTC funds is that they may receive favorable consideration under the CRA for this activity. Banks can invest in LIHTC funds that provide benefits to a statewide or regional area that includes a bank's assessment area(s), even if there is no direct benefit to their assessment area(s), provided they have adequately addressed their local needs. Additionally, recent changes to CRA allow banks to target community development activities, including affordable housing investments in designated disaster areas, such as hurricane-stricken areas. The recently enacted "GO Zone" hurricane relief legislation also created additional affordable housing investment opportunities for banks by increasing the LIHTC allocations to Gulf States between 2006 and 2008.

National banks may invest in LIHTCs under the Part 24 community development investment authority. Banks needing information about the Part 24 authority can find the regulation, the CD-1 filing form, and answers to common Part 24 questions on the left-hand navigation bar on this page. A listing of national and regional tax credit funds, in which national banks have invested using Part 24 authority, and a list of LIHTC Internet resources are also provided on the navigation bar.

Other community development investment opportunities are described by the OCC's District Community Affairs Officers in our article "This Just In...OCC's Districts Report on New Investment Opportunities for Banks."

Thanks for visiting our e-zine. We hope we are providing you with useful information about community development investing. If you would like to share your thoughts about this edition or any community development topics we might cover in the future, please send me a note at the following e-mail address.

Barry Wides
Deputy Comptroller
Community Affairs
CommunityAffairs@occ.treas.gov