What is the New Markets Tax Credit Program?
The New Markets Tax Credit Program (“NMTC”) is a federal program intended to encourage private capital investment in eligible, impoverished, low-income communities. Created under the Community Renewal Tax Act of 2000, NMTCs are allocated by the Community Development Financial Institutions Fund “(CDFI”), a bureau within the United States Department of Treasury, under a competitive application process.
How Does the NMTC Work?
The NMTC Program provides investors with a 39 percent federal tax credit claimed over a seven-year period. The tax credit proceeds create equity, which can be permanently placed in eligible low-income community projects.
Through taxadvantagegroup (“TAG”), part of Cherry Bekaert’s Tax Advisory services, we help our clients successfully implement NMTC projects, and have participated in over $1 billion in NMTC funding.
We work in all areas of the NMTC Program, including:
- Community Development Entity (“CDE”) Certification
- NMTC Allocation Applications
- NMTC Management Services
- NMTC Placement
CDE Certification
We specialize in securing low-cost, flexible financing for community development projects throughout the United States. NMTC funding is available to certified Community Development Entities (“CDEs”). We can assist with preparation and filing of the CDE Certification application to the CDFI Fund. We also provide guidance in choosing the most appropriate controlling entity and Low Income Community (“LIC”) advisory board members, and provide NMTC training for governing and advisory boards.
Applying for New Markets Tax Credits
We help organizations prepare NMTC applications, through a strategic review or a full turn-key project. To date, our TAG has authored applications resulting in over $520 million of NMTC allocation. Our aim is to position our clients strategically to secure and manage their NMTC allocations.
During the strategic review, we examine any prior NMTC application filings, provide best-practice recommendations to incorporate into a current filing, including input on your business strategy, and provide question-by-question training on the current year NMTC application. For organizations wishing to become NMTC lenders, we provide turn-key services to get them started, including CDE formation, building the NMTC Governing Board and Advisory Board, drafting the NMTC Allocation Application, securing Capital Commitments and training.
New Markets Tax Credit Management Services
Receiving New Markets Tax Credit allocation is a tremendous accomplishment. Some of the most challenging work toward maintaining funding lies in successful deployment, thorough compliance and asset management, and meticulous accounting and bookkeeping. TAG is one of the few in the industry to provide comprehensive NMTC Management Services to CDEs.
New Markets Tax Credit Deployment
Faithful adherence to the NMTC application will be the reason the CDE might receive future allocations. It is important to understand all explicit and implied “promises” made in the application and embed them in the deployment of the allocation. Our professionals can help you create and deploy NMTC allocation by designing and implementing comprehensive deployment policies and training CDE staff. Deployment policies include:
- Borrower application procedures that both help you analyze and manage your pipeline;
- Collection of due diligence documents and transaction underwriting;
- Advisory Board strategies;
- Securing NMTC investors;
- Developing reservation letters, term sheets, and borrower performance agreements and;
- Leading the CDE through successful transaction closings.
Compliance and Asset Management
Our expertise in compliance and asset management is built upon the processes we implement for our $89 million affiliate fund called Greenville New Markets Opportunity LLC. We take the same principles used for this fund’s successful compliance and asset management processes and apply them to client CDEs to help ensure their successful allocation maintenance. We will develop a Compliance and Asset Management Policies and Procedures Program that includes action steps and documentation requirements required to maintain the CDE status, comply with CDFI Fund reporting requirements, comply with CDFI Fund Allocation Agreement requirements, and comply with IRS requirements.
New Markets Tax Credit Accounting and Bookkeeping
We can perform accounting services such as monthly bookkeeping and financial statement preparation and interact with external accounting resources on all related new markets tax and audit issues keeping you in financial good standing.
New Markets Tax Credit Placement
Often, important community projects lack funding to reach fruition. By working together, we can enrich communities by helping developers, businesses, and NMTC Allocatees bridge financial gaps through NMTC financing. We can help through the following:
- Project Feasibility – Review project sources and uses to identify potential hurdles and accurately represent NMTC transactions.
- Project Placement – Market the project to the NMTC Lenders by preparing a comprehensive financial request, identifying and securing NMTC Allocation and federal and/or state investors, working through Term Sheet and/or Commitment Letters, identifying any loan providers and providing other structuring advice.
- Project Closing – Lead and coordinate the closing on behalf of the project.
TAG has successfully closed over $230 million of NMTC transactions demonstrating our broad range of project experience including community facilities, commercial goods and services facilities, industrial facilities, and mixed-use facilities.