CRA & OZ Development
What is the CRA Final Rule Signed in October 2023?
The Community Reinvestment Act (CRA) Final Rule, signed into effect in October 2023, represents a significant update to the 1977 legislation aimed at encouraging financial institutions to meet the credit needs of all communities, particularly those underserved or economically disadvantaged. This final rule introduces several key changes to modernize the CRA framework and enhance its effectiveness in addressing contemporary community needs.
The updated rule focuses on increasing transparency and accountability by requiring banks to provide more detailed reports on their community development activities. It also expands the definition of community development to include a broader range of activities and investments, ensuring that banks' efforts are better aligned with the evolving needs of their communities. Additionally, the rule introduces new metrics for evaluating performance and emphasizes the importance of targeting investments to low- and moderate-income areas. These changes are designed to ensure that CRA activities have a meaningful impact and that financial institutions are more actively contributing to community development.
What are opportunity Zones
Opportunity Zones are designated economically distressed areas established under the Tax Cuts and Jobs Act of 2017 to encourage investment and stimulate economic development. The program offers significant tax benefits to investors who support qualified projects within these zones, aiming to drive growth and create jobs in underserved communities.
Investors can take advantage of some tax incentives like the deferral of capital gains taxes on investments made in Opportunity Zones, and potential exclusion from capital gains taxes on any additional gains earned from the Opportunity Zone investment if held for at least 10 years. The program is designed to attract long-term investments that will spur economic development, infrastructure improvements, and job creation, benefiting both investors and the communities involved.