New Markets Tax Credit Finance

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 New Market Tax Credit Financing 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 the Tax Advantage Group by Cherry Bekaert, we help our clients successfully finance NMTC projects, and have participated in $1.9 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

Community Development Entity (“CDE”) Certification

We specialize in securing low-cost, flexible financing for community and economic development projects throughout the United States. NMTC funding is available to certified CDEs. We can assist with the preparation and filing of the CDE Certification application to the CDFI Fund. We also provide strategic planning related to the CDEs Controlling Entity and Governing and Advisory Boards.

New Markets Tax Credits Allocation Applications

We help organizations prepare NMTC applications, through a limited review or a full turn-key application. To date, TAG has authored applications resulting in over $1 billion of NMTC allocation. Our aim is to position our clients strategically to secure and manage their NMTC allocations.

During the limited review, we examine any prior NMTC application filings, provide best-practice recommendations to incorporate into a current filing, and provide in-depth training on the current year NMTC application. For a full turn-key application, we draft for approval, and file, all sections of the Application, including Business Strategy, Community Outcomes (including recommending Methods and Metrics), Management, Capitalization (including securing capital commitments, if necessary), and Past NMTC Experience.

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. Cherry Bekaert is one of the few firms in the industry to provide a full suite of  NMTC Management Services to CDEs.

Policies and Procedures (“P&P”)

The Tax Advantage Group creates or supplements a CDE’s P&P to ensure sound management practices throughout the lifecycle of a NMTC investment. These P&P include:

• Governance
• Deployment
• Compliance
• Asset Management
• Servicing

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. We can help deploy NMTC allocation by designing implementing deployment policies to include:

• Pipeline Management
• Due Diligence Collection
• Operating and Advisory Board Procedures NMTC Investors Solicitation
• Transaction Documents (e.g. reservation letters, performance agreements, Fee Disclosure Forms, Better Rates and Terms documentation)
• Financial Model Review (required to lead the CDE through successful transaction closings)

Compliance and Asset Management (“CAM”)

Receiving NMTC funding is a tremendous accomplishment but some of the most challenging work toward maintaining funding over its 7-year life lies in thorough CAM procedures. TAG’s CAM expertise is built upon the process we created for our $89 million Greenville New Markets Opportunity LLC affiliate. By applying these same CAM principles to client CDEs, we help ensure successful allocation maintenance. NMTC CAM Policies and Procedures (“P&P”) include:

• CDE Maintenance,
• CDFI Fund Reporting Compliance,
• CDFI Fund Allocation Agreement Compliance, and
• IRS Compliance.

The Tax Advantage Group’s services are scalable and may be structured to create and train CDE staff on P&P or implement CAM P&P.

Servicing

TAG manages the billing and collection of debt service and fees as required per the transaction documents and directs and manages the transfer of funds between the transaction accounts.

Accounting and Bookkeeping

TAG provides accounting services such as bookkeeping and financial statement preparation and interacts with external accounting resources on all related NMTC tax and audit issues keeping you in financial good standing.