News Archive:
2002
December
San Francisco, Calif. - December 20, 2002
As the year end approaches, Novogradac & Company LLP would like to alert you to the fact that Community Development Entities (CDE) may be required to file federal and state tax returns for the period ending December 31, 2002. CDEs that have been formed as a partnership with a December 31 year-end may be required to file federal and state returns of income by April 15, 2003. CDEs that have been formed as a limited liability company by filing the articles of organization as a LLC can be classified as partnerships or as domestic corporations for federal income tax purposes and may be required to file applicable federal and state tax returns.
It is important to note that certain states may require the payment of an annual tax even if there was no activity during the year. For instance, California generally imposes an $800 annual tax on limited partnerships and limited liability companies that are "doing business" in California.
If you have any questions regarding the filing requirements of your CDE, please contact Novogradac & Company LLP or your tax advisor.
WASHINGTON, D.C. - December 13, 2002 -
The New Markets Tax Credit Coalition (NMTCC) in a letter to President Bush this week requested that an additional $2.5 billion in NMTC allocations be included in the economic stimulus package being crafted by the administration. The NMTCC estimates the federal government's cost of encouraging an additional $2.5 billion in private investment to be $42 million over five years and $700 million over 10 years. Click here to read the letter.
WASHINGTON, D.C. - December 9, 2002 -
The Community Development Financial Institutions (CDFI) Fund today published notices and requests for comments concerning the New Markets Tax Credit (NMTC) program allocation application as well as the Community Development Entity (CDE) certification application. Written comments are due by February 7, 2003 and should be directed to Linda Davenport, Financial Equity Manager, Community Development Financial Institutions Fund, U.S. Department of the Treasury, 601 13th Street, N.W., Suite 200 South, Washington, D.C. 20005; Fax: (202) 622-8911.
October
WASHINGTON, D.C. - October 25, 2002 -
The Community Development Financial Institutions (CDFI) Fund announced today that it will take significantly longer than 60 days to review and process applications for certification as a community development entity (CDE). Initially, the CDFI Fund expected that it would take 60 days from the date of receipt to notify CDE certification applicants of its decisions. However, due to a large volume of CDE certification applications from organizations that also applied for new markets tax credit (NMTC) allocations, the review process will be considerably longer. The CDFI Fund says those entities that submitted a CDE certification application prior to July 25, applied for a NMTC allocation, and are awarded an allocation should receive notice by the end of December 2002 and before any announcements of allocations of NMTC authority are made.
All other entities that either applied for an allocation or submitted applications prior to October 2002 will be reviewed in the order that the applications were received and will receive notification as early in 2003 as possible. Each applicant received notification from the Bureau of Public Debt (BPD) that its application had been received, and each applicant will receive an email request for information, if necessary, from the staff member assigned to review the application. The CDFI Fund discourages calls to inquire about the status of a particular CDE certification application.
To learn more about CDE certification, click here.
WASHINGTON, D.C. - October 10, 2002 -
Community investment loans for housing, child care and small businesses in economically disadvantaged markets are as safe as loans in higher-income "conventional" markets, according to a new National Community Capital Association (NCCA) study released today by the Community Investing Program of the Social Investment Forum Foundation and Co-op America. The NCAA study reports on almost $4 billion of financing by 107 community development financial institutions (CDFIs) in distressed urban and rural markets. The findings in "CDFIs: Bridges Between Capital and Communities," suggest that loan portfolios with high-perceived risk had net charge-offs of 0.5 percent, which compares favorably to 0.9 percent for all commercial banks, and 0.5 percent for commercial banks with less than $100 million in assets. For more information, click here.
September
WASHINGTON, D.C. - September 20, 2002 -
The New Markets Tax Credit (NMTC) program will not be limited by the availability of certain other federal tax benefits, according to Internal Revenue Service (IRS) Notice 2002-64. These benefits include the rehabilitation tax credit, all depreciation deductions, the expense deduction for depreciable property under Section 179 and all tax benefits relating to Empowerment Zones (EZ), Enterprise Communities (EC), Renewal Communities (RC), the District of Columbia Enterprise Zone and the New York City Liberty Zone. The IRS and Treasury Department are studying how the low-income tax credit (LIHTC) may limit the availability of the NMTC. Click here to read Notice 2002-64.
WASHINGTON, D.C. - September 17, 2002 -
The Treasury Department today announced that 345 applications were received in the first round of competition for the allocation of tax credit authority under the New Markets Tax Credit (NMTC) Program. The applicants requested authority to provide investors tax credits an aggregate of more than $25.8 billion in potential equity investments. The total equity under the program is $15 billion, which is available on a phased-in basis through 2007. In this first round, a total of $2.5 billion in equity investments, for which tax credits may be claimed, can be allocated.
