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NEW MARKETS
TAX CREDIT
FR E QU E NT LY AS K E D QU ES TIO N S
U PDAT ED JULY 2024
WWW.CDFIFUND.GOV/NMTC
COMPLIANCE MONITORING
AND
EVALUATION
FREQUENTLY ASKED QUESTIONS
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 2
This document supersedes the November 2023 edition of the New Markets Tax Credit
(NMTC), Compliance and Monitoring Frequently Asked Questions by adding, revising or
updating select questions from that edition. The highlighted questions have been added
or have been significantly modified from the published document of December 2022.
Capitalized terms used but not defined herein shall have the respective meanings assigned
to them in the applicable Allocation Application, the applicable Allocation Agreement, the
Act, and/or the NMTC Program Income Tax Regulations.
Table of Contents
1. Does the CDFI Fund impose an annual monitoring/compliance fee? ........................................ 8
2. Will the CDFI Fund share data submitted by Allocatees with the Internal Revenue Service
(IRS) or any other entity or agency? .............................................................................................................. 8
3. When is compliance measured and for what period of time will the CDFI Fund measure
compliance? ....................................................................................................................................................... 8
4. What happens if an Allocatee fails to meet the performance requirements outlined in the
Allocation Agreement? ..................................................................................................................................... 9
B. Allocation and QEI Tracking ..................................................................................................................... 10
5. How are allocation transfers and QEI reporting tracked in the AMIS environment?............. 10
6. Can a Community Development Entity (CDE) that has received an allocation provide a QEI
to another Allocatee?...................................................................................................................................... 10
7. Can an Allocatee amend a finalized QEI in AMIS? ....................................................................... 10
8. I did not receive the QEI notification email. How do I obtain a copy for our records? ......... 11
9. My CDE is 100% owned by an S Corporation that has numerous shareholders. Will AMIS
require the user to enter each of the shareholders and their respective information as NMTC
claimants? ........................................................................................................................................................ 11
C. Allocation Agreement ................................................................................................................................ 12
10. Which activities are permissible with respect to financial counseling and other services
(FCOS)? ............................................................................................................................................................. 12
11. How can a CDE take advantage of the provisions outlined in Treasury Directive (TD) 9600?
12
12. What is the definition of Non-Real Estate QALICB for purposes of TD 9600? ....................... 13
13. What is the definition of Real Estate QALICB versus Non-Real Estate QALICB for purposes
of the Allocation Agreement? ....................................................................................................................... 14
14. My CDE has received principal repayments on a QLICI and will reinvest those proceeds in
a new QLICI. Is the new QLICI subject to the same requirements found in Section 3.2 of the
Allocation Agreement (i.e., Types of QLICIs, Service Area, etc.)? ......................................................... 14
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 3
15. Is the six-month cure period found under § 1.45D-1(e)(6) available to correct an Allocatee’s
or Subsidiary Allocatee’s failure to invest substantially all of its QEI proceeds? ............................... 14
16. If an Allocatee is providing loans to or investments in other CDEs, how will the CDFI Fund
monitor compliance with the provisions of Section 3.2? Will the CDFI Fund only consider the
initial QLICI into the other CDEs, or will the CDFI Fund look through the CDEs to the ultimate
QALICB recipients? ........................................................................................................................................ 15
17. How does the CDFI Fund view an Allocatee’s use of QLICIs to finance housing units if
Section 3.2(k) of the Allocation Agreement is listed as “Not Applicable”? .......................................... 15
18. How does the CDFI Fund define “affordable housing” for the purpose of meeting Section
3.2(k) of the Allocation Agreement? ............................................................................................................ 16
19. What is the “substantial rehabilitation” threshold for purposes of meeting Section 3.3(h) of
the Allocation Agreement? ............................................................................................................................ 17
20. How does the CDFI Fund evaluate 3.3(h)(iv) of the Allocation Agreement regarding the
exception for acquisition costs in connection with new construction in cases where the QALICB’s
principal business activity is the rental to others of real property? ...................................................... 18
21. How does the CDFI Fund measure “innovative investments” for the purpose of meeting
Section 3.2(l) of the Allocation Agreement? ............................................................................................... 18
22. How does the CDFI Fund measure “small dollar QLICIs” in meeting Section 3.2(l) of the
Allocation Agreement? ................................................................................................................................... 19
23. If An Allocatee commits to provide QLICIs for non-Real Estate Activities as an innovative
investment under Section 3.2(l) of the Allocation Agreement, can a financial note financing both
Real Estate and non-Real Estate Activities count toward this commitment? ...................................... 20
24. My CDE is making several disbursements related to a QLICI to a project over a set period.
At the time of the initial QLICI disbursement, the project was deemed to be in an eligible NMTC
census tract. Will future disbursements connected to the QLICI under the project qualify if the
tract is later deemed not to be an eligible NMTC census tract? ............................................................. 21
25. If an Allocatee elects to transfer allocations to a Subsidiary Allocatee (i.e., a Subsidiary
CDE listed in Section 3.2 of its Allocation Agreement), will the CDFI Fund monitor compliance with
Section 3.2 separately by each subsidiary or on a consolidated basis for all Subsidiary Allocatees
that are parties to the Allocation Agreement? ........................................................................................... 21
26. How does the “joint and several liability” provision of the Allocation Agreement apply to
Allocatees that intend to sub-allocate tax credit authority to Subsidiary Allocatees? ....................... 21
27. How will the CDFI Fund monitor compliance with the unrelated entity requirement in
Section 3.2(d) of the Allocation Agreement? .............................................................................................. 22
28. Section 3.2(f) of my CDE’s Allocation Agreement states that “All of the Allocatee’s QLICIs
must (a) be equity or equity-equivalent financing, (b) have interest rates that are “X” percent lower
than either the prevailing market rates for the particular product or lower than the Allocatee’s
current offerings for the particular product, or (c) satisfy at least five of the indicia of flexible or
non-traditional rates and terms, as listed in Section 3.2(f).” How can my CDE demonstrate that it is
satisfying this requirement?.......................................................................................................................... 23
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 4
29. Does an SBA designated HUB Zone qualify as an eligible area of higher distress and how
does the CDFI Fund determine if a QLICI supports businesses that obtain HUB Zone certification?
24
30. How does an Allocatee document “better rates and terms” for its QLICIs and how will the
CDFI Fund determine compliance with the better rates and terms requirement of the Allocation
Agreement? ...................................................................................................................................................... 24
31. What supporting documentation does an Allocatee need to retain in order to demonstrate
compliance with Section 3.2(h) - Targeted Distressed Communities of the Allocation Agreement by
investing in areas of higher distress? What resources are available to determine if a census tract
is in an approved Area of Higher Distress? ................................................................................................ 25
32. How will the CDFI Fund measure compliance with meeting the requirement of Section
3.2(h) Targeted Distressed Communities for a QALICB with tangible property in several census
tracts? 26
33. Is there a source to determine the unemployment rate for a census tract? ........................... 27
34. How does the CDFI Fund define activities that “support health related services” as it
relates to QLICIs in federally designated medically underserved areas? ............................................. 27
35. How will the CDFI Fund determine if a project is located in a Food Desert using USDA’s
Food Access Research Atlas? ...................................................................................................................... 28
36. How does the CDFI Fund define “other similar federal/state/local programs targeted
towards particularly economically distressed communities”? ............................................................... 28
37. All Allocatees are required to invest substantially all (generally 85%) of their QEIs as
QLICIs. Section 3.2(j) of the Allocation Agreement may require an Allocatee to invest an even
higher percentage of QEIs (e.g., 95%; 100%) as QLICIs, based on representations made by the
Allocatee in its Allocation Application. How does the CDFI Fund monitor compliance with Section
3.2(j) of the Allocation Agreement?.............................................................................................................. 29
38. Does Section 3.3(h) of my Allocation Agreement (prohibitions on real estate refinancing),
allow for the “take-out” of both debt and equity? ..................................................................................... 30
39. Can takeout financing apply to an amortizing loan under Section 3.3(h)(v) of the Allocation
Agreement? ...................................................................................................................................................... 30
40. What is a Material Event? ................................................................................................................. 31
41. Section 6.9 of the Allocation Agreement requires CDEs to report Material Events to the
CDFI Fund within a specified number of days of the occurrence stated in the Allocation
Agreement. How do I report a Material Event to the CDFI Fund? ........................................................... 32
42. What are the restrictions on the use of Bond Proceeds under the CDFI Bond Guarantee
Program in NMTC related activities? ........................................................................................................... 33
43. What are the restrictions on the use of QLICI proceeds to repay or refinance any debt or
equity provider, or an Affiliate of any debt or equity provider, whose capital was used, directly or
indirectly, to fund a QEI? ............................................................................................................................... 33
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 5
44. How will the CDFI Fund monitor the restriction on the use of QLICI proceeds to directly or
indirectly repay or refinance any debt or equity provider, or Affiliate to any debt or equity provider,
whose capital was used, directly or indirectly, to fund the QEI required under the CY 2015-2016
NMTC Application? ......................................................................................................................................... 35
45. Can a QALICB use QLICI proceeds to repay or refinance any debt or equity provider, or
Affiliate of any debt or equity provider, and to monetize an asset owned by, contributed, sold, or
otherwise transferred to the QALICB (or an Affiliate of a QALICB) including but not limited to the
accreted value of an asset? ........................................................................................................................... 35
46. How will the CDFI Fund evaluate adherence to 3.3(i) of the Allocation Agreement as it
pertains to NMTC activities that are “generally consistent” with the Application? ............................ 36
