The Community Development Financial Institutions (CDFI) Fund recently released an updated draft allocation agreement for the CY 2015-2016 new markets tax credit (NMTC) allocation round. NH&RA’s New Markets Tax Credit Council will be hosting a call in the near future to discuss these changes and looks forward to your contributions towards a comment letter. The following is a summary of changes:

  • Added fraud/mismanagement on the part of the Controlling Entity to the list of reasons the CDFI Fund may engage in additional due diligence, assuming that fraud and/or mismanagement could affect the performance under the Allocation Agreement. Previously, only fraud/mismanagement by the Allocatee was considered.
  • Innovative Investments: Added QLICIS in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands and Alaska Native Village Statistical Areas to this section.
  • Now references the NMTC Allocation Application Q&A Document published in 2015.
  • As has been the case, the Allocatee, by a certain time, must make at least 75% of the total dollar amount of its QLICIS in either areas that are characterized by at least one item in an enumerated list (census tracts with certain poverty levels or unemployment rates, etc.) OR in areas characterized by at least two items in another enumerated list. A targeted populations item in the first enumerated list has been expanded to include situations where “at least 60% of the projects’ gross income is derived from sales, rentals, services, or other transactions to customers who are LIPs”.
  • Impacted Coal Counties was added to the second enumerated list mentioned in the previous bullet.
  • New language re QLICI proceeds used to pay debt/equity providers:

“(j) The Allocatee shall not use the proceeds of a QEI to make a QLICI in a QALICB where such                   QLICI proceeds are used, in whole or in part, to repay or refinance expenditures incurred by a                     debt or equity provider whose capital was used to fund the QEI, or are used to repay or refinance               expenditures incurred by any Affiliate of such a debt or equity provider, except where:

(i) the QLICI proceeds are used to repay or refinance documented reasonable        expenditures                  of the debt or equity provider (or its Affiliate), that are directly            attributable to the                                qualified business of the QALICB, and such expenditures             were incurred no more than 24                  months prior to the QLICI closing date; or

(ii) no more than 5% of the QLICI proceeds are used to repay or refinance             documented                      reasonable expenditures of the debt or equity provider (or its           Affiliate) that are directly                        attributable to the qualified business of the QALICB. For purposes of this subsection, refinance                  includes transferring cash or property, directly or indirectly, to the debt or equity provider or                      an Affiliate of the debt or equity provider.”

Please note, per the document’s disclaimer, that this draft document is “provided for illustrative purposes only”. This document is meant to provide boilerplate language, subject to modification by the CDFI Fund. Specific NMTC allocations will have their own particular terms.