The General Characteristics Of A Highly Ranked NMTC Application – Part One

Applying for New Markets Tax Credits (NMTC) allocation is complicated. At Savage & Associates, we strive to support this process for our clients. We can help you realize your dreams to help your local communities. The best way to accomplish this is to ensure that you submit a thorough NMTC  application. This first blog on this topic discusses the application process and several characteristics of a highly ranked NMTC application.

The Community Development Financial Institutions Fund (CDFI Fund) received 208 Allocation Applications from Community Development Entities (CDEs), requesting a total of just over $15 billion in allocations. The CDFI Fund made allocation awards totaling $5 billion, or about 33.1% of the total amount requested by applicants, to 100 CDEs which was almost half (48%) of the total applicant pool.

The Application Process – Phase One

There are two phases to the review of an NMTC application. Applicants receive points for demonstrating certain attributes. In Phase One, two reviewers independently evaluate and score the Business Strategy and Community Outcomes sections of the application.

An Applicant will receive additional points for demonstrating a track record of serving disadvantaged businesses or communities and committing to invest substantially all proceeds from Qualified Equity Investments (QEIs) in unrelated entities.

For an Applicant to receive further consideration in Phase Two of the application process, an application must achieve certain minimum scores in the Business Strategy section and Community Outcomes section of the NMTC application. Failure to receive the minimum score in each section will cause the application to be considered not highly qualified. Therefore, it will receive no further consideration.

At the end of Phase One, all applications that achieve minimum scores in the Business Strategy section and Community Outcomes section of the NMTC application and are considered highly qualified will be sent to the Panel for further review in Phase Two.

The Application Process – Phase Two

The Panel will also review information related to prior allocations, including the CDFI Fund’s Awards Management Information System. This data may also include audited financial statements and other supplemental information requested by the CDFI Fund.

In determining allocation award recommendations, Panelists in Phase Two consider the following list which is not all-inclusive:

  • *Any issues noted by the Phase 1 reviewers.
  • *The Applicant’s capacity to deploy and monitor NMTC investments.
  • *The Applicant’s record of providing direct loans and/or equity investments.
  • *The existence of notable relationships and their benefits (cost savings, lower fees) for Qualified Active Low-Income Community Business (QALICB) or unaffiliated end-users.
  • *Whether clear and meaningful community outcomes are likely to occur and benefit Low-Income Persons and/or residents of Low-Income Communities, based on the Applicant’s pipeline projects, including the Applicant’s ability to track community outcomes.
  • *The Applicant’s investment decisions aligning with community priorities.
  • *The financial health and feecompensation structure of the Applicant.
  • *The distribution of benefits among the investor, CDEs, and QALICBs.
  • *The Applicant’s track record of raising QEIs. Panelists also considered the consistency of the Applicant’s past NMTC activities with prior Allocation Applications, if applicable, as well as the Applicant’s proposed commitments to provide Qualified Low-Income Community Investments (QLICIs) in Non-Metropolitan Counties and engage in innovative investments.

The CDFI Fund also reviews compliance, due diligence, eligibility, and regulatory matters including:

  • *Whether an Applicant or its affiliates were previously awarded funds through other CDFI Fund programs and maintained compliance with the  award agreement.
  • *Whether prior-year Allocatees successfully issued the minimum requisite QEIs and made the minimum requisite QLICIs from prior NMTC Allocations as specified in the Notice of Allocation Availability (NOAA).
  • *Whether prior-year Allocatees were compliant with the requirements of past Allocation Agreements.
  • *For regulated financial institutions, information from the Applicant’s primary federal regulator. 
  • *Information related to the Assurances and Certifications section of the application.

Next, as provided for in the NOAA, the NMTC Program staff reviews the initial allocation determinations to ensure that:

(i) the proportion of Allocatees that are Rural Community Development Entities (Rural CDEs) was, at a minimum, equal to the proportion of highly qualified Applicants that were Rural CDEs; and

(ii) at least 20% of all QLICIs made by Allocatees under the 2020 allocation round would be invested in Non-Metropolitan Counties, based upon commitments made in their applications.

In our next blog, Part Two, we will examine the business strategy characteristics of a highly qualified NMTC application.

Let’s Work Together to Develop our Communities

If you want to learn more about NMTCs, contact Savage & Associates at 215.880.9441 in Philadelphia, or 202.817.3941 in Washington D.C. to arrange a consultation. Dionne Savage can assist you to gain access to the benefits provided by the New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, Historic Tax Credits, and other vital economic development tools that benefit local communities throughout the United States. Visit our website at Savage & Associates 24 hours a day, seven days a week for more information.

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