NMTC Working Group Asks CDFI Fund to Speed Release of CY 2021 NMTC Round
When it comes to the calendar year 2021 (CY 2021) new markets tax credit (NMTC) application round, the sooner the better.
That was the theme of a letter submitted to the Community Development Financial Institutions (CDFI) Fund this week on behalf of the New Markets Tax Credit Working Group. With the standard time of about eight weeks from the notice of allocation authority (NOAA) to the application deadline, any delay by the CDFI Fund threatens to push the deadline into the December holidays–and create difficulties. If the CDFI Fund maintains the 54-day window of the past two rounds between the NOAA and application deadline and wants the application deadline to be at least a week before Christmas, the NOAA would have to be posted by Oct. 25.
A survey of NMTC Working Group members revealed that 80% of respondents said having the application due after the federal Christmas holiday (Dec. 24) would create an unnecessary burden on their ability to manage deployment of existing allocations and to apply in the CY 2021 round.
The NMTC Working Group consists of participants in the NMTC world who work together to help resolve technical NMTC issues and provide recommendations to make the incentive more efficient in delivering benefits to qualified businesses in low-income communities. The group includes more than 60 organizations that are allocatees, nonprofit and for-profit community development entities (CDEs), consultants, investors, accountants and lawyers.
An end-of-year pinch to apply for the CY 2021 allocation round would exacerbate the strain on CDEs, which are typically busiest during the fourth quarter. Recent history is a lesson: Both the CY 2019 and CY 2020 applications were due in the fourth quarter (Oct. 28, 2019; Nov. 16, 2020), putting severe strain on the CDEs–many of which spend hundreds of hours preparing their applications.
It’s common for CDEs that received an allocation one year to apply the next–over the past 10 NMTC application rounds, nearly 50% of allocatees won an allocation in the prior round and more than 70% won an allocation in one of the prior two allocation rounds. That means that CDEs are managing deployment of a previous round while applying for the next allocation while under end-of-year pressure for both.
The NMTC Working Group letter requested that if the application deadline is after the federal Christmas holiday, the CDFI Fund extend the application round beyond the standard rate of 50 to 55 days from the past four rounds. In other words, if the application isn’t due before Christmas, push the deadline back several weeks.
The NMTC Working Group also recommended that the qualified equity investment/qualified low-income community investment (QEI/QLICI) issuance deadline be adjusted back to its previous length. There was just 184 days between the 2019 award announcement and the 2020 QEI/QLICI issuance deadline, while in previous rounds that gap was 228 to 253 days.
The return to a longer period for QEI/QLICI issuance is made more important in view of the impact of the COVID-19 pandemic’s affect on businesses and issues that have complicated construction deadlines. The working group asked the CDFI Fund to announce the QEI/QLICI deployment deadlines as soon as possible, even before the CY 2021 notice of allocation authority.
To simplify the annual process, the NMTC Working Group proposed that the CDFI Fund release the NMTC application on a similar timeline each year, providing consistency. Fluctuation in timelines create uncertainty in the market, which damages the effectiveness of deploying NMTC resources.
The final portion of the NMTC Working Group letter requested more information in the application and/or NOAA concerning NMTC scoring and preferences of the CDFI Fund. The group requested the CDFI Fund send post-award debriefing letter to all applicants, rather than the current practice of only sending those letters to applicants that don’t receive an allocation.
The CY 2021 round will be the key topic of discussion at the Novogradac 2021 New Markets Tax Credit Fall Conference Oct. 28-29 in Austin, Texas.
The NMTC Working Group continues to help resolve technical regulatory and administrative NMTC program issues and provide recommendations to make the incentive more efficient. Membership in the group is open.