Category: 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.

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 potential opportunities available to you. You can also find Savage & Associates online 24 hours a day, seven days a week, for more information about our services.

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.

A foundational requirement of the New Markets Tax Credit (NMTC) program is that Community Development Entities (CDEs) use NMTC allocations to serve eligible Low-Income Communities (LICs). LICs can fall within any of the following three categories:

The first two categories are based solely on geographical location. However, the third category, Targeted Populations, is based not on geographical location but income and access to loans and equity. More specifically, Targeted Populations consist of individuals, or an identifiable group of individuals, including an Indian tribe, who either are low-income persons or otherwise lack adequate access to loans or equity investments.

Categories of Eligible Targeted Populations

Under the NMTC program, there are two categories of eligible targeted populations, as follows:

• Low-Income Targeted Populations (LITPs) – LITPS are persons or groups of persons who are low-income, which means having an income, adjusted for family size, of no more than:
  • 80% of the area median family income for metro areas; and
  • The greater of 80% of the area median family income or 80% of the statewide non-metro area median family income for non-metro areas
• GO Zone Targeted Populations (GZTP) – GZTPs are persons or groups of persons who otherwise lack adequate access to loans or equity investment and are displaced from their principal residences and/or lost their principal source of employment as a result of Hurricane Katrina. To qualify under a GZTP, an individual’s principal residence or principal source of employment must have been located in a population census tract within the GO Zone that contains one or more areas designated by FEMA as flooded, having sustained extensive damage, or having sustained catastrophic damage as a result of Hurricane Katrina.

Requirements for Businesses Serving Targeted Populations

IRS guidance outlines how CDEs can use NMTCs to serve Targeted Populations and thus qualify as Qualified Active Low-Income Community Businesses (QALICBs). Generally, the entity can satisfy the requirements if:

• at least 50% of its total gross income for any taxable year is derived from sales, rentals, services, or other transactions with members of the Targeted Population; or
• at least 40% of its employees are members of the Targeted Population; or
• members of the Targeted Population own at least 50% of the entity.

IRS guidance also provides for certain other limitations concerning entities that serve Targeted Populations, such as the following:

• LITPs – The QALICB must generally be located in a census tract where the median family income does not exceed 120% of the applicable area median family income. However, exceptions are provided for low-population census tracts in non-metropolitan areas and low-population census tracts zoned for commercial or industrial use.
• GZTPs – Only those CDEs with a significant mission of recovery and redevelopment in the GO Zone that received a special allocation of NMTCs pursuant to the GO Zone Act of 2005 may serve this population. Additionally:

• The QALICB must be located in a census tract within the GO Zone that contains one or more areas designated by FEMA as flooded, having sustained extensive damage, or having sustained catastrophic damage as a result of Hurricane Katrina;
  • The QALICB must generally be located in a census tract for which the median family income does not exceed 200% of the applicable area median family income. However, exceptions are provided for low-population census tracts in non-metropolitan areas and low-population census tracts zoned for commercial or industrial use.

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. You can 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.

As promised in 2021, the Community Development Financial Institutions (CDFI) Fund has launched a New Markets Tax Credit (NMTC) Program Native Initiative. This initiative aims to spur greater investment in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands, and Alaska Native Village Statistical Areas.

These NMTC Native Areas historically have lacked representation in the NMTC program. For instance, in the latest round of NMTC funding, only one native entity received NMTC funding. The NMTC program also has historically favored investment in urban rather than rural environments, which leads to disadvantages for the inherently rural settings of most Indian areas.  

How Tribes and Tribal Organizations Can Participate

Tribes and organizations that serve tribal interests can participate in and benefit from the NMTC Program Native Initiative in two different ways:

• Tribes and tribal organizations can apply to become certified as qualified community development entities (CDEs), seek NMTC allocation, and make loans to projects in NMTC Native Areas. There already are 69 Native CDFIs that automatically could qualify for CDE status. The NMTC Program Native Initiative looks to facilitate the application and allocation process for native CDFIs and other tribal organization applicants.
• Organizations that serve tribal interests can seek NMTC financing as qualified active low-income community business (QALICB) borrowers. QALICBs then use the NMTC loan funds for real estate development projects in NMTC Native Areas.

CDFI Fund Selects Contractor to Conduct NMTC Program Native Initiative  

The CDFI Fund recognizes that barriers exist for tribes and organizations promoting tribal interests participating in the NMTC program. As a result, the CDFI Fund has contracted with Big Water Consulting, LLC (“Big Water”) to conduct the work of the NMTC Program Native Initiative. Big Water will produce a survey of historic NMTC lending practices in NMTC Native Areas, create a self-assessment guide for native-owned or controlled entities, and conduct technical workshops for those entities that wish to participate in the program.

NMTC and the NACA Program

Many NMTC participants also participate in other tax credit programs and funding sources, such as the federal historic rehabilitation tax credit, the Low-Income Housing Tax Credit (LIHTC), the Opportunity Zone Program, and state tax credit programs. Native CDFIs can participate in the Native American CDFI Assistance Program (NACA Program), which offers financial assistance and technical assistance grants to Native CDFIs. These entities can use NACA funds for projects that also qualify for NMTCs.  

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. You can 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 types of transactions that are popular for New Markets Tax Credits (NMTC) investors have changed over time. For instance, five years ago, charter schools were an extremely lucrative and common form of NMTC investment. However, with significant increases in political regulations, charter schools as NMTC investments have become less popular in recent years. Here is a look ahead with what some investors believe may be popular types of transactions for NMTC investors in 2022.

Overall, investors are looking for community-driven, focused projects ready to begin at a moment’s notice. Projects should be able to articulate their goals and specifically explain how they are going to achieve those goals and how those goals will impact the surrounding community. Furthermore, since it is unclear when the next round of NMTC awards will occur, projects that are ready to go when the awards do occur may have an advantage for investors who are ready and willing to invest.

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. You can contact our offices by calling 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. to discuss your ideas with us. You can also find Savage & Associates online 24 hours a day, seven days a week, to get more information about the innovative financial tools that 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.