Category: Federal Tax Credits

The New Markets Tax Credit (NMTC) program offers financing for projects for which traditional financing often is not an option. Generally, NMTC financing offers more flexible and creative terms. In contrast, traditional financing is limited to strict parameters and structures that may not meet the needs of the investors in these projects.

Investors Benefit from Tax Credits Over Seven Years

The biggest benefit for investors in NMTC programs is that they can claim tax credits against their federal tax obligations. The investors’ allotted tax credits equal 39% of the NMTC project over seven years. Traditional investments in such projects do not allow investors to claim these tax credits.

NMTCs Result in Investments in Low-Income Communities

NMTCs only are available for investments in qualifying low-income communities. In many cases, lenders and investors are wary of investing in projects located in these communities due to the level of risk involved. However, the benefits of the NMTC program outweigh the risks for investors and lenders.

NMTC Loans Have More Flexible Terms

The tax credits available due to the NMTC program provide a subsidy that can significantly reduce the interest rate for business loans or increase the business owner’s equity in the project. NMTC loans to these qualifying businesses often have more flexible terms than conventional loans, including decreased origination fees, longer interest-only payment periods, increased loan-to-value (LTV) ratios, decreased debt coverage ratios (DCR), and lengthier amortization periods.

NMTCs Can Combine with Other Financing Sources

Unlike many types of traditional financing, NMTCs can combine with many other sources of financing to fill in financing gaps where needed. As a result, investors have successfully used NMTCs in addition to historic rehabilitation tax credits, state NMTCs, and USDA loan programs, among others, to finance projects.

NMTCs Can Benefit Lenders

Using NMTCs, lenders can earn rates at or near market rates. They also can participate in transactions that would be unfeasible without NMTCs. Furthermore, lenders can help meet their Community Reinvestment Act (CRA) requirements by investing in CDEs for the purposes of the NMTC program.

We Can Work Together to Develop Communities

Savage & Associates is an economic development law firm providing sophisticated legal and business advice to clients interested in making significant changes in their communities. We advise developers, investors, nonprofit organizations, entrepreneurs, and anyone looking to effectuate change.

Contact our offices by calling 215.880.9441 in Philadelphia or 202.817.3941 in Washington, D.C., to discuss your ideas. You can also find Savage & Associates online 24 hours a day, seven days a week, to get more information about the innovative financial tools we can use to make your vision a reality. From New Markets Tax Credits to Historic Tax Credits, we can design the unique transaction best designed to achieve your objectives.

The Community Development Financial Institutions (CDFI) Fund recently published a Frequently Asked Questions (FAQs) document concerning the CDFI certification cure period that is currently in place. Along with the FAQs, the CDFI Fund published certification-related cure period worksheets.

The CDFI Fund previously announced a six-month blackout period beginning October 1, 2022, to prepare for a revised CDFI certification application and reporting requirements. During the blackout period, CDFIs must maintain their certification status in good standing.

CDFIs and Cure Periods for CDFI Certification

CDFIs in a cure period concerning their CDFI certification have failed to demonstrate that they meet one or more CDFI certification requirements. Therefore, they must take action to correct the deficiency or deficiencies that have placed them in the cure period.

The CDFI Fund recently sent general cure notifications to all CDFIs with similar deficiencies. Those notifications specify the issue or issues the CDFI must address and the deadlines for addressing and resolving those issues.

CDFI’s FAQs advise CDFIs in a cure period on how to resolve certification-related deficiencies generally. These CDFIs must submit certain documents concerning their cure requirements by the relevant deadlines. Failing to follow these CDFI Fund directives could result in losing their certifications.

Highlights of the CDFI Cure Period FAQs

The FAQs include general information about how CDFIs can determine what deficiencies they have, how to resolve them, and how long they have to resolve them, including how to:

Call Savage & Associates Today

If you want more information about NMTCS and similar opportunities available to you, call our offices at 215.880.9441 in Philadelphia or 202.817.3941 in Washington, D.C., and schedule a time to speak with us today. You also can find Savage & Associates online 24 hours a day, seven days a week, to learn more about our extensive range of services.

Dionne Savage is here to help you access the benefits of economic development tools such as New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, and Historic Tax Credits. These programs can give you the resources to revitalize and build up communities across the United States. With our legal advice and your ideas, we can work to achieve your dreams for your community.

The Community Development Financial Institutions (CDFI) Fund has CDFI Information Mapping System v.4 (CIMS) available for use. Public members can access a limited version of CIMS4. Organizations applying for or receiving funds from CDFI can access a full version through their Awards Management Information System (AMIS) accounts. You can use CIMS4 to perform various functions related to various CDFI programs, including geocoding addresses, mapping census tracts, and counties, and determining the eligibility of census tracts and counties under various CDFI programs.

