CDFI Fund Shares Plans, Predictions at Novogradac NMTC Conference

Published by Brad Elphick on Friday, February 5, 2016 - 12:00am

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Elphick_Ibanez, by Brad Elphick, CPA

Novogradac’s New Markets Tax Credit (NMTC) conference was held earlier in Scottsdale just weeks after Congress agreed to a five year extension of the NMTC at $3.5 billion per year. We were fortunate to have Bob Ibanez, program manager of the Community Development Financial Institutions (CDFI) Fund’s NMTC Program and Bank Enterprise Award Program join us to talk to about the calendar year 2015 application round, including when the CDFI Fund anticipates announcing the awardees; the CDFI Fund’s past practice on who receives NMTCs and how much they receive; and what the public comment period for the 2016 NMTC application means for the CDFI Fund and for applicants, among other topics.

2015 Application Round Update

Regarding the 2015 application round, Ibanez predicted the total number of applicants would be below 250 applicants. That estimation was proved correct when the CDFI Fund announced 238 applicants requested NMTC authority in the 13th round. He said the CDFI Fund doesn’t analyze characteristics of the applicants in depth at the initial stages of the application process.

Ibanez told attendees that if the CDFI Fund were to award $3.5 billion in awards, he anticipates the average award size to be about $50 million in NMTC authority, meaning that roughly 70 awards are likely, if history is any guide (and he did say that history should be our guide). For a couple of years, the CDFI Fund made smaller awards to more applicants, but it has found that larger awards were more efficient for NMTC investment. A recent study agrees with this assessment.

As has been reported in earlier updates, Ibanez said the CDFI Fund expects to make the 13th NMTC round award announcement in the summer of 2016.

2016 Application Round Update

The 2016 application round is of course coming quickly. A change this year is that the public will be invited to comment on the 2016 application, possibly as early as this spring. Ibanez said that there would be a 60-day comment period, and he vigorously encouraged the NMTC community to submit comments, questions and feedback, to both inform the final application in 2016, but also to help his team understand better the types of analyses (including the ones listed below) that are of interest to NMTC stakeholders. He noted the timing of the eventual release of the final application and opening of the 2016 NMTC allocation application round would be determined, in part, on the volume and substance of the comments the CDFI Fund receives. That said, he predicted the 14th round could be opened in the fall.

Ibanez said his business unit is taking this opportunity to explore all aspects of the application such as:

  • CDE access – exploring ways to increase the number of CDEs accessing NMTCs
  • Geographic considerations – exploring ways to increase geographic distribution of investments
  • Use of other Federal, State, and local subsidies – exploring the interplay and impact on projects
  • Deployment – exploring factors that may contribute towards increasing the speed of deployment and influence project selection/outcomes
  • CDE capacity – exploring key attributes of CDEs to successfully manage their NMTC line of business (financial /human resources)
  • Fees/benefits – exploring ways to increase transparency and net benefits to QALICBs
  • Multi-CDE transactions – assessing costs/benefits
  • Project selection – Identifying drivers of project selection (location, readiness to proceed, projected outcomes, financial feasibility, community support, etc.)
  • Community outputs/outcomes – assessing the breadth/depth of impacts on LICs/LIPs

Ibanez made it clear that it’s premature to speculate on what, if any, specific issues will be addressed in the 2016 application; however, whatever is proposed will be released to the public for comments.

No New Compliance Guidance Currently Planned

While compliance is not part of Ibanez’s core focus, he did respond to a question regarding the new restricted use of qualified low-income community investment (QLICI) proceeds that was included in the notice of allocation availability (NOAA) and discussed Questions 42, 43 and 44 of the NMTC Compliance Monitoring FAQs document that was issued in December 2015. Specifically, he said there is no plan to modify the current guidance. However, he also noted that the CDFI Fund’s plans could change in the future, to the degree that it continues to receive questions and comments submitted to its compliance business unit.

To that end, the NMTC Working Group is working on putting together examples, refining requests for clarifications on the current language, and making recommended changes the CDFI Fund might consider for the next allocation application round. For more information about becoming a member to ensure your input is included on an NMTC topic, visit www.nmtcworkinggroup.com.

Another Opportunity to be Involved

To hear more NMTC news straight from the source, join Novogradac & Company in Washington, D.C. June 2-3 for the Novogradac 2016 New Markets Tax Credit Conference. As invited speakers are confirmed, updates will be posted.