The applications will now go through a competitive review process to identify those applicants that the Community Development Financial Institutions (CDFI) Fund finds best suited to have the greatest impact by facilitating the flow of private sector capital into low-income rural and urban communities. The CDFI Fund administers the NMTC Program in coordination with the Internal Revenue Service (IRS) and Treasury's Office of Tax Policy.
Click here to read the CDFI Fund's announcement.
WASHINGTON, D.C. - September 9, 2002 -
The service area designated in the NMTC allocation application must be consistent with the service area the applicant was certified for in its community development entity (CDE) certification. A CDE planning to modify its service area in the context of the 2002 allocation application must submit this information to the Community Development Financial Institutions Fund (CDFI Fund) no later than 5 p.m. Eastern Time on September 11, 2002, according to the latest version of the allocation and application Q&A, published by the CDFI Fund on August 5. In the Q&A, the CDFI Fund addressed the issue of modifying the service area after entering into the allocation agreement saying the applicant CDE may modify the service area to include any market that was not identified at the time of the allocatee's receipt of a NMTC allocation and/or initial certification as a CDE. The CDFI Fund will consider these requests on a case-by-case basis.
August
WASHINGTON, D.C. - August 27, 2002 -
In the August 5, 2002 Updated NMTC Allocation Application Q&A, the CDFI Fund indicated that it would issue further guidance on Question #34, which dealt with earning 5 bonus points for investing in unrelated entities. On August 26, 2002, CDFI Fund provided the additional guidance. The guidance is currently available in the electronic NMTC Allocation Application; when an applicant enters the program, they encounter an alert screen and the applicant must acknowledge the alert in order to access their application.
The following is a copy of the electronic guidance:
"As of August 26, 2002, further guidance is being offered regarding Question 34 of the NMTC Allocation Application. Please (1) review and, if applicable, change your answer to Question 34 carefully in accordance with the following guidance (altered text is highlighted in red); and (2) check the box below to indicate that you have reviewed this new guidance.
In Question #34 of the Allocation Application, can an applicant earn the 5 priority points for investing in unrelated entities if it intends to hold a majority equity interest in the business, subsequent to making a QLICI in the business?
No. An applicant can only earn the 5 unrelated entity priority points if persons unrelated to the CDE will hold a majority equity interest in the business, after the CDE makes a QLICI in the business. Subsequent to the CDE making the QLICI, persons unrelated to the CDE would be expected to continue to own a majority interest in the business, in order to comply with the terms of the Allocation Agreement.
The Fund will review any changes in such circumstances on a case-by-case basis. Applicants should refer to IRC §§267(b) and 707(b)(1) and consult their own tax advisors for more information about the definition of a related entity."
WASHINGTON, D.C. - August 16, 2002 -
The U.S. Treasury Department yesterday released a letter submitted on behalf of the New Markets Tax Credit Coalition (NMTCC). In the letter, which asks for clarification on several issues related to the New Markets Tax Credit (NMTC), The NMTCC urges the Treasury to address its request before the August 29 deadline for the first round of allocation applications. The coalition's request includes clarification regarding:
- The definition of control under Section 45D(d)(6)(ii) of the temporary regulations,
- The terms and conditions for recapture prevention under Section 45D(g)(2)B,
- Allowable activities for lower tier CDEs under Section 45D(d)(l)(iv) A,
- Whether an investment LLC may make qualified equity investments in a CDE,
- Whether the purchase of loans is limited to a single purchase transaction, or whether a chain of purchase transactions among several CDEs is allowed, and
- Whether it will be possible to use a warehouse line of credit to assemble loans in advance of calling for pay-ins of capital by qualified equity investors.
Click here to read the NTMCC's letter. For more information about the temporary regulations under Section 45D, click here.
WASHINGTON, D.C. - August 14, 2002 -
In order to eligible for new markets tax credit (NMTC) allocation this year, applicants were required to apply for certification to become a community development entity (CDE) by July 25. As of June 20, the Community Development Financial Institutions (CDFI) Fund had certified 340 CDEs, but has yet to release updated lists of all CDEs certified by the July 25 cut-off.
However, the Fund recently reported "unprecedented demand" in the number of applications to become certified as a Community Development Entity (CDE). CDFI says it received more than 900 applications for CDE certification, and based on a non-binding survey accompanying the application, expects between 350-500 applications for NMTC allocation.
WASHINGTON, D.C. - August 8, 2002 -
The Internal Revenue Service (IRS) today released a notice and request for comments regarding Form 8874, New Markets Credit. In order to claim a credit for equity investments made in qualified community development entities (CDE), investors must submit Form 8874 to the IRS. Comments on the form should be submitted by October 7 to: Glenn P. Kirkland, Internal Revenue Service, Room 6411, 1111 Constitution Avenue N.W., Washington, D.C., 20224. For a draft copy of the form, click here.