1. Create and Manage Target Market Maps  – CDFI must meet certain eligibility criteria, including serving one or more eligible Target Markets. CDFIs can apply to establish Target Markets based on either Investment Areas (IAs) or Low-Income Targeted Populations (LITP), or Other Targeted Populations (OTP). Applicants must create separate Target Market Maps for each of their Target Markets. Targeted Populations sharing the same geographic boundaries can share a map, but those that do not need separate maps. CDFIs can use CIMS4 to create new maps for Target Markets, edit existing Target Market Maps, or delete Maps that they no longer need.
2. Interface Information Entered in AMIS with Grants.gov – Some CDFI programs require applicants to submit their SF-424 program application via Grants.gov. AMIS interfaces with Grants.gov, downloads the application, and associates it with the applicant organization.
3. Create a Program Profile Specific to Each CDFI Fund Program – AMIS automatically creates a separate partial program profile for your organization for each CDFI Fund program. You then can edit your organizational data as needed in the profile for each program.
4. Assess the Program Eligibility of Investments, Lending and Financial and Development Services Activities in Specific Geographic Areas for CDFI Fund Programs – Users can access all eligibility data for all CDFI programs by census tract, including data based on the most recent five-year American Community Survey, and criteria based on prior census years. You also can access CDFI headquarters locations, Congressional Districts boundaries, and all census data.

Let’s Get Together to Talk About Your Next Deal

Savage & Associates is an economic development law firm that provides clients with the legal and business insights to grow, revitalize, and build their communities. We use individualized strategies for our clients, ranging from large public companies to burgeoning entrepreneurs, to determine the best strategy for achieving their goals.

We are experienced in using New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, Historic Tax Credits, and other investment options to help developers, investors, nonprofit organizations, and entrepreneurs change their communities. Our unique qualifications allow us to devise unique plans to carry out your objectives and work toward improving your communities.

You can get started today by contacting our offices at 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. Set up a session with us to discuss your ideas and learn more about the opportunities that may be available to you. You can also find Savage & Associates online 24 hours a day, seven days a week, for more information about our services.

U.S. Sens. Mark D. Warner (D-VA) and Mark Crapo (R-ID) recently announced the creation of the 14-member bipartisan Senate Community Development Finance Caucus (CDFC). The purpose of the CDFC is to support the missions of Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs), which exist to increase lending in low and moderate-income (LMI) communities. CDFIs play a major role in bringing affordable credit to underserved communities, which typically are disadvantaged urban and rural communities nationwide.

Previously, Sen. Warner worked with Sen. Crapo and others to introduce the Jobs and Neighborhood Investment Act, a part of the larger December 2020 COVID relief package. This bill provided a $12 billion investment in CDFIs and MDIs, including $3 billion for grant funding and $9 billion for tier-one-capital investments.

In creating the CDFC, Sens. Warner and Crapo pointed out that although CDFIs are making a difference, they still lack the resources to fulfill their full potential. In addition to the legislation mentioned above, Congress allocated $9 billion in capital for long-term preferred stock and subordinated debt investments in CDFIs and MDIs through the Emergency Capital Investment Program. Furthermore, Congress awarded $1.25 billion in grants to 863 CDFIs to respond to the pandemic and $1.75 billion in grants and technical assistance to expand CDFI activities through the Rapid Response and Equitable Recovery Program. Still, when considering the awards available versus the awards requested in these and similar programs, the need dwarfs the available funds.

CDFC pledges to create a strategic, coordinated approach to increase opportunities for CDFIs. They are looking to coordinate and expand the private sector and government efforts to build on recent momentum by Congress in these funding initiatives by focusing on four key areas:

• Education of members and staff as to the challenges facing community-based lenders
• Coordination of regulatory and legislative bipartisan efforts related to CDFIs
• Legislation to further support CDFIs and MDIs
• Tracking of federal legislation and private sector commitments

Many organizations and financial institutions have enforced the CDFC, including the National Bankers Association, the Community Development Bankers Association, the Opportunity Finance Network, Inclusiv, the African-American Credit Union Coalition, the National Association of Latino Credit Unions and Professionals, the Local Initiatives Support Corporation, the American Bankers Association, the Hope Credit Union, MoFi, the Independent Community Bankers of America, the Northwest Native Development Fund, the Native CDFI Network, and the CDFI Coalition.

Allow Savage & Associates to Help You Develop Your Vision

We are an economic development law firm dedicated to offering complex and innovative legal and transactional advice to developers, investors, nonprofit organizations, entrepreneurs, and changemakers. We are not a traditional law firm. Instead, we are a small boutique law firm that focuses on what you need to develop the strategies necessary to impact communities.

We have worked with clients to obtain all types of tax credits and other government programs to finance the revitalization of communities. Savage & Associates has handled over a billion dollars in New Markets Tax Credit financing transactions and more than 300 commercial real estate closings. As a result, we know how to leverage the available tax credit tools to transform your communities.

Contact our offices by calling 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. to discuss your ideas. You also can find out more about our services online. We look forward to working with you to build your communities through traditional and alternative investment mechanisms based on your individual needs.

A recent Washington Post article chronicles how a St. Lous, Missouri couple has partnered with the local chapter of Habitat for Humanity to obtain $18.3 million in New Markets Tax Credits (NMTCs) to build 103 affordable homes across the city. Furthermore, they have used their innovative model to guide nonprofit community development entities (CDEs) in over 30 cities to use almost $500 million in tax credit investments to build over 4,200 affordable homes.