47. What is the expectation of Allocatees regarding Section 4.13 of the Allocation Agreement?
38
48. What does Section 6.12 of the Allocation Agreement require?................................................. 38
49. How should an Allocatee report QALICB consulting fees? ....................................................... 41
D. Reporting and Financial Statements ....................................................................................................... 42
50. Which organizations are required to submit audited financial statements to the CDFI
Fund? 42
51. Will the CDFI Fund accept the audit of an Allocatee’s controlling entity, or parent
company, if the Allocatee is not separately audited? ............................................................................... 42
52. Is a Tax Basis financial statement acceptable in lieu of GAAP prepared financial
statement? ........................................................................................................................................................ 42
53. How will the CDFI Fund treat an audit that has an opinion other than “unqualified”? ......... 42
54. How will an Allocatee fulfill its reporting requirements as outlined in Section 6.5 of the
Allocation Agreement? ................................................................................................................................... 43
55. What is the QEI “Closeout Report”? .............................................................................................. 43
56. Are Allocatees that have yet to issue a QEI required to submit ILRs and TLRs? .................. 44
57. What if the Allocatee and the sub-Allocatee have differing fiscal year end dates? .............. 44
58. Will there be any penalties for late reporting? ............................................................................. 44
59. What happens when a Subsidiary Allocatee has completed the seven-year NMTC
compliance period? ........................................................................................................................................ 44
60. What happens after an Allocatee completes its seven-year compliance period after
issuance of its last QEI? ................................................................................................................................ 45
E. CDFI Fund’s Information Mapping System ............................................................................................ 46
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 6
61. Can Allocatees rely on data from the CDFI Fund’s Information Mapping System (CIMS) for
the purpose of determining whether transactions are located in NMTC eligible low-income
communities? ................................................................................................................................................... 46
62. CIMS indicated that an address is not valid. How do I geocode an address that CIMS
cannot validate? .............................................................................................................................................. 46
63. Why do I get a different census tract location when I map the same address at a later date?
How will the CDFI Fund handle such differences? ................................................................................... 48
64. What data should be used to determine qualifying census tracts? ......................................... 48
F. CDE Certification ......................................................................................................................................... 50
65. Am I required to notify the CDFI Fund if a certified CDE has been dissolved? ...................... 50
66. How will an Allocatee maintain their CDE Certification status?................................................ 50
67. Does the CDE certification have an expiration date? .................................................................. 50
68. If a CDE loses its status as a CDE, will it be offered an opportunity for a cure period? ...... 51
G. Amendments ............................................................................................................................................... 52
69. Can an Allocatee request an amendment to its Allocation Agreement? ................................. 52
70. How can Allocatees add additional Subsidiary Allocatees to Section 3.2? ............................ 52
71. Can a CDE amend the Service Area stipulated in the Allocation Agreement? ....................... 53
H. Controlling Entities, Control of Allocatees and Subsidiary Allocatees. ........................................... 55
72. Are New Markets Tax Credit Program (NMTC) allocation recipients (Allocatees) permitted
to transfer their tax credit authority to other entities? ............................................................................. 55
73. How does the CDFI Fund define “Control,” for the purpose of demonstrating that an
Allocatee controls a subsidiary entity? ....................................................................................................... 55
74. If an Allocatee designated a Controlling Entity in its NMTC Allocation Application for the
purpose of demonstrating a track record, is the Controlling Entity required to maintain control
during the entire NMTC term of the Allocation Agreement? ................................................................... 56
75. Can a Controlling Entity be removed from an Allocation Agreement? .................................... 56
76. Procedures for requesting an amendment to remove the designated Controlling Entity? . 57
77. What are the requirements to be a Controlling Entity? .............................................................. 57
78. What does the CDFI Fund deem to be a “controlling influence over the management
policies” of another entity? ........................................................................................................................... 58
79. What does the CDFI Fund deem to be a “controlling influence over the investment
decisions” of another entity? ........................................................................................................................ 59
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 7
80. Will the CDFI Fund review operating agreements submitted by Allocatees to determine
whether they “control” Subsidiary Allocatees? ........................................................................................ 60
81. How does the CDFI Fund view investor rights to remove the Allocatee as the managing
entity of the Subsidiary Allocatee? .............................................................................................................. 61
I. Contacting the CDFI Fund’s Compliance Unit ........................................................................................ 62
82. How to contact the CDFI Fund’s Office of Compliance Monitoring and Evaluation?............ 62
J. Additional Guidance for COVID-19 Pandemic. ....................................................................................... 63
83. Can an Allocatee request an amendment to Schedule 1- Authorized Uses of NMTC of the
Allocation Agreement in response to the COVID-19 pandemic? ............................................................ 63
84. How will the CDFI Fund evaluate changes in an Allocatee’s business strategy in response
to the COVID-19 pandemic in terms of compliance with the Allocation Agreement and future
eligibility for the NMTC Program? ................................................................................................................ 63
85. What relief will the CDFI Fund provide for compliance with Section 3.3(j) in light of the
COVID-19 pandemic? ...................................................................................................................................... 64
NOTE: This document is intended to serve as public guidance for the subject matter
contained herein. The CDFI Fund reserves the right, however, to modify this guidance at
any time upon public notice. The examples contained in this guidance are not exhaustive
in nature and the CDFI Fund has the discretion to consider additional factors when
determining matters of compliance.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 8
A. General Compliance Questions
1. Does the CDFI Fund impose an annual monitoring/compliance fee?
As of the publication date of this document, the Community Development Financial Institutions (CDFI)
Fund has elected not to collect the annual monitoring/compliance fee outlined in Section 7.1 of the
Allocation Agreement. If the CDFI Fund elects to impose a monitoring/compliance fee, it will provide
advance notification to all Allocatees.
2. Will the CDFI Fund share data submitted by Allocatees with the Internal Revenue
Service (IRS) or any other entity or agency?
The CDFI Fund will, consistent with applicable law (including Internal Revenue Code (IRC) § 6103), make
Allocatee reports available for public inspection after deleting any materials necessary to protect privacy
or proprietary interests. The IRS will be given access to the CDFI Fund’s data to facilitate IRS’s
compliance program for IRC Section 45D.
3. When is compliance measured and for what period of time will the CDFI Fund
measure compliance?
In general, compliance for most items under section 3.2 of the Allocation Agreement is triggered by the
earlier of two events: 1) a specific date found in Allocation Agreement subsections 3.2 or 2) when an
Allocatee has made 100% of its Qualified Low-Income Community Investments (QLICIs).
