Correspondence Date: August 29, 1997

Dear [ ]:

This is in response to your letter that inquires about how a grant from a financial institution to provide your organization's [] ("curriculum") to local school districts may be considered under the revised Community Reinvestment Act (CRA). You have also asked for clarification of the income level criteria contained in the CRA, and for an opinion on whether grants by banks or thrifts to support training teachers to learn your curriculum would be considered under the CRA. As you know, the four bank and thrift regulatory agencies have promulgated substantively identical Community Reinvestment Act regulations.1 Therefore, staff from all of the agencies have considered your letter, and they concur in the opinions expressed herein.

The revised CRA regulations establish a framework and criteria by which the agencies assess an institution's record of helping to meet the credit needs of the community. An institution may receive positive consideration for making "qualified investments" that have primarily a community development purpose and benefit the institution's assessment area or a broader statewide or regional area. The October 21, 1996 "Interagency Questions and Answers Regarding Community Reinvestment" provide examples of some of the types of qualified investments that would receive positive CRA consideration. One example is "Investments, grants, deposits or shares in or to: ... Not-for-profit organizations serving low- and moderate-income housing or other community development needs, such as counseling for credit, home-ownership, home maintenance, and other financial services education ..."

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The CRA regulations contain a definition of what type of activities are considered "community development" for the purposes of the regulation. At 12 CFR 228.12(h) it states, "Community development means: (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; or (4) Activities that revitalize or stabilize low- or moderate-income geographies." Community development activities may include direct or indirect lending; investments, grants or donations; or providing services to the community.

For the purposes of CRA, low-income is defined as less than 50 percent of the HUD adjusted median family income for the MSA in which the person lives, or, if not in an MSA, the statewide nonmetropolitan median family income. Moderate-income is at least 50 percent and less than 80 percent of the same income figures.

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Your curriculum provides the types of financial services education that are described above. However, if a financial institution would like to receive positive CRA consideration, it would have to target its grant to a school that primarily serves low- and moderate-income children. If the grant is given to the school district for it to use to provide the curriculum to the entire school district or a wide variety of schools, it may not be possible for the investing bank or thrift to determine if the program is primarily serving low- and moderate-income individuals.

You have also asked whether a grant to fund training for teachers so they can in turn instruct their students in the curriculum would receive favorable CRA consideration. While there is an obvious multiplier benefit to training teachers so they can use the curriculum over several years, this type of a grant would meet the definition of a qualified investment only if the teachers being trained primarily teach low- and moderate-income students. To avoid any question in this regard it may be necessary for the investing bank or thrift to target its grant to benefit such teachers if it wishes to receive favorable CRA consideration, rather than having the school district use the grant to train teachers that work with all types of students.

I hope this has been responsive to your inquiry. If you have any questions, you may contact me at (202) 452-3585 or Karen Murtagh of this Division's staff at (202) 452-2652.


Glenn E. Loney
Associate Director
Division of Consumer and Community Affairs
Board of Governors of the Federal Reserve System

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1 See 12 C.F.R. parts 25, 228, 345, and 563c