What Role Does the Comprehensive Investment Plan Play in a CDE’s NMTC Application?

What Role Does the Comprehensive Investment Plan Play in a CDE’s NMTC Application

According to the Guidance for the New Markets Tax Credits (NMTC) program found at 66 Fed. Reg. 21846 (May 1, 2001), the comprehensive investment plan (CIP) is a document that a community development entity (CDE) must include in its application for an allocation of NMTCs. This plan provides historical information and, at a minimum, a five-year investment strategy, with details about the following issues:

  1. The applicant’s track record in making investments and promoting community development;
  2. The applicant’s financial and operational capacity, including its ability to track NMTC investment proceeds;
  3. The capacity, skills, and experience of its management team;
  4. An analysis of its target market;
  5. Its plan for raising capital with an NMTC allocation; and
  6. Its strategy for using the proceeds from such an allocation, including its financial and community development underwriting criteria.

The CIP supports an applicant’s eligibility for the NMTC program in various ways. For instance, the CIP analyzes the applicant’s target market. Under NMTC program guidelines, the target market of any NMTC investment must involve low-income communities (LICs). LICs are census tracts that have any of the following characteristics:

  1. A poverty rate of at least 20%;
  2. A median family income that does not exceed 80% of the area median family income;
  3. A median family income does not exceed 85% of the area median family income provided the census tract is located in high migration rural county; or
  4. A census tract has a population of less than 2,000, is contained within a Federally designated Empowerment Zone, and is contiguous to at least one other LIC.

NMTC investments may also serve other targeted populations, not in LICs, who are low-income. These persons have a family income of no greater than 80% of the applicable area median family income to the extent that the project is located in a census tract with a median family income at or below 120% of the median family income.

Furthermore, only CDEs may apply for NMTCs. In becoming CDEs, these organizations must demonstrate that they have a primary mission of serving or providing investment capital for low-income communities or people. They also must show that they maintain accountability to low-income communities through representation on the organization’s Governing Board or Advisory Board. These characteristics are some of the same characteristics that CDEs must describe in their CIP regarding their track record in making investments and promoting community development.

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