The OCC issued an interpretive letter (“ Letter 1131”) in which it concluded that a national bank (the “Bank”) could meet its obligation to dispose of a parcel of DPC real property (the “DPC Property”), i.e., a property acquired by the Bank in connection with a debt previously contracted, by transferring the DPC Property to a limited partnership wholly-owned by the Bank’s Community Development Corporation (“CDC”) subsidiary (the “CDC Subsidiary”).
The DPC Property was a Low-Income Housing Tax Credit development project that the Bank acquired by deed in lieu of foreclosure. Although the Bank held the DPC Property pursuant to its authority to hold DPC assets (its “DPC Authority”), the OCC states that the DPC Property is also a permissible public welfare investment because it primarily benefits low- and moderate-income individuals. Under the Bank’s DPC Authority, it would generally be required to dispose of the DPC Property within five years of its acquisition. Letter 1131, however, concludes that the Bank can accomplish the required “disposition” by transferring the DPC Property to the CDC Subsidiary because the CDC Subsidiary’s business is to make public welfare investments such as investments in the DPC Property. Accordingly, the Bank can, by using the CDC Subsidiary, extend the Bank’s holding and development period for the DPC Property beyond the five-year period allowed under the Bank’s DPC Authority.