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NMTC Non-Real Estate Investments

Effective September 28, 2012, IRS issued final regulations to incentivize the use of NMTC to provide working capital and equipment loans to non-real estate businesses by modifying the reinvestment requirements.

Updated NMTC Eligible Low-Income Communities

On May 1, 2012, the Community Development Financial Institutions Fund released the updated new markets tax credit eligible census tracts based on the 2006-2010 American Community Survey (ACS) data on income and poverty, and transition rules which generally require use of the ACS data with respect to qualified low-income community investments that close after June 30, 2013. The ACS replaces the decennial census as the source of the applicable data for census tract boundaries, low-income community status, higher distress criteria, and non-metropolitan county status.

Final Targeted Populations Regulations

IRS issued final regulations providing rules for satisfaction of the QALICB requirements for businesses serving low-income targeted populations. The final regulations were issued pursuant to the American Jobs Creation Act of 2004 which expanded the definition of low-income communities to include individuals or groups of individuals who are low-income persons or lack adequate access to loans or equity investments. The final regulations are effective for tax years ending on or after December 5, 2011 and taxpayers can apply the regulations to prior tax years for targeted populations designated as low-income communities after October 22, 2004.

Updated CDFI Fund Compliance and Monitoring Guidance

September 2011, the Community Development Financial Institutions Fund (CDFI Fund) issued updated responses to frequently asked questions regarding NMTC compliance and monitoring matters, replacing the May 2009 edition. CDFI Fund reserves the right to modify the guidance at any time upon public notice. Additional guidance was provided clarifying, for example, the requirements relating to the allocatee's affordable housing commitment and the substantial rehabilitation threshold applicable to loans or investments made to businesses whose principal business activity is rental real estate.

CDFI Fund Request for Public Comment

On November 7, the CDFI Fund issued a request for public comment with respect to the NMTC program in order to increase the effectiveness of the program including comments on census tract eligibility, commitments to areas of higher distress, types of qualifying businesses, community accountability, transaction costs, evaluation of financial products, and combining NMTCs with other federal subsidies. Comments are required to be submitted in writing by February 6, 2012.

2011 NMTC Allocations

The CDFI Fund has indicated informally that it anticipates that the NMTC allocation awards for the 2011 (9th) round will be made in February 2012. 314 applications were submitted requesting $26.6 billion in NMTC allocation authority.

2009 NMTC Allocation Awards

October 30, 2009, the Community Development Financial Institutions Fund (CDFI Fund) of the U.S. Department of Treasury awarded $5 billion of new markets tax credit (NMTC) investment authority to 99 Community Development Entities to stimulate investment and job creation in low-income communities and to benefit targeted populations. The allocation includes $1.5 billion of NMTC authority awarded to 24 Community Development Entities authorized by the American Recovery and Reinvestment Act of 2009. A list of the award recipients is available at cdfifund.gov.

2009 Round of NMTC Allocations Opens - $3.5 Billion Available

January 16, 2009, CDFI Fund announced the opening of the seventh round of New Markets Tax Credit allocations for $3.5 billion of equity investments. The CDFI Fund announcement states: “To date organizations awarded tax credits have raised $12.6 billion in equity investments. In fact, awardees have raised over $1 billion of equity in the past six months alone, demonstrating that the NMTC Program has been a critical tool for economic development during a period of tightened credit markets.” The Notice of Allocation Availability addresses the application process and provides various deadlines that must be met by applicants. The application deadline is 5 pm ET on April 8, 2009.

2008 New Markets Tax Credit Allocation Awards

On October 20, 2008, the Community Development Financial Institutions Fund (CDFI Fund) awarded $3.5 billion of new markets tax credit (NMTC) investment authority to 70 organizations to stimulate investment and job creation in low-income communities and to benefit targeted populations.

New Markets Tax Credit Extension

October 3, 2008, the Emergency Economic Stabilization Act of 2008 was enacted, including a one-year extension of the NMTC, with $3.5 billion of investment authority for 2009.

September 30, 2008, CDFI Fund issued guidance to CDEs that serve targeted populations and certain geographic areas. All certified CDEs may serve targeted populations within their approved service area.

NMTC Proposed Amendments to Treasury Regulations

Proposed regulations relating to NMTC issued August 11, 2008 modify and clarify the “operating income” safe harbor and “reasonable expectation” safe harbor and address the implications of Community Development Entity (CDE) tax terminations. The proposed regulations will be effective on the date final regulations are published.

Targeted Populations

September 24, 2008, IRS issued proposed regulations relating to the NMTC that provide rules for determining how qualified active low-income community business (QALICB) requirements are satisfied for investments made to low-income targeted populations and GO Zone targeted populations. Written comments were due December 23, 2008. The public hearing was January 22, 2009. Final regulations are anticipated to be issued in 2010.

NMTC Awards

On June 1, 2006, the Community Development Financial Institutions Fund (“CDFI Fund”) announced the 63 organizations awarded tax credits for $4.1 billion in investments under the New Markets Tax Credit program, including $600 million for specific investment in the redevelopment of the Hurricane Katrina Gulf Opportunity Zone. The awards range from $2 million to $143 million. As reported by the CDFI Fund, most of the recipients committed to provide investments in areas of greater economic distress and to provide either equity or debt that is at least 25% below market and/or is characterized by multiple concessionary features. Most of the recipients committed to invest at least 95% of qualified equity investments received in qualified low-income community investments.

For the 2007 allocation round, the CDFI Fund is authorized to issue up to $3.9 billion in New Markets Tax Credit investment authority, including $400 million dedicated to the Gulf Opportunity Zone.

Targeted Populations Guidance

On June 30, 2006, the CDFI Fund and the Internal Revenue Service issued Notice 2006-60 providing guidance regarding the designation of certain targeted populations under the New Markets Tax Credit program, including a special designation in the Gulf Opportunity Zone as “low-income communities.” Taxpayers may rely on this notice until regulations are issued. The Notice provides guidance as to the applicable requirements for a qualified active low-income community business when its activities involve such targeted populations.

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