Once compliance is triggered by either event noted above, the CDFI Fund will begin its annual
compliance checks, and will continue such checks until Qualified Equity Investments (QEIs) are
redeemed. Though the CDFI Fund will not complete formal compliance checks prior to the triggering
event nor after QEI redemptions begin to occur, Allocatees are expected at all times to comply with the
requirements set forth in the Allocation Agreement. Allocatees that fail to do so could, at a minimum, be
found in default of the Allocation Agreement.
Notwithstanding the above, the CDFI Fund recognizes that the IRS regulations allow Allocatees up to one
year to invest QEI proceeds into QLICIs, and also allow Allocatees to retain principal repayments of
QLICIs for a prescribed period before being required to reinvest these proceeds into other QLICIs. The
CDFI Fund will take these allowances under consideration when conducting its compliance checks.
Example 1: An Allocatee receives a $100 million allocation, issues $100 million in QEIs and
closes $95 million in QLICIs in fiscal year 2012. The Allocatee retains $5 million for administrative
costs and did not close any additional QLICIs after December 31, 2012. The CDFI Fund would
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 9
conduct its initial compliance check on the $95 million in QLICIs and it will continue monitoring
compliance for six years thereafter.
Example 2: An Allocatee with a September 30
th
, fiscal year end receives a $100 million allocation,
issues a $70 million QEI and closes a $65 million QLICI in fiscal year 2012 and retains $5 million
for administrative costs. The Allocatee does not issue any additional QEIs prior to the September
30, 2012, compliance trigger date. On September 30, 2012, the CDFI Fund would conduct its
initial compliance check on the $65 million QLICI and it will continue monitoring compliance for six
years thereafter.
In year five, the Allocatee receives an additional QEI of $25 million and fully invests those
proceeds in a new QLICI. The CDFI Fund would now conduct its compliance test on combined
QLICIs of $90 million until the 7
th
anniversary of the second QEI.
4. What happens if an Allocatee fails to meet the performance requirements outlined
in the Allocation Agreement?
Failure to meet the requirements, including those requirements articulated in Schedule 1, of the Allocation
Agreement are regarded as an Event of Default and therefore must be reported to the CDFI Fund as a
Material Event. (Please refer to Question 40 of this document for additional details on Material Events.)
Typically, the CDFI Fund provides a cure period of up to 90 days to remedy Events of Default. It is
incumbent on the Allocatee to report in a timely manner if it failed, or will fail, to meet any of the
requirements of the Allocation Agreement. Failure to report a Material Event in a timely manner could
impact an Allocatee’s ability to apply for or receive a future allocation.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 10
B. Allocation and QEI Tracking
5. How are allocation transfers and QEI reporting tracked in the AMIS environment?
As of May 25, 2018, the CDFI Fund transitioned Qualified Equity Investment (QEI) reporting from the
Allocation Tracking System (ATS) to the Awards Management Information System (AMIS). AMIS displays
a dedicated section titled “Allocations” for QEI reporting which provides enhanced functionality, reliability,
reporting capabilities and data transparency. All historical data entered into ATS has been transferred to
the AMIS environment. For new QEIs, AMIS will require Allocatees to enter data to differentiate between
the tax credit equity investor and the debt provider in a leveraged structure; identify each investor’s
investment amount; and identify the relationship between the Allocatee and the investor.
To facilitate reporting, a user guide is available on the CDFI Fund’s website.
6. Can a Community Development Entity (CDE) that has received an allocation
provide a QEI to another Allocatee?
No. The IRS regulations specifically prohibit an Allocatee that has received an allocation from directly
providing a QEI to another Allocatee. Additionally, an entity that invests in an Allocatee and subsequently
receives its own allocation cannot provide QEIs to other Allocatees after the effective date of its Allocation
Agreement.
For example, in June 2010, ABC Bank provided a QEI to Main Street CDE, a calendar year (CY) 2007
NMTC Allocatee. Subsequently, ABC Bank applied for and was awarded a CY 2011 NMTC allocation.
ABC Bank would not be allowed to provide additional QEIs to Main Street CDE or any other Allocatee on
or after the date of their award notification. This rule, however, would not preclude an affiliate of ABC
Bank from providing QEIs to Main Street CDE, provided the affiliate has not received an allocation or sub-
allocation of NMTCs.
7. Can an Allocatee amend a finalized QEI in AMIS?
No. Only the CDFI Fund may amend a finalized QEI. All amendment requests must be submitted in
writing by the Authorized Representative. QEI Amendments can be submitted via the CDFI Fund’s
Awards Management Information System (AMIS) through a Service Request. The Service Request
should reference the following:
1. The Allocatee’s name
2. QEI Identifier
3. The Allocatee’s Award Control Number
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 11
4. The specific changes needed to be made.
The CDFI Fund will typically process QEI amendment requests in five business days. However, more
complex situations can extend the time necessary to implement corrections. To avoid delays, it is
imperative that Allocatees review all QEI entries for accuracy prior to finalizing them.
8. I did not receive the QEI notification email. How do I obtain a copy for our
records?
All future email notifications will be sent to the Authorized Representative indicated in the organization’s
account in AMIS and stored in the Allocations section in AMIS. If the Authorized Representative has
changed or his/her email address has changed, please refer to the CDFI Fund’s website for guidance on
how to update this information. If you did not receive the QEI notification email after finalizing a QEI,
please submit an inquiry via an AMIS Service Request. Of note, AMIS allows Allocatees to add a
secondary contact to receive the QEI notifications.
9. My CDE is 100% owned by an S Corporation that has numerous shareholders.
Will AMIS require the user to enter each of the shareholders and their respective
information as NMTC claimants?
If the individual shareholders claim the tax credit on their individual tax returns, each individual
shareholder should be listed as a tax claimant in AMIS and the required investor information (i.e., name,
and investor type) should be completed. This is necessary to assist the IRS in comparing AMIS entries
with IRS Form 8874 (New Markets Credit) that it receives from taxpayers.
The CDFI Fund does not collect Taxpayer Identification Number (TIN) if “Individual” is selected as the
Investor Type.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 12
C. Allocation Agreement
NOTE: The examples below describe the approach the CDFI Fund is taking with respect
to monitoring compliance with Section 3.2 and 3.3 of the Allocation Agreement. The IRS
may adopt a different approach with respect to monitoring compliance with IRC Section
45D.
10. Which activities are permissible with respect to financial counseling and other
services (FCOS)?
FCOS is “advice” provided by the CDE relating to the organization or operation of a trade or business,
including non-profit organizations. Possible FCOS activities include, but are not limited to, business plan
development, assistance with business financials, assistance in securing financing, and assistance with
general business operations. FCOS does not include “advice” provided to individuals, such as
homeownership counseling or consumer counseling, that does not pertain to the operation of a trade or
business.
The FCOS activity may be carried out by the CDE directly, or through third party agreements managed by
the CDE. To the extent QEI proceeds are dedicated for FCOS, a portion of the monies must be spent,
and counseling services provided, within one year of receipt of the QEI in order to qualify as a QLICI.
Any questions regarding the eligibility of FCOS activities should be addressed to the IRS.
11. How can a CDE take advantage of the provisions outlined in Treasury Directive
(TD) 9600?
To encourage investments in non-real estate businesses for working capital and equipment, the IRS
issued final regulations (TD 9600) that modify the reinvestment requirements under the NMTC Program. If
a CDE is availing itself of the IRS provisions for NMTC Non-Real Estate Investments (TD 9600), it must
first designate the equity investment as a Non-Real Estate QEI in AMIS. The revised regulations,
provided in TD 9600, allow a CDE that makes a QLICI in Non-Real Estate Qualified Active Low-Income
Business (QALICB) to invest certain returns of capital from those investments in unrelated certified CDFIs
that are also CDEs at various points during the seven-year credit period. Both the registration of the QEI
and amount deposited in CDFIs should be reported in AMIS – see screenshot below:
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 13
The regulations outlined in TD 9600 are effective for equity investments in CDEs made on or after
September 28, 2012, the date that TD 9600 was published in the Federal Register by the IRS.
Allocatees are responsible for ensuring compliance with the specific requirements of TD 9600 in order to
avail themselves of those provisions. In particular, be aware that under TD 9600 the purpose of the
capital or equity investment in, or loan to, the Non-Real QALICB must not be connected to the
development, management, or leasing of real estate. Development of real estate includes construction of
new facilities and rehabilitation/enhancement of existing facilities. A CDE’s compliance with the provisions
of TD 9600 will ultimately be determined by the IRS.
