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NOTICE: Part VI

DOCUMENT ACTION: Guidance for Certification of Community Development Entities, New Markets Tax Credit Program.

SUBJECT CATEGORY: Guidance for Certification of Community Development Entities, New Markets Tax Credit Program

DATES: Effective immediately, the Fund will accept applications from entities seeking to be certified as CDEs. There is no deadline for the submission of CDE Certification Applications. The Fund will review CDE Certification Applications on an ongoing basis. However, for an Applicant CDE that also expects to submit a NMTC allocation application, please refer below to Part IV, CDE Certification, Section A, for further information.

DOCUMENT SUMMARY: Title I, subtitle C, section 121 of the Community Renewal Tax Relief Act of 2000 (the Act), as enacted by section 1(a)(7) of the Consolidated Appropriations Act, 2001 (Public Law 106554, December 21, 2000), amended the Internal Revenue Code (IRC) by adding IRC section 45D, New Markets Tax Credit. Section 45D requires the Secretary of the Treasury (Treasury) to establish a program that will provide an incentive to investors in the form of a tax credit over seven years, which is expected to stimulate investment in new private capital that, in turn, will facilitate economic and community development in distressed communities. Section 121(f) of the Act, among other things, requires the Secretary to issue guidance on how entities may apply to receive allocations of New Markets Tax Credits (NMTCs), the competitive procedure through which such allocations will be made, and the actions that will be taken to ensure that proper allocations are made to appropriate entities. The Secretary delegated such authority to the Under Secretary (Domestic Finance), who in turn delegated such authority to the Director of the Community Development Financial Institutions Fund (the Fund).

On April 20, 2001, the Fund issued guidance (which was published in the Federal Register on May 1, 2001 at 66 FR 21846) (the General Guidance) that provided general information on how an entity may apply to become certified as a ``qualified community development entity'' (CDE), how a CDE may apply to receive an allocation of NMTCs, the competitive procedure through which such allocations will be made, and the actions that will be taken to ensure that proper allocations are made to appropriate entities. In addition, through the General Guidance, the Fund sought written comments from the public as to certain application and allocation issues.

This document (i) summarizes written public comments submitted to the Fund pursuant to the General Guidance, specifically with respect to the Fund's certification of entities as CDEs, and (ii) provides, in accordance with IRC section 45D(c)(1)(C), specific guidance on how an entity may apply to become certified as a CDE. Effective immediately, this Guidance encourages entities to apply for CDE certification. This Guidance does not solicit applications for allocations of NMTCs.

As provided by IRC section 45D(i), Treasury is authorized to prescribe regulations relating to the NMTC Program. Treasury and the Internal Revenue Service (IRS) will promulgate regulations related to tax aspects of the NMTC Program. Following the promulgation of said IRS regulations, the Fund will publish a Notice of Allocation Availability (NOAA) that will provide additional, specific guidance on how a CDE may apply to receive an allocation of NMTCs, the competitive procedure through which such allocations will be made, and the actions that will be taken to ensure that proper allocations are made to appropriate entities. As part of the NOAA, the Fund also will summarize written comments submitted by the public with respect to application and allocation issues presented in the General Guidance. The Fund anticipates that, pursuant to the NOAA, it will allocate to CDEs in calendar year 2002 the authority to issue to their investors up to the aggregate amount of $2.5 billion in equity as to which NMTCs may be claimed (the authority will include the aggregated amounts of $1 billion for calendar year 2001 and $1.5 billion for calendar year 2002, as permitted under IRC sections 45D(f)(1) and 45D(f)(3)).

SUMMARY: Treasury Department, Community Development Financial Institutions Fund,