For instance, in Atlanta, Georgia, the use of the couple’s model resulted in $20 million in NMTCs used to renovate 133 homes. In Santa Fe, New Mexico, advocates used NMTCs to turn a blighted mobile home park into 40 homes and 13 condominiums. In addition, the city built 26 homes in Pittsburgh, Pennsylvania, using the NMTC program.

As explained in the article, the NMTC program attracts investors to distressed communities by offering them a 39 percent tax break over seven years. In addition, the CDEs use their investments to make housing affordable by offering down-payment assistance to qualified buyers or a second deferred loan to be paid off only when buyers sell the home. These techniques can result in savings ranging from $30,000 to $100,000 per home, depending on the neighborhood.

Although CDEs doubted that the highly-regulated NMTC program was usable to produce affordable housing, this couple has proved them wrong. They have created a model that others can easily replicate by developing model templates that any nonprofit can use to navigate the NMTC program process from beginning to end. The couple also points out that despite their success, the Community Development Financial Institutions Fund (CDFI) does not actively promote the NMTC program for affordable housing. Part of the scoring matrix for NMTC proposals also depends on a history of past success; as a result, organizations may be reluctant to embark upon a new approach to the NMTC program.

Affordable housing needs are on the rise. The National Low-Income Housing Coalition estimates it would take 6.8 million more rental units to house all low-income families adequately. Moreover, according to a 2021 study by the Urban Institute and Moody’s Analytics, there is less housing for rent and sale than there has been over the last 30 years. As a result, homeownership is becoming farther and farther out of reach, particularly for people of color.

Most federal support for affordable housing comes through the Low-Income Housing Tax Credit (LIHTC). However, only a small portion of those tax credits awarded went toward housing.  

We Can Work Together to Develop Communities

Savage & Associates is an economic development law firm providing sophisticated legal and business advice to clients interested in making significant changes in their communities. We advise developers, investors, nonprofit organizations, entrepreneurs, and anyone looking to effectuate change. Contact our offices by calling 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. to discuss your ideas. You can also find Savage & Associates online 24 hours a day, seven days a week, to get more information about the innovative financial tools we can use to make your vision a reality. From New Markets Tax Credits to Historic Tax Credits, we can design the unique transaction best designed to achieve your objectives.

The New Markets Tax Credit (NMTC) program provides tax incentives to investors through federal tax credits to promote investments in distressed communities nationwide. Complex issues can arise when utilizing this program, as it has many requirements that applicants and investors must understand and follow to remain eligible for its benefits. As a result, you must become familiar with the lexicon used in the NMTC program and the common acronyms used for different pieces of the program.

First, the Community Development Financial Institutions (CDFI) Fund is a division of the U.S. Department of Treasury. The CDFI Fund administers the NMTC program. Part of its duties is to certify entities as qualified community development entities or CDEs to participate in the NMTC program. Qualified CDEs can be any domestic corporation, partnership, or limited liability company (LLC) that meets the following criteria:

• Its primary mission is to serve or provide investment capital for low-income communities or low-income persons;
• It maintains accountability to residents of low-income communities through their representation on any governing board of or advisory board to the entity; and
• The CDFI Fund certifies the entity as a CDE.

Next, the CDE must seek taxpayers to make qualifying equity investments or QEIs in the CDE. A QEI is any equity investment in a CDE if:

• It is acquired by the investor at its original issue solely in exchange for cash;
• Substantially all the cash is used by the CDE to make qualified low-income community investments; and
• The CDE designates the investment as a QEI.

An investment that a CDE makes is a qualified low-income community investment or QLICI if it is:

• Any capital or equity investment in, or loan to, any qualified active low-income community business;
• The purchase from a CDE or any loan made by such entity that is a qualified low-income community investment;
• Financial counseling and other services to businesses located in and residents of low-income communities; and
• Any equity investment in, or loan to, any CDE.

A qualified active low-income community business or QALICB is any corporation or partnership if, for any taxable year, meets the following criteria:

• At least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community;
• A substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income community;
• A substantial portion of the services performed for such entity by its employees are performed in any low-income community;
• Less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to collectibles (as defined in IRC §408 (m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such business; and
• Less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity (as defined in IRC §1397C(e)) is attributable to nonqualified financial property.

Let’s Get Together to Talk About Your Next Deal

Savage & Associates is an economic development law firm that provides clients with the legal and business insights to grow, revitalize, and build their communities. We use individualized strategies for our clients, ranging from large public companies to burgeoning entrepreneurs, to determine the best strategy for achieving their goals.

We are experienced in using New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, Historic Tax Credits, and other investment options to help developers, investors, nonprofit organizations, and entrepreneurs change their communities. Our unique qualifications allow us to devise unique plans to carry out your objectives and work toward improving your communities. You can get started today by contacting our offices at 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. Set up a session with us to discuss your ideas and learn more about the opportunities that may be available to you. You can also find Savage & Associates online 24 hours a day, seven days a week, for more information about our services.