Additional guidance on TD 9600 can be found on the CDFI Fund’s website.
12. What is the definition of Non-Real Estate QALICB for purposes of TD 9600?
Under TD 9600, a non-real estate qualified active low-income community business is any business whose
predominant business activity (measured by more than 50% of the business’ gross income) does not
include the development (including construction of new facilities and rehabilitation/enhancement of
existing facilities), management, or leasing of real estate. The purpose of the capital or equity investment
in, or loan to, the Non-Real QALICB must not be connected to the development, management, or leasing
of real estate.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 14
13. What is the definition of Real Estate QALICB versus Non-Real Estate QALICB for
purposes of the Allocation Agreement?
For allocations received in and after the CY 2014 round, the CDFI Fund eliminated the distinction
between Real Estate QALICB and Non-Real Estate QALICB. These are no longer defined terms in the
Allocation Agreement. Thus, Allocatees can make investments in, or loans to any QALICB, as long as this
is designated as an eligible activity in its Allocation Agreement. “Real Estate Activities” was added to the
Allocation Agreement as a new defined term. “Real Estate Activities” is the development (including
construction of new facilities or rehabilitation/enhancement of existing facilities), acquisition, management
or leasing of real estate by a business.
To align with TD 9600, the CDFI Fund defined “Real Estate QALICB” for CY 2013 and CY 2012, as any
QALICB whose predominant business activity (i.e., activity that generates more than 50% of the business’
gross income) includes the development, management, or leasing of real estate. The CDFI Fund defines
a Non-Real Estate QALICB as any QALICB that does not satisfy the definition of a Real Estate QALICB.
Loans or investments made to a special purpose entity that is Controlled by or under common Control
with a Non-Real Estate QALICB, and that was set up specifically to lease the property back to the Non-
Real Estate QALICB such that the Non-Real Estate QALICB is the principal user of the property, must be
classified as investments in a Real Estate QALICB.
Please note, the definitions as described above, pertain solely to the Allocation Agreement and do not
affect eligibility for TD 9600.
14. My CDE has received principal repayments on a QLICI and will reinvest those
proceeds in a new QLICI. Is the new QLICI subject to the same requirements
found in Section 3.2 of the Allocation Agreement (i.e., Types of QLICIs, Service
Area, etc.)?
Yes. To the extent a CDE reinvests repayments of principal as new QLICIs, the CDFI Fund will check
compliance for all reported QLICIs against the requirements specified in the Allocation Agreement. For
example, if an Allocatee is required to invest 85% of its QLICIs in its approved service area, the CDFI
Fund will measure compliance against all reported QLICIs that are currently outstanding, whether original
investments or reinvestments, to ensure that 85% of its QLICIs are in the approved service area.
15. Is the six-month cure period found under § 1.45D-1(e)(6) available to correct an
Allocatee’s or Subsidiary Allocatee’s failure to invest substantially all of its QEI
proceeds?
Yes. The six-month cure period found under § 1.45D-1(e)(6) is available to correct an Allocatee or
Subsidiary Allocatee’s failure to invest substantially all of its QEI proceeds in QLICIs within the 12-month
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 15
period as required by § 1.45D-1(c)(5)(iv). However, the six-month cure period is not automatically added
to the 12-month period. As the rule states, the six-month cure period begins on the date the CDE
becomes aware (or reasonably should have become aware) of the failure to invest substantially all of the
QEI proceeds in a QLICI within the 12-month period.
16. If an Allocatee is providing loans to or investments in other CDEs, how will the
CDFI Fund monitor compliance with the provisions of Section 3.2? Will the CDFI
Fund only consider the initial QLICI into the other CDEs, or will the CDFI Fund
look through the CDEs to the ultimate QALICB recipients?
The CDFI Fund will look through to the ultimate QALICB recipient for the purpose of monitoring
compliance with specific provisions of Section 3.2 of the Allocation Agreement, including compliance with
the service area requirement, the better rates and terms requirement, and the areas of higher distress
requirement.
Allocatees are required to provide the CDFI Fund with transaction level data via AMIS, even if an
Allocatee uses multiple layers of CDEs to execute its QLICIs. For example, to determine compliance with
the service area provision in Section 3.2 for an Allocatee that invests in other CDEs, the Allocatee will
submit census tract information of the ultimate QALICB recipient that receives the QLICI proceeds to
determine if the QALICB recipient was located in the service area as defined in Section 3.2. The location
of the CDE that received the initial loan or investment from the Allocatee will not be considered. As such,
the Allocatee should have appropriate procedures in place to obtain the necessary reporting data
pertaining to the ultimate QALICB recipient.
In measuring compliance with the better rates and terms provisions of the Allocation Agreement (Section
3.2 (f)), both the initial loan/investment to the CDE and ultimate QLICI to the QALICB, must meet the
requirements of the Allocation Agreement.
17. How does the CDFI Fund view an Allocatee’s use of QLICIs to finance housing
units if Section 3.2(k) of the Allocation Agreement is listed as “Not Applicable”?
All Allocatees may use their QLICIs to develop/rehabilitate housing units so long as the project(s) fall
within one or more of the Qualified Low-Income Community Investments listed in section 3.2(a) of the
Allocation Agreement and otherwise meet the terms of the Allocation Agreement. For the CY 2015-2016
Round and prior rounds, section 3.2(k) of the Allocation Agreement only applies to an Allocatee if it is
marked as “Applicable” in that Allocatee’s Allocation Agreement. In cases where section 3.2(k) is marked
“Not Applicable” in an Allocation Agreement it is the CDFI Fund’s preference that, if an Allocatee uses its
QLICIs to finance the development or rehabilitation of housing units, at least 20% of the aggregate
housing units financed are affordable housing units.
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Beginning with the CY 2017 Round, section 3.2(k) is marked as “Applicable” for all CY 2017 and later
round Allocation Agreements. Therefore, if an Allocatee in the CY2017 and subsequent rounds uses its
QLICIs to finance the development or rehabilitation of housing units, the Allocatee must ensure that at
least 20% of the aggregate housing units that the Allocatee financed are affordable housing units.
In general, housing units includes manufactured housing and manufactured housing lots, permanent
housing for disabled homeless persons, transitional housing, single-room occupancy housing, and group
homes. Housing also includes elder cottage housing opportunity (ECHO) units that are small,
freestanding, barrier-free, energy-efficient, removable, and designed to be installed adjacent to existing
single-family dwellings. Housing does not include shelters, including those for disaster victims, or facilities
such as nursing homes, convalescent homes, hospitals, residential treatment facilities, correctional
facilities, halfway houses, housing for students, or dormitories.
18. How does the CDFI Fund define “affordable housing” for the purpose of meeting
Section 3.2(k) of the Allocation Agreement?
1) Rental Housing: An Allocatee that finances rental housing units will satisfy the requirements of Section
3.2(k) if the following criteria are met:
a) 20% or more of total rental units financed with QLICIs, throughout the seven-year NMTC
compliance period, are both (i) Rent Restricted (the maximum monthly rent should not exceed
30% of the adjusted income of a family whose annual income equals 80% of the median income
for the area, as determined by HUD, with adjustments for the number of bedrooms in the unit)
and (ii) occupied by individuals whose
family income calculated in accordance with the U.S.
Department of Housing and Urban Development (HUD) Handbook 4350.3 REV-1 (or subsequent
versions), is less than or equal to 80% of the area median family income as determined and
adjusted annually by HUD.
Tenants should be certified as of the later of the date the QLICI is made or at move-in. Units occupied by
nonqualified student households (as determined under Low-Income Housing Tax Credit (LIHTC)
guidelines) will not qualify as affordable units.
For QLICIs funded with pre-CY 2018 NMTC allocations, Allocatees must document maintenance of the
Rent Restrictions for the seven-year NMTC compliance period by certifying the initial household income
of the initial qualifying tenant and documenting reasonable attempts to ensure that each subsequent
tenant occupying the property during the seven-year NMTC compliance period meets the income
qualifications. Whether adequate reasonable attempts were made to comply with this provision will be
determined by the CDFI Fund based on the specific circumstances of the property and factors including
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but not limited to the size and location of the project, lease-up strategy, tenant turnover rates, and market
conditions.
