Inclusiv Continues to Inform Member Credit Unions about New Markets Tax Credits

Published by Bob Ibanez on Friday, May 10, 2019 - 12:00AM

This month, Inclusiv, formerly known as the National Federation of Community Development Credit Unions, will present the third of three webinars for its members about the New Markets Tax Credit (NMTC) program.

Inclusiv’s efforts in this area began last year and were initiated with a session on NMTCs at Inclusiv’s annual conference in October 2018 in Clearwater, Fla. The session entitled “Breaking the Cycle of Disinvestment: The New Market Tax Credit” was attended by representatives from community development credit unions (CDCUs) that have a mission of serving low- and moderate-income people and communities. CDCUs specialize in serving populations with limited access to safe and affordable financial products and services.

From there, Inclusiv moved to a three-part webinar series on NMTCs for their member CDCUs. I was joined by Novogradac’s Nicolo Pinoli to co-present the first webinar: “A Novogradac New Markets Tax Credit Overview for Credit Unions.” Topics included:

  • an introduction to Internal Revenue Code Section 45D, the section of the Internal Revenue Service (IRS) code that permits individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments (QEIs) in qualified community development entities (CDEs);
  • claiming the tax credits: 5 percent of the investment for each of the first three years and 6 percent for the remaining four years—for a total of 39 percent;
  • an overview of the unleveraged NMTC structure, where the equity investor typically recovers all or a portion of its original investment after the 7-year tax credit compliance period;
  • roles played by participants in the NMTC Program (i.e. , CDFI Fund, equity investor, CDE, leverage lender and the business/borrower);
  • acronyms commonly associated with the NMTC (i.e. CDEs, “Sub All,” QEIs, QLICIs, QALICBs, and LICs);
  • low-income communities designated for NMTC investments;
  • an overview of the leveraged NMTC structure, where the equity investor borrows from a lender and aggregates the borrowed funds with its own cash, and then uses the blended funds to make a QEI into a CDE; and
  • the annual NMTC application rounds and allocation authority awarded processes administered by the CDFI Fund.

The second webinar consisted of a NMTC case study on St. Louis Community Credit Union (SLCCU), a full-service CDCU open to anyone who lives, works, worships or attends school in St. Louis City and St. Louis County in Missouri, or St. Clair, Madison, Monroe or Jersey counties in Illinois. SLCCU President/CEO Kirk Mills and Vice President of Community Development Paul Woodruff discussed best practices for leveraging the NMTC based on their experience using NMTCs. They were joined by Donna Aronoff Smith and Jill Gilbert of Smith NMTC Associates LLC who provided an overview of the following two NMTC transactions they worked on with SLCCU.

With approximately $4 million in NMTC financing, SLCCU built two new full service branches (one former Gateway Bank, the first African American owned and operated bank in Missouri). SLCCU also built a Wealth Accumulation Center, a multi-use facility that provides financial capability, affordable alternatives to payday lending and financial education.  With approximately $3 million in NMTC financing, St. Louis Community Credit Union upgraded two existing credit union branches and built a Wealth Accumulation Center in a new credit union branch.

The third webinar is scheduled for May 23. Kevin Boes, president of Local Initiatives Support Corporation (LISC) New Markets Support Company, will present an overview of the NMTC market, becoming a CDE and NMTC allocatee, and building a pipeline with examples of NMTC projects. 

This three -part webinar series is well timed. Novogradac’s 2019 NMTC Conference June 6-7 in Washington, D.C. will be an opportunity for CDCUs to build on what they have learned in the webinar series by gaining additional insights on how to use NMTCs to address their specific community’s needs by engaging with NMTC industry-leading companies in workshops, panels and networking events.

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