WASHINGTON, D.C. - August 6, 2002 -
The Community Development Financial Institutions (CDFI) Fund this week updated its new markets tax credit (NMTC) application and allocation Q&A. The new version, dated August 5, amends questions 3, 5-7, 9, 16 and 19 from the July 1 document. In addition, questions 24-34 are new questions that the CDFI Fund says were the most frequently asked during its NMTC information sessions in July. To view the updated Q&A, click here.
July
WASHINGTON, D.C. - July 30, 2002 -
The Community Development Financial Institutions (CDFI) Fund today posted the paper application submission form on its web site, www.cdfifund.gov. The CDFI Fund must receive this form no later than 5 p.m. EST on August 9, 2002 if applicants wish to submit a paper application rather than an electronic application for the new markets tax credit (NMTC) program.
All applications for allocations of new markets credits are due no later than 5 p.m. EST on August 29, 2002.
WASHINGTON, D.C. - July 26, 2002 -
The Community Development Financial Institutions (CDFI) Fund posted the electronic applications for new market tax credits (NMTCs) on its web site, www.cdfifund.gov, July 17, along with detailed instructions for a community development entity (CDE) to submit an allocation request. The CDFI Fund is expecting to rely heavily on the electronic format, according to financial and program analyst Jennifer Westerbeck, who says that the process is intended to be easier for both CDEs and the CDFI Fund. In addition, the agency plans to use a similar online format for ongoing program monitoring and compliance.
Applicants who wish to submit paper applications must tender requests to the CDFI Fund by August 9, and all applications must be received no later than 5 p.m., Eastern Time, August 29.
More information about the CDFI Fund's expectations and instructions for the online application process can be found in the August issue of the NMTC Report.
Washington, D.C., July 22, 2002 -
WASHINGTON, D.C. - July 22, 2002 - For those who want to apply for new market tax credits, the first in a series of deadlines for the 2002 New Markets Tax Credit (NMTC) program is Thursday. To be eligible to receive a NMTC allocation in 2002, organizations must have submitted to the Bureau of Public Debt by 5 p.m. (Eastern Time) on Thursday, July 25 an application for certification as a community development entity (CDE). Applicants that have not been certified as CDEs will not be eligible for NMTC allocation.
WASHINGTON, D.C. - July 17, 2002 -
The Community Development Financial Institutions (CDFI) Fund today posted the electronic application for the new markets tax credit (NMTC) program on its web site, www.cdfifund.gov. To qualify for allocation, applicants must submit request for community development entity (CDE) certification by July 25; applications for NMTCs are due no later than 5 p.m. EDT August 29.
WASHINGTON, D.C. - July 15, 2002 -
During the Community Development Institutions (CDFI) Fund's July 12 video conference information session, Paul Handleman, of the Internal Revenue Service (IRS) office of associate chief counsel, indicated that the IRS may release guidance on combining the new markets tax credit (NMTC) with other federal subsidies, such as the historic rehabilitation tax credit, by the NMTC application deadline August 29.
In addition, the Treasury Department announced that guidance under Section 45D regarding new markets tax credits (NMTC) will be forthcoming in 2002-2003. Treasury and the IRS last week released the priorities for tax regulations and other administrative issues for 2002-2003 that they will address through regulations, rulings, notices and other forms of guidance during the year ending June 30, 2003. The plan reflects the combined input of taxpayers, practitioners and industry groups who were invited to submit comment earlier this year in Notice 2002-22.
WASHINGTON, D.C. - July 8, 2002 -
The Community Development Financial Institutions (CDFI) Fund last week published updated Q&As on community development entity (CDE) certification as well as the new markets tax credit (NMTC) application and allocation process. Click here for the CDE certification Q&A. To view the allocation and application Q&A, click here.
June
WASHINGTON, D.C. - June 28, 2002 -
In a recent letter to the Treasury Department, Robert A. Rapoza requested guidance on the temporary regulations for the new markets tax credit (NMTC) program (T.D. 8971) on behalf of the New Markets Tax Credit Coalition. The letter appealed for clarification on issues including combining NMTCs with low-income housing tax credits and historic rehabilitation tax credits. For the complete letter, click here.
WASHINGTON, D.C. - June 6, 2002 -
Speaking to a gathering of industry professionals at Novogradac & Company LLP's New Markets Tax Credit Conference, CDFI Fund Financial and Program Advisor Matt Josephs today announced that the CDFI Fund's new markets tax credit program notice of allocation availability (NOAA) will be released officially in the Federal Register on Tuesday, June 11.