For QLICIs funded with CY 2018 NMTC allocation and later rounds, Allocatees must document
maintenance of the Rent Restrictions for the seven-year NMTC compliance period by certifying the initial
household income of the initial qualifying tenant and each subsequent qualifying tenant occupying the
property during the seven-year NMTC compliance period. QLICIs funded with CY 2018 NMTC allocation
and later rounds must adhere strictly to this guidance.
2) For-Sale Housing: An Allocatee that finances for-sale housing units will satisfy the requirements of
Section 3.2(k) if 20% or more of the total for-sale housing units financed are:
a) purchased and occupied by Low Income Persons whose household income is 80% or less of
the area’s median family income as determined and adjusted annually by HUD at the time the
units are sold to the homebuyer; and
b) occupied by Low Income Persons meeting the requisite Debt-To-Income Ratio requirement
for home loans insured by the Federal Housing Administration (FHA) at the time the units are
sold to the homebuyer.
Alternatively, in the event that an Allocatee cannot document that a homebuyer meets the
stated Debt-To-Income Ratio established by the FHA, the Allocatee must be able to
substantiate that the purchase price of the home does not exceed 95% of the median
purchase price for the area as used in the HOME Investment Partnership Program and as
determined by HUD and the applicable participating jurisdiction for the year in which the
home is purchased. The purchase price limits, as determined annually by HUD, can be found
on the HUD website.
For all for-sale housing, it is incumbent on the Allocatee to have processes in place to ensure that the
homebuyer has an ability to: 1) repay the loan according to the terms of the loan, and 2) meet their other
major financial obligations and basic expenses.
19. What is the “substantial rehabilitation” threshold for purposes of meeting Section
3.3(h) of the Allocation Agreement?
In order to meet the substantial rehabilitation threshold, a CDE must show that for each building located
on such property, the cost basis (as defined in 26 USC § 1012) of any improvements made during any
24-month period that includes any portion of the taxable year in which the QLICI is made, equals or
exceeds 25% of the adjusted basis (as defined in 26 USC § 1011(a)) of the building with respect to which
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 18
the improvements are made as of the beginning of the applicable 24 month period. In essence, each
building on the property should meet the substantial rehabilitation threshold.
In the event no substantial rehabilitation occurred, it is the CDFI Fund’s expectation that an operating
company that Controls or is under common Control with a QALICB whose principal business activity is
the rental to others of real property must, as soon as it is feasible, occupy and be the primary user of the
property in order for the Allocatee to be deemed in compliance with 3.3h.
20. How does the CDFI Fund evaluate 3.3(h)(iv) of the Allocation Agreement
regarding the exception for acquisition costs in connection with new
construction in cases where the QALICB’s principal business activity is the rental
to others of real property?
A QALICB whose principal business activity is the rental to others of real property can meet the exception
outlined in Section 3.3(h)(iv) of the Allocation Agreement, provided that the construction cost is greater
than or equal to 25% of the acquisition cost.
21. How does the CDFI Fund measure “innovative investments” for the purpose of
meeting Section 3.2(l) of the Allocation Agreement?
Consistent with the other provisions of section 3.2, compliance for “innovative investments” is triggered by
the earlier of two events: 1) a specific date found in section 3.2 of the Allocation Agreement, or 2) when
an Allocatee has closed 100% of its QLICIs. An underlying objective of “innovative investments” is to
encourage Allocatees to make QLICIs into operating business through the provision of short-term or small
dollar investments than the typical NMTC investments. As such, the CDFI Fund will allow a transaction to
meet multiple categories of innovative investment. For example, a QLICI of $1.5 million with a term of 50
months that financed working capital would satisfy the criteria for small dollar QLICIs, short-term QLICIs
and financing of Non-Real Estate Activities.
The criteria for “innovative investments” are specific to the applicable allocation round. For example, in
the CY 2013 round, “innovative investments” included investments in States or U.S. Island Areas that
have received fewer dollars of QLICIs in proportion to their statewide populations residing in Low-Income
Communities, including Alabama, Arkansas, Florida, Georgia, Idaho, Kansas, Nebraska, Nevada,
Tennessee, Texas, Puerto Rico, American Samoa, Guam, Northern Mariana Islands, and US Virgin
Islands. In the CY 2014 round, “innovative investments” for underserved States or U.S. Island Areas did
not include the state of Arkansas as it was supplanted by West Virginia.
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22. How does the CDFI Fund measure “small dollar QLICIs” in meeting Section 3.2(l)
of the Allocation Agreement?
A CDE making a small dollar QLICI in a QALICB will satisfy the innovative investments requirement if the
following criteria are met:
(1) The QALICB has not received a QLICI in any amount within the past 24 months; or
(2) The QALICB has received QLICIs within the past 24 months which when combined with the
CDE’s QLICI will not exceed the applicable maximum small dollar investment limit.
The applicable maximum small dollar QLICI limit is the amount stated in the Application submitted related
to the Allocation under which the CDE is making the small dollar QLICI. However, if the QALICB has
received previous QLICIs within the past 24 months, the applicable maximum small dollar QLICI limit is
the amount stated in the Application for the Allocation under which the first QLICI to that QALICB within
that 24-month period was made.
If a CDE receives principal repayments on a small dollar QLICI from the QALICB, that CDE or another
CDE may make additional QLICIs to that QALICB provided that the total outstanding QLICI(s) to the
QALICB do not exceed the applicable maximum small dollar QLICI limit.
Example #1: Applicable maximum small dollar investment limit
CDE 1 makes a $1M small dollar investment in a QALICB in January 2018 using a CY 2017 Allocation
(maximum small dollar limit $2M). CDE 2 has a CY 2018 Allocation under which the maximum small
dollar investment limit in the CY 2018 Application is $4M. However, until after January 2020, CDE 2 is
restricted by CDE 1’s previous QLICI and therefore cannot get credit for a small dollar investment under
3.2(l) of their Allocation Agreement for any QLICI(s) to the QALICB that would exceed a total of $2M
outstanding. After January 2020 (expiration of 24-month period), assuming CDE #1’s $1M small dollar
investment in January 2018 was the only previous QLICI in that QALICB, CDE 2 can make QLICI(s) up to
$4M in the QALICB.
Example #2: Sample permissible transactions (listing is not exhaustive of all permissible transactions)
CDE 1 makes a small dollar investment in January 2016 in QALICB of $1M using a CY 2015 Allocation,
the maximum small dollar investment limit in the CY 2015 Application was $2M. All of the following
transactions will satisfy the innovative investment requirements of 3.2(l):
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• CDE 1 can make other small dollar investments in that same QALICB anytime through January
2018 of up to a total of $1M without exceeding the CY 2015 applicable maximum small dollar
investment limit ($2M), or
• CDE 2 can make other small dollar investments in that same QALICB anytime through January
2018 of up to a total of $1M without exceeding the CY 2015 applicable maximum small dollar
investment limit ($2M), or
• CDE 1 can make other small dollar investments into the QALICB after January 2018 up the
applicable maximum small dollar investment limit in the Application for the Allocation under which
CDE 1 is making the small dollar QLICI or
• CDE 2 can make other small dollar investments into the QALICB after January 2018 up the
applicable maximum small dollar investment limit in the Application for the Allocation under which
CDE 2 is making the small dollar QLICI.
CDEs are expected to monitor to ensure that the QALICB does not exceed the applicable maximum small
dollar QLICI limit within a 24-month period. If a subsequent CDE (“CDE 2”) makes a small dollar QLICI
into a QALICB that causes the QALICB’s total QLICIs within a 24-month period to exceed the applicable
maximum small dollar investment limit for the previous QLICI in that QALICB; CDE 2 cannot receive
innovative investment credit for the QLICI even if it otherwise satisfies the requirements.
23. If An Allocatee commits to provide QLICIs for non-Real Estate Activities as an
innovative investment under Section 3.2(l) of the Allocation Agreement, can a
financial note financing both Real Estate and non-Real Estate Activities count
toward this commitment?
