We are interested in participating as a CDE in New Markets Tax Credit Financing . . .

Each year the Community Development Financial Institutions Fund (the “CDFI Fund,” which is a division of the U.S. Treasury Department) awards $3.5 billion to applicants, which are “qualified community development entities” (“CDEs”).

If a CDE receives a NMTC allocation authority award from the the CDFI Fund, then the CDE becomes an “Allocatee” and:

  • can provide NMTC financing up to the amount of the NMTC Allocation Award, which does not require the use of its own capital (i.e., the NMTC investor provides a “qualified equity investment” (a “QEI”) in an affiliate CDE of the Allocatee, which entitles the NTMC investor to NMTCs equal to 39% of the QEI);
  • will receive upfront and ongoing fees of approximately 6% to 8% of such NMTC Allocation Award over the 7-year NMTC compliance period;
  • will have its closing and transaction fees paid by the borrower; and
  • will be able to further its purpose by providing financing to borrowers and projects that have substantial community impact in the Allocatee’s service area.

Typical NMTC Allocation Awards are between $10 million ad $80 million.  Therefore, fees can be in the range between $600,000 and $800,000 and the range of $4.8 million and $6.4 million, respectively.  Such fees arise without the Allocatee or its affiliate CDEs using any of their own funds (i.e., there is no risk of loss of capital to the Allocatee or its affiliate CDEs).