Legal Requirements to be a CDE

There are many statutory and regulatory requirements as well as specific guidance provided by the IRS and the Community Development Financial Institutions Fund (the “CDFI Fund”).

In order to be a “qualified community development entity” (a “CDE”), an entity must:

• be a U.S. corporation, partnership or limited liability company;
• have a primary mission to serve or provide investment capital for “low-income communities” (“LICs”) or “low-income persons” (“LIPs”)
• have a governing board or advisory board which is “accountable” to residents of LICs or LIPs; and
• be certified as a “CDE” by the CDFI Fund.

Generally, an applicant may apply for certification as a “CDE” at any time.  Qualification is not competitive.  As long as these 4 requirements are satisfied, certification will be granted by the CDFI Fund.

These requirements are deemed to be satisfied if the entity is a “community development financial institution” or a “specialized small business investment company.”

During the 7-year NMTC compliance period, there cannot be a “Recapture Event.”

Community Reinvestment Associates:

• drafts organizational documents and files all applicable applications with state governmental entities and the IRS;
• determines qualification of each board member intended to be “accountable” to residents of LICs or LIPs;
• completes the CDFI Fund’s online application for qualification to be a CDE (including gathering all necessary due diligence materials);