No. To be compliant with the non-Real Estate Activities provision of Section 3.2(l), all QLICIs to the
project must be used entirely for non-Real Estate Activities, must be supported by documentation that its
uses are designated for non-Real Estate Activities and must be recorded in the TLR with a “purpose” of
“Non-Real Estate Business”, “Non- Real Estate Microenterprise” or “Other.”
For example, if the Applicant provides two financial notes (i.e., Note A and Note B) to a QALICB and all of
Note A finances non-Real Estate Activities and a portion of Note B is financing Real Estate Activities, then
no portion of the Note A or Note B to that QALICB may be counted towards its commitment for non-Real
Estate innovative investments.
With respect to multi-CDE transactions, the financing activities of other CDEs are not considered in the
Allocatee’s commitment to Non-Real Estate Activities. As a result, in such transactions, other CDEs may
provide financing for Real Estate Activities.
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24. My CDE is making several disbursements related to a QLICI to a project over a
set period. At the time of the initial QLICI disbursement, the project was deemed
to be in an eligible NMTC census tract. Will future disbursements connected to
the QLICI under the project qualify if the tract is later deemed not to be an eligible
NMTC census tract?
Yes. The CDFI Fund would consider a QLICI to be made within a qualifying census tract as long as the
census tract qualified at the time the QLICI is closed, and an initial disbursement related to the QLICI is
made (meaning an investment for which the Allocatee has distributed proceeds from the QLICI to the
QALICB and/or to a disbursement/escrow account for future draws as reflected in the QLICI
documents).
The Allocatee must maintain relevant maps from the CDFI Information Mapping System (CIMS) to
demonstrate eligibility at the time of the initial disbursement of the QLICI and maintain relevant
documents to demonstrate that follow-on disbursements are from the same QLICI and are directly tied to
the original project at the same address.
25. If an Allocatee elects to transfer allocations to a Subsidiary Allocatee (i.e., a
Subsidiary CDE listed in Section 3.2 of its Allocation Agreement), will the CDFI
Fund monitor compliance with Section 3.2 separately by each subsidiary or on a
consolidated basis for all Subsidiary Allocatees that are parties to the Allocation
Agreement?
The CDFI Fund will monitor compliance on a consolidated basis for the total allocation amount. For
example, if ABC Allocatee receives a $1 million allocation and is required to invest 100% of its QEIs as
QLICIs, and 75% of its QLICIs in areas of severe economic distress, then ABC Allocatee must invest at
least $750,000 into areas of severe economic distress. If ABC Allocatee sub-allocates $500,000 of its
allocation to each of two Subsidiary Allocatees, each Subsidiary Allocatee does not have to separately
invest 75% of its $500,000 sub-allocation amount into areas of severe economic distress. It would be
permissible, for example, for one Subsidiary Allocatee to invest $500,000 into areas of severe economic
distress and the other to only invest $250,000 in such areas. Provided that the total dollar amount of
QLICIs invested in such areas meets or exceeds $750,000 on a consolidated basis, the Allocatee and its
Subsidiary Allocatees would be deemed in compliance with the Allocation Agreement.
26. How does the “joint and several liability” provision of the Allocation Agreement
apply to Allocatees that intend to sub-allocate tax credit authority to Subsidiary
Allocatees?
As stated in the Allocation Agreement, the Allocatee and each of its Subsidiary Allocatees are jointly and
severally liable for any event of default under Section 8.1 whether the Allocatee or any of its Subsidiary
Allocatees incurs the default. If such an event of default occurs, the CDFI Fund may impose remedies
jointly or severally upon the Allocatee and its Subsidiary Allocatees, except that the CDFI Fund will not
terminate or reallocate any unused portion of the NMTC allocation with respect to any investment
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 22
commitments related to a NMTC allocation made to a non-defaulting Allocatee or Subsidiary Allocatee, as
determined by the CDFI Fund.
27. How will the CDFI Fund monitor compliance with the unrelated entity requirement
in Section 3.2(d) of the Allocation Agreement?
Section 3.2(d) requires certain Allocatees to meet the IRS’s “substantially all” requirement by making
investments in entities that are unrelated to the Allocatee. Allocatees are required to indicate in the
Transaction Level Report (TLR) whether each QLICI made was to a related or unrelated entity. This test
is measured on an aggregate QEI basis.
Beginning in the CY 2015-2016 NMTC Application Round, an Allocatee that has committed to invest in
Unrelated Entities will be in compliance with its Allocation Agreement only if persons Unrelated to the
Allocatee and Subsidiary Allocatee (if the Subsidiary Allocatee makes the QLICI) will hold a majority
equity interest in the QALICB after a QEI is made in the Allocatee or Subsidiary Allocatee, but before the
Allocatee or Subsidiary Allocatee uses the proceeds of that QEI to make its initial QLICI in the QALICB.
The Allocatee must determine whether such persons are related to the Allocatee and Subsidiary
Allocatee (within the meaning of IRC §267(b) and §707(b)(1)) in consultation with its own tax advisors
and document such an assessment. The CDFI Fund will assess compliance with the Unrelated Entities
requirement at the Allocatee and Subsidiary Allocatee level, if the Subsidiary Allocatee makes the QLICI.
This requirement applies to all QLICIs made with allocations awarded in the CY 2015-2016 round.
An Allocatee (awarded in and prior to the CY 2014 round) that has committed to invest in Unrelated
Entities will be in compliance with its Allocation Agreement only if persons unrelated to the Allocatee will
hold a majority equity interest (as defined in IRC §45D(f)(2)(B)), and as determined subsequent to the
receipt of a QEI, but prior to the Allocatee using the proceeds of that QEI to make the initial QLICI. The
Allocatee must determine whether such persons are related to the Allocatee (within the meaning of IRC
§267(b) and §707(b)(1)) in consultation with its own tax advisors. Furthermore, for such Allocatees, for all
QLICIs made on or after April 15, 2010, the CDFI Fund will assess compliance with the Unrelated Entities
requirement at the Allocatee or the Subsidiary Allocatee (if the Subsidiary Allocatee makes the QLICI)
level.
CDFI Fund may review any subsequent changes in QALICB, Allocatee CDE, or Subsidiary Allocatee
ownership resulting in common ownership between the Allocatee CDE (and Subsidiary Allocatee) and the
QALICB on a case-by-case basis to determine whether a principal purpose of a transaction or a planned
series of transactions is to achieve a result that is inconsistent with the purposes of this rule. The
requirement of Section 3.2(d) does not apply if an Allocatee becomes related to a business due to
financial difficulties of the business that were unforeseen at the time the QLICI was made to the business.
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28. Section 3.2(f) of my CDE’s Allocation Agreement states that “All of the
Allocatee’s QLICIs must (a) be equity or equity-equivalent financing, (b) have
interest rates that are “X” percent lower than either the prevailing market rates for
the particular product or lower than the Allocatee’s current offerings for the
particular product, or (c) satisfy at least five of the indicia of flexible or non-
traditional rates and terms, as listed in Section 3.2(f).” How can my CDE
demonstrate that it is satisfying this requirement?
The CDFI Fund generally monitors transactions on an investment-by-investment basis. Each QLICI made
with QEI proceeds must: (1) be an equity investment, equity equivalent financing, or a loan with an
interest rate that is at least “X” percent below a market comparable; or (2) have the corresponding
number of concessionary terms (e.g., higher loan to value ratio; reduced fees; non-traditional collateral;
etc.).
It is permissible for a CDE to combine separate QLICI transactions for the purposes of meeting this
requirement, provided that these transactions are part of a simultaneous closing and: 1) 50% of the dollar
value of the combined transactions is in the form of equity, equity equivalents, or the blended interest rate
is at least “X” percent below market (see example 1); or 2) at least 50% of the dollar value of the
combined transactions have concessionary terms (see example 2).
Example 1: A CDE finances a $1 million transaction by providing two notes: Note A consisting of
$750,000 market-rate loan and Note B consisting of $250,000 loan that may be purchased by the
QALICB or affiliate for a nominal rate after seven years. If the blended interest rate on these
combined products is “X” percent below the prevailing market rate, the CDE satisfies the
requirements of Section 3.2(f) provided these transactions are part of a simultaneous closing.
