The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) released its 2011 Notice of Allocation Availability (NOAA) on May 31, 2011. The NOAA officially opens competition for $3.5 billion in tax credits under the New Markets Tax Credit Program (NMTC Program). The CDFI Fund also released the 2011 NMTC Program allocation application and application Q&As.

The effect of the NMTC Program is wide-ranging. Since the first awards were made in 2002, real estate projects have dominated the program. However, the use of NMTCs has been steadily diversifying, with more awards going toward operating businesses and real estate-related projects, such as food banks, charter schools, and health care centers.

The NMTC Program is an innovative and effective tool used to attract private sector capital into distressed communities by providing a tax credit to institutional or individual taxpayers that make qualified equity investments in Community Development Entities (CDEs). The CDEs then invest the capital directly into projects and businesses located in and benefiting low-income communities. Investors in the NMTC Program receive a tax credit equal to 39 percent of the investment in a CDE, which is realized over a seven-year period.

An organization wishing to receive an allocation award under the NMTC Program must participate in a competitive application process. First, the organization must be certified as a CDE by the CDFI Fund. Then, the CDE must submit an NMTC Program allocation application to the CDFI Fund clearly detailing the CDE’s mission and proposed strategy to serve low-income communities and individuals. Awards will be made by the CDFI Fund in late 2011 or early 2012.

The CDFI Fund has prerecorded a webinar that will address the 2011 NMTC Program application process. Thereafter, the CDFI Fund will host a conference call to answer questions related to the 2011 application process. A list of important dates for the 2011 NMTC Program follows:

  • May 31, 2011 | Release of NOAA and application materials
  • June 13, 2011 | Prerecorded application webinar posted to CDFI Fund Web site
  • June 15, 2011, 4:00 p.m. ET; June 21, 2011, 2:00 p.m. ET | Conference calls to answer questions on 2011 application
  • June 22, 2011 | CDE Certification Applications (postmarked on or before)
  • July 27, 2011 | NMTC Program Allocation Application

According to Donna J. Gambrell, the CDFI Fund Director, the NMTC Program will help “economically distressed communities to create or retain thousands of jobs and provide low-income community residents with access to quality education, health care, job training, healthy food options, and other critical retail services in their communities.”

Since the NMTC Program’s inception, the CDFI Fund has allocated a total of $29.5 billion in tax credit authority to CDEs. The NMTC Program was extended in December 2010 for two years, at $3.5 billion a year, under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

Ballard Spahr has extensive experience in working with CDEs in all aspects of the application process and in structuring complex transactions following receipt of an NMTC Program allocation. Please contact Stephanie L. Franklin-Suber, partner-in-charge of Ballard Spahr’s NMTC practice, at 215.864.8203 or franklinsubers@ballardspahr.com; or M. Michelle Allred at 801.517.6877 or allredm@ballardspahr.com if you have any questions about how you or your organization might use NMTCs. Ms. Franklin-Suber will address the use of NMTCs in non-real estate deals as a panelist at Novogradac & Company LLP’s New Markets Tax Credit Spring Conference, from 4:00 p.m. to 4:50 p.m. on June 9, 2011, in Washington, D.C.

Ms. Franklin-Suber and the other members of the multidisciplinary NMTC team at Ballard Spahr are experienced in combining NMTCs with other tax credits and financing sources, such as historic rehabilitation tax credits, energy tax credits and incentives, state and local tax credits, grants and subsidized loans, tax-exempt bond financing, American Recovery and Reinvestment Act funds, Tax Increment Financing, U.S. Department of Housing and Urban Development public housing development funds, HUD 108 loan guarantee program funds, HUD Community Development Block Grant funds, and other federal government agency loan guarantees, as well as conventional financing. 

 


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