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4000 - Advisory Opinions

Appraisals: Loans to Non-Profit Corporations May Qualify Under Business Loan Exemption


July 6, 1994

Walter P. Doyle, Counsel

Thank you for your recent letter to Robert F. Miailovich inquiring whether a church loan of $300,000 would be exempt from Title XI appraisal requirements as a "business loan" if it is not dependent on the sale of real estate or rental income therefrom as a primary source of repayment.

Section 2(d) of FDIC's appraisal regulation (12 C.F.R. 323.2(d)) defines "business loan" as "a loan or extension of credit to any corporation, general or limited partnership, business trust, joint venture, pool, syndicate, sole proprietorship, or other business entity." While a church may not ordinarily be considered to be a business, it certainly can be operated as such in some situations. In any event, this definition seems by its express terms to cover a loan "to any corporation" whether or not operated for profit in the normal sense. Therefore, while it may not have been the drafters' intent to include loans to nonprofit corporations within the scope of the business loan exemption in § 3(a)(5) of the regulation (12 C.F.R. 323.3(a)(5)), that nevertheless seems to be the straightforward result of the regulatory language used.

Accordingly, it is my view that a loan to a church or other religious society organized as a corporation under applicable State law could qualify under the business loan exemption in the recent amendments to FDIC's appraisal regulation.

Please let us know if we can be of any further assistance.

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