A Summary of Notable NMTC Allocation Application Changes for 2014
Along with this week’s issuance of its Notice of Allocation Availability (NOAA) for CY 2014, the CDFI Fund provided a newly updated NMTC Allocation Application. The new application form features some welcomed changes when compared to prior year applications.
Additionally, there have been a number of modifications to the process that the CDFI Fund will implement this year in its review and scoring of the applications. These process changes should not impact how an applicant should complete the application form.
The following, highlights, by section, some of the more notable changes, additions, and deletions in the 2014 NMTC Allocation Application versus the 2013 application.
2014 New Markets Tax Credit Application: 2014 Changes
|Section||Question #||Notable Changes|
|Application Information||2||Under “Tip,” this year’s application includes a specific date for inquiries to the CDFI Fund relating to entities being defined as Affiliated. This date is within a week of the NMTC Allocation Application release date (which makes this year’s date 8/12/14).|
|3||Under “Tip,” if the applicant elects to designate a “Controlling Entity” in the application, all future applications made by the applicant (assumes subject application results in an allocation) must designate the same controlling entity (this was not a requirement in the past).|
|Part 1: Business Strategy||13 (Exhibit A)||The CDFI Fund clarified/revised its definitions of Real Estate vs. Non-Real Estate QALICB’s (i.e. Operating Businesses). These QALICB’s have now been collapsed into one Table (Table AI) as compared to two distinct tables in prior year applications. (Note that question #13 does, however, request a percentage estimate of non-real estate, real estate owned through an affiliate and occupied by an operating business, and real estate that is principally leased or sold to third-party tenants).|
|17||Under Prior Performance “Tip” if you designate a controlling entity you must (last year stated may as option) include financing activities of all subsidiaries of the controlling entity.|
For Projected NMTC Investments, Real Estate and Non-Real Estate Investments have been combined into one Table (Table BI) as compared to two distinct tables in prior year applications.
|20 (b)||Under Value Added & Innovative Investments, you must now identify “risk metrics” in your discussion of undertaking activities of greater financial risks. Additionally, when comparing these risk factors, you should compare to financial institutions using their typical market risk criteria (in prior years you could only compare to yourself/Applicant or Controlling Entity).|
|20 (c)||Under Pursue Innovative QLICI’s, you are now being asked to discuss QLICI’s with initial terms less than or equal to 60-months (in prior year, this question solely addressed revolving product loans).|
|Community Outcomes||24 (12)||Added to this year’s list of Highly Distress Investments are Federally Designated Promise Zones (i.e. geographic areas defined by HUD whose designation enables the federal government to partner with local leaders who are addressing multiple community revitalization challenges).|
|24 (13)||For Highly Distressed Investment purposes, investments in FEMA disaster areas, the initial investment date has been extended from 24 months to 36 months following the disaster declaration date.|
|25 (1)||Under “Job Creation,” the applicant is no longer required to compare job projections to its past history of job creation.|
|Management Capacity||28 (b)||The CDFI Fund will only review the first 15 individuals listed in Table C1.|
|Capitalization Strategy||35||A new table (Table E2) has been added to this year’s application, requesting applicants to disclose recent (2009-2014) QEI investors from previous allocations. Additionally, applicants that have raised QEI’s during the period 1/1/09 through 8/5/14, and equal to or greater than the subject allocation request, should not submit letters of investor interest/commitments or respond to question #37(c) & #37(d).|
|37||Applicants that have raised QEI’s between 1/1/09 and 8/5/14, and that are cumulatively less than the subject year allocation request, should not complete Table E2. However, they must complete Table E3 and submit investor letters.|
|44 (a&b)||This defines the cut-off date, for purposes of discussing the current status of previous allocations, as August 5, 2014.|
|44 (b)||This requests applicants to describe what was done to ensure that the amount of NMTC Allocation to an investment did not exceed the amount necessary to assure project feasibility.|
|44 (b)||Applicants are requested to discuss efforts to secure alternative sources of capital to complete the projects.|
We believe these changes to the application are an improvement, clarifying and simplifying the application for what is already a complex and somewhat arduous process.
For more information, please contact Scott Szeliga, Partner, at email@example.com or 410-783-7472.
To learn more about CohnReznick’s New Markets Tax Credits services, please visit our webpage.
The information contained herein (or in any attachment) is not intended to be used by any taxpayer for the purpose of avoiding any penalties that a taxing authority might impose on the taxpayer or for the promoting, marketing or recommending to another party any tax related matters.
The information in this transmission is privileged and confidential and intended only for the recipient listed above. If you are not the intended recipient, please advise the sender immediately by reply e-mail and delete this message and any attachments without retaining a copy. If you are not the intended recipient, you are hereby notified that any disclosure, copying or distribution of this message, or the taking of any action based upon it, is strictly prohibited.
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.