Bank groups ask regulators to drop a 15 percent overhead limit on nonprofits in community reinvestment grants
The OCC and FDIC would count a large bank's grant only if the nonprofit's indirect costs stay at or below 15 percent. Comments closed Oct. 13, and four national bank trade groups said the limit would hurt small nonprofits and intermediaries.
Washington. Banking trade groups that back much of a federal plan to rewrite the Community Reinvestment Act rules are asking regulators to drop one part of it: a 15 percent limit on the overhead of nonprofits that receive community development grants from large banks. They made the case in comment letters filed by the Oct. 13 deadline.
The proposal itself is not new. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation issued it on July 31, and it appeared in the Federal Register on Aug. 12. The Federal Reserve is not part of it. By Oct. 15, 353 comments had been posted to the public docket.
What would change for nonprofits
A bank would get credit only for a grant that the recipient uses directly for a program whose primary purpose is community development in the bank's area. For a large bank, one with more than $10 billion in assets, the recipient's indirect costs of administering the grant could not exceed 15 percent, calculated under the federal Uniform Guidance for grants. The bank would need the recipient's written attestation and documents such as its Form 990.
The agencies say the limit, modeled on the federal 15 percent de minimis rate for indirect costs, would keep grant dollars in communities rather than with the organizations administering them. In their example, a grant of which about 25 percent went to internal expenses would no longer count. Their own analysis says the change may reduce support for general operating grants, capacity building and grants to intermediaries that support several downstream projects, and that smaller and newer nonprofits may find the documentation harder to provide.
What the banks asked for
The American Bankers Association, joined by 45 state associations, said credit should not be limited to project grants and asked that grants through qualified nonprofit intermediaries keep counting.
“Salaries, technology, rent, and other organizational infrastructure are not ancillary to community development.”
The Independent Community Bankers of America wrote that complying could require a nonprofit to buy software or hire outside accountants, itself an indirect cost. It proposed exceptions for grants below an amount such as $25,000 a year and for small nonprofits that file Form 990-EZ or 990-N.
The Consumer Bankers Association and the Bank Policy Institute asked the agencies to withdraw the limit. They wrote that the federal 15 percent rate was designed as a simplifying option, not a cap, and that the agencies had not analyzed how many community development partners would qualify. If a limit stays, they proposed exempting grants below a threshold such as $250,000 a year, and intermediaries such as certified community development financial institutions.
The proposal sets no date for a final rule.
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