Example 2: A CDE finances a $1 million transaction by providing two notes: Note A consisting of
$500,000 market-rate loan with Note B consisting of $500,000 below market rate loan. If Note B
(consisting of 50% of the total transaction) has: a) an interest rate that is less than “X” percent
below market; b) a loan to value ratio more favorable than market; c) origination fees that are
lower than market; d) a debt service coverage that is lower than market; and e) interest-only
payments for seven years; then the CDE satisfies the requirements of Section 3.2(f).
Example 3: A CDE finances a $1 million transaction by providing Note A of $750,000 with a 4.0%
(market rate) interest rate and Note B of $250,000 with a 2.4% interest rate. With a combined
interest rate 3.6%, the CDE fails the requirements of Section 3.2(f) because less than 50% of the
blended product offering meets the 50% below-market interest rate requirement.
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Example 4: A CDE finances a $1 million transaction by providing Note A consisting of $800,000
market rate loan with QLICI B consisting of $200,000 equity investment. The combined
transaction has five concessionary features that include: a) interest rate that is less than “X”
percent below market; b) loan to value ratio more favorable than market; c) origination fees lower
than market; d) debt service coverage lower than market and e) interest-only payments for seven
years. The CDE meets the requirements of section 3.2(f).
29. Does an SBA designated HUB Zone qualify as an eligible area of higher distress
and how does the CDFI Fund determine if a QLICI supports businesses that
obtain HUB Zone certification?
Depending on the allocation agreement, an SBA designated HUB Zone may qualify as an eligible area of
higher distress. For the CY 2005 – CY2022 allocation rounds, the project must be located in an SBA
designated HUB Zone and the QLICIs must support businesses that obtain HUB Zone certification from
the SBA.
For the purposes of compliance, the CDFI Fund will consider that an investment “supports” a HUB Zone
business if the QLICI meets one of the following criteria:
1. The QLICI is used to finance a QALICB that maintains an active HUB Zone business certification.
2. The QLICI is used to finance a QALICB where at least 50% of the dollar value of the contracts
and sub-contracts related to the development, management or leasing of the QALICB go to
businesses with active HUB Zone certifications.
3. The QLICI is used to finance a real estate QALICB where at least 50% of the rentable square
footage is leased to businesses with an active HUB Zone Certification.
When completing the areas of higher distress section in AMIS, Allocatees should respond to these criteria
based on the language found in its Allocation Agreement. Thus, Allocatees who received a CY 2005 –
CY2022 should only respond “Yes” to an SBA HUB Zone if both requirements are met as detailed in the
Allocation Agreement. For CY2023 and later allocatees, SBA designated HUB Zone is no longer
considered an area of higher distress.
30. How does an Allocatee document “better rates and terms” for its QLICIs and how
will the CDFI Fund determine compliance with the better rates and terms
requirement of the Allocation Agreement?
To document better rates and terms to a QALICB that would not otherwise obtain financing in the market,
the Allocatee may use documents from other financial institutions that demonstrate that: the QALICB did
not meet its financial underwriting criteria and the loan was not approved; or that the loan was approved
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 25
with certain conditions, rates and terms that would result in the project being economically unfeasible or
unsustainable.
If the Allocatee’s Controlling Entity, Affiliate(s) or QEI investor provides financial products similar to those
offered by the Allocatee (or Subsidiary Allocatee), the Allocatee may use the rates, terms and flexible
features (LTV, DSCR, etc.) of the non-NMTC product (for a similar project and similar borrower) as a
comparable for demonstrating that the QLICI meets the provisions of Section 3.2(f). Documentation may
include the underwriting memorandum, or project assessment reviewed and approved by the Allocatee's
investment committee. Such documentation should detail the rates, terms and flexible features of the
QLICI and document how non-NMTC rates, terms and features were adjusted for the NMTC product,
borrower and project.
If the Allocatee is basing its determination on market comparables, it must retain all documentation that
can demonstrate what the comparable market rate was at the time of closing the QLICI. For example, if
the CDE benchmarks its returns to a specified market indicator (e.g., 200 points over the 7-year Treasury
rate), then the Allocatee must retain documentation demonstrating: 1) what the market indicator was on
the day the transaction closed; and 2) that the interest rate offered by the Allocatee was sufficiently lower
than the comparable market offering.
The CDFI Fund will require a CDE to identify, in its TLR, whether a transaction met the requirements for
better rates and terms, as well as the applicable market comparable. The CDE must also maintain
supporting documentation in its files, should the CDFI Fund request them. As stated above,
documentation must reflect information relevant at the time the loan and/or investment was made.
31. What supporting documentation does an Allocatee need to retain in order to
demonstrate compliance with Section 3.2(h) - Targeted Distressed Communities
of the Allocation Agreement by investing in areas of higher distress? What
resources are available to determine if a census tract is in an approved Area of
Higher Distress?
In addition to CIMS, which provides Non-Metropolitan status, poverty rates, Median Family Income (MFI)
percentages and unemployment rates, the CDFI Fund provides several links on its website to assist
Allocatees.
When completing the areas of higher distress section in AMIS, Allocatees should respond to these criteria
based on the requirements found in its Allocation Agreement as only some of the criterion might be
applicable. Allocatees are advised to retain all relevant information in support of its decision to invest in
such areas. Supporting documentation for the areas of higher distress requirement may include:
statistical indices of economic distress such as poverty rates, MFI or unemployment rates at the census
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 26
tract level based upon the Census or American Communities Survey (ACS); materials from other
government programs (e.g., HUD Renewal Communities; EPA Brownfields) demonstrating the area
qualified for assistance under those programs; etc. Please visit the “Compliance Monitoring and
Evaluation” section on the CDFI Fund’s website for links to the following sites:
• Brownfield Sites
• SBA Designated HUB Zones
NOTE: Beginning with the CY 2006 round and thereafter, QLICIs made in HUB Zones
can only qualify as an area of higher distress to the extent that the QLICIs will support
businesses that obtain HUB Zone certification by the SBA. A listing of HUB Zone
Certified Firms is available from the SBA.
• Medically Underserved Areas (Department of Health and Human Services)
• Appalachian Regional Commission Distressed Counties
• Delta Regional Authority Distressed Counties and Parishes
• Food Desert
• Promise Zone
• Federal Emergency Management Agency (FEMA) Disaster Declaration Areas
NOTE: Eligible counties qualifying as Areas of Higher Distress are limited to those for
which the Federal Emergency Management Agency (FEMA) has (a) issued a “major
disaster declaration” and (b) made a determination that such County is eligible for both
“individual and public assistance,” regardless of whether specific categories of individual
and public assistance were conveyed in the disaster declaration.
• Impacted Coal Counties
• Base Realignment and Closure (BRAC) Sites
• Qualified Opportunity Zones
32. How will the CDFI Fund measure compliance with meeting the requirement of
Section 3.2(h) Targeted Distressed Communities for a QALICB with tangible
property in several census tracts?
The CDFI Fund will determine compliance with the “Targeted Distressed Communities” by aggregating
data at the QALICB level (e.g., the “project level” in AMIS). A QLICI into a QALICB with locations/assets
across multiple census tracts will be considered a QLICI into a specific Targeted Distressed Community
based on elements of the QALICB qualification criteria. For example, a QLICI into a QALICB that meets
the criteria below:
A. At least 50% of the total gross income is from the active conduct of a qualified business in the
eligible Targeted Distressed Community; and
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 27
B. At least 40% of the use of tangible property of the business is within the eligible Targeted
Distressed Community; and
C. At least 40% of the services performed by the business’ employees are performed in the eligible
Targeted Distressed Community.
Alternatively, the requirement under A is considered met if the requirement under B or C is met at 50%. In
instances where the QALICB has no employees, the CDE will satisfy requirement C by meeting the
tangible property criteria (requirement B) at 85%.
CDEs must demonstrate and maintain records showing that the QLICI meets the criteria for being in the
specific Targeted Distressed Community.
