On Your Mark CDFI Fund Opens New Funding Round for New Markets Tax Credit Program

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The Community Development Financial Institutions (CDFI) Fund has announced a new, eighth funding round for the federal new markets tax credit (NMTC) program, offering up to $5 billion in allocation authority.

The new round, though, is contingent on the enactment of legislation to extend the program.

Under the NMTC program, organizations called community development entities (CDEs) compete for allocations of NMTC in periodic funding rounds. CDEs that win allocation awards raise capital from investors and deploy it, as Qualified Low-Income Community Investments (QLICIs), in eligible projects and activities located in or benefiting low-income communities.

“In our efforts to ensure that economic recovery reaches the hardest-hit communities, the New Markets Tax Credit remains a critical tool and I am delighted to announce, subject to Congressional authorization, the $5 billion of tax credit authority available in the fiscal year 2010 round,” said CDFI Fund Director Donna Gambrell. “These credits will help finance small businesses, grocery stores, healthcare centers, charter schools and job-training sites and will help create, save or support local jobs where they are needed most.”

Application, Other Deadlines

Applications for NMTC allocation authority in the new funding round must be submitted electronically by 5 p.m. ET on June 2, 2010. Those eligible to submit applications are certified CDEs as well as organizations that submit an application to the Fund (postmarked no later than April 26) requesting certification as a CDE.

CDEs that received one or more NMTC allocations in previous funding rounds must demonstrate that they have met certain percentage equity-raising thresholds by July 21 in order to be eligible to apply in the eighth round.

An applicant already certified as a CDE wishing to change its designated service area must submit a request for such a change to the Fund by June 2.

The CDFI Fund said it doesn’t anticipate providing allocation awards larger than $150 million in the eighth round, higher than the $125 million cap in 2009. However, the Fund may provide awards larger than $150 million to applicants that meet certain conditions.

Details on the eighth funding round are available in a Notice of Allocation Availability (NOAA), application instructions document, and application “Q&A” document that are posted on the CDFI Fund’s Web site, at http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=5. The NOAA was published in the Federal Register on April 8.

Reaction, Modifications

Washington, D.C. tax attorney Michael Sanders, a partner in Blank Rome LLP, described the issuance of the new NOAA as a “highly unusual situation” – given that authorization for the NMTC program expired on December 31. The issuance of the NOAA, however, suggests that the Obama Administration is confident that the program will be extended. The Administration has proposed a two-year extension of the program, through calendar 2011. In addition, pending “tax extenders” legislation awaiting final congressional passage would continue the NMTC through 2010 at a funding level of $5 billion.

Sanders asserted that an extension of the NMTC is critical. “This program generates jobs,” he noted.

Some of the changes to the application for the 2010 funding round include:

  • Modifying, under the Community Impact section, the list of areas qualifying as severely distressed or underserved areas, including to move up high on the list non-metropolitan counties and targeted populations. As in prior rounds, the CDFI Fund plans to ensure that: (1) at least 20% of all QLICIs made by allocatees from 2010 allocations are invested in non-metro areas, and that (2) a proportionate number of Rural CDEs receive allocation awards.
  • Permitting multiple entities controlled by the same governmental unit to submit applications in the same round.
  • Asking if the applicant is minority-owned.