33. Is there a source to determine the unemployment rate for a census tract?
Yes. The CDFI Fund utilizes the Census or ACS data when determining if a census tract’s unemployment
rate is 1.5 or 1.25 times greater than the national average. Unemployment data for individual census
tracts can be found in CIMS and in the tabular data files.
For Allocatees using the 2011-2015 ACS data, the national unemployment rate for the 50 states, the
District of Columbia, Puerto Rico and Island Areas of the United States (American Samoa, Guam,
Northern Mariana Islands and the US Virgin Islands) is 8.3%.
For Allocatees using the 2016-2020 ACS data, the national unemployment rate for the 50 states, the
District of Columbia, Puerto Rico and Island Areas is 5.4%.
34. How does the CDFI Fund define activities that “support health related services”
as it relates to QLICIs in federally designated medically underserved areas?
In order for an investment to meet the criterion of being in an area of higher distress due to its location in
a medically underserved area (MUA), the QALICB must provide medical and health related services to
communities or populations in the MUA or increase access to medical and health related services in the
MUA. For the purposes of compliance, the CDFI Fund will consider a QLICI to support health related
services if the QLICI meets at least one of the following criteria:
1. The QLICI is used to finance a QALICB that provides direct medical and dental care, including
screenings, diagnostic and preventive care, or support services that contribute directly to that care
(e.g., referrals/case management, chronic disease management, transportation necessary for
adequate patient care, etc.).
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 28
2. The QLICI is used to finance a QALICB that provides non-medical care such us mental health
care, behavioral health care, substance abuse treatment (including assessments); physical and/or
occupational therapy; or support services that contribute directly to that care (e.g., referrals/case
management, chronic disease management, transportation necessary for adequate patient care,
etc.).
3. The QLICI is used to finance real estate activities where at least 50% of the rentable square footage
is leased to businesses providing health care services.
35. How will the CDFI Fund determine if a project is located in a Food Desert using
USDA’s Food Access Research Atlas?
Provided that a project is located in any of the four “Low Income and Low Access” criteria in the USDA’s
Food Access Research Atlas it would be deemed to be in an area of higher distress for the purposes of
the NMTC program, to the extent QLICI activities will increase access to healthy food. Please note,
USDA’s Food Access Research Atlas has two layers, 2019 and 2015. Allocatees can continue to use
2015 Food Desert layer until January 1, 2024. QLICIs closed on or after January 1, 2024 must use 2019
Food Desert layer to determine if a QALICB is located in a food desert.
36. How does the CDFI Fund define “other similar federal/state/local programs
targeted towards particularly economically distressed communities”?
The federal, state or local program designation should be for a specific geographic area, as opposed to a
population, and preferably where the federal, state or local government has designated the area for
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 29
redevelopment via legislation. The CDFI Fund will not pre-approve such programs. Allocatees are advised
to maintain all relevant documentation regarding these program designations in its files in the event the
CDFI Fund requests the documentation. Some examples of local areas that qualify for designation include:
• A local Tax Increment Financing (TIF) district;
• An area affected by a major plant or facility closing resulting in permanent layoffs;
• State Enterprise zone programs;
• Federally designated Promise Zones;
• Impacted Coal Counties;
• Base Realignment and Closure areas;
• An area of unusually high commercial vacancy rates;
• An area designated for the establishment of a regional technology/business center;
• Qualified Opportunity Zones
37. All Allocatees are required to invest substantially all (generally 85%) of their QEIs
as QLICIs. Section 3.2(j) of the Allocation Agreement may require an Allocatee to
invest an even higher percentage of QEIs (e.g., 95%; 100%) as QLICIs, based on
representations made by the Allocatee in its Allocation Application. How does the
CDFI Fund monitor compliance with Section 3.2(j) of the Allocation Agreement?
(A) All Allocatees must be able to demonstrate that they initially made QLICIs in the amount specified in
their Allocation Agreements.
Example: If an Allocatee received QEIs totaling $1 million and is required in its Allocation
Agreement to invest 100% of its QEIs as QLICIs, then it must be able to demonstrate that $1
million was initially invested as QLICIs.
(B) If an Allocatee subsequently receives repayments of principal from the QLICIs (e.g., amortizing loan
payments, unexpected return of principal), but consistent with applicable IRS regulations does not
reinvest these proceeds into other QLICIs, then the Allocatee will be treated as fulfilling the requirements
of Section 3.2(j) – notwithstanding the fact that the Allocatee is no longer “fully invested” at the initial
percentage.
Example: An Allocatee received QEIs totaling $1 million and is required in its Allocation
Agreement to invest 100% of its QEIs as QLICIs. It makes a loan of $1 million to a QALICB. In
accordance with the terms of the loan, the QALICB makes interest-only payments for two years,
and beginning in year three, some small payments of principal along with the interest payments.
At the end of the seven-year compliance period, the principal payments total less than $150,000
– or 15% of the $1 million loan to the QALICB. This amount of repayment is sufficiently minimal
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 30
as to not trigger reinvestment requirements under the IRS regulations. The Allocatee is in
compliance with 3.2(j).
(C) If an Allocatee subsequently receives repayments of principal from the QLICIs that are sufficient
enough to trigger reinvestment requirements under the IRS regulations, the Allocatee is required to
reinvest those proceeds in the same percentage as is required in the Allocation Agreement.
Example: An Allocatee received QEIs totaling $1 million and is required in its Allocation
Agreement to invest 100% of its QEIs as QLICIs. It makes a loan of $1 million to a QALICB. The
QALICB repays the entirety of the loan after two years. The Allocatee must reinvest the entire $1
million into a QLICI within the timeframes required under IRS regulations in order to be compliant
with Section 3.2(j).
NOTE: Consistent with IRS regulations regarding reinvestment, the CDFI Fund will not
require Allocatees to reinvest principal repayments that are received in year seven of the
compliance period.
38. Does Section 3.3(h) of my Allocation Agreement (prohibitions on real estate
refinancing), allow for the “take-out” of both debt and equity?
Yes. Section 3.3(h), which is applicable to all Allocatees that received allocations in the CY 2005 and later
rounds, generally prohibits Allocatees from using QEI proceeds to re-finance loans that were made to
businesses whose principal activity is the rental to others of real property. As provided for in Section
3.3(h), this general prohibition does not apply in the case of financing that is used to “take-out” debt or
equity that was used to finance certain eligible prior construction or acquisition activities.
39. Can takeout financing apply to an amortizing loan under Section 3.3(h)(v) of the
Allocation Agreement?
Yes. The intent of 3.3(h)(v) of the Allocation Agreement is to prevent the refinancing of permanent loans
solely to reduce financing costs to the QALICB. The structure (amortizing or interest-only) of the
underlying loan to be taken out is immaterial. The Allocatee must determine whether the take-out
financing for the underlying loan fits the intent of section 3.3(h)(v) – namely, to prevent the refinancing of
permanent loans.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 31
40. What is a Material Event?
The CDFI Fund defines a “Material Event” as an occurrence that affects an organization’s strategic
direction, mission, or business operation and, thereby, its status as a certified CDFI or CDE, and/or its
compliance with the terms and conditions of its Allocation Agreement.
If you have a question about whether something constitutes a Material Event, it is best to report the event
and allow the CDFI Fund to make that determination. The Material Event Form can be submitted via the
CDFI Fund’s AMIS as a document attachment to a Service Request.
The list below provides examples of Material Events that must be reported to the CDFI Fund within
30
calendar days (or as specified in the Allocation Agreement) of the occurrence of such event. Please note
that this list is not exhaustive:
a. An Event of Default, as that term is defined in Section 8.1 of the Allocation Agreement, or any
event which upon notice or lapse of time, or both, would constitute an Event of Default. This
includes failure to meet the requirements articulated in Schedule 1 and Section 3.2 of the
Allocation Agreement.
b. A merger, acquisition, or consolidation with another entity.
c. A change in the Controlling Entity identified in any Allocation Agreement or the Controlling Entity
no longer having any ownership or management interest in the Allocatee and/or no longer having
Control over the day-to-day management and operations (including investment decisions) of the
Allocatee.
d. A change in the organization’s legal status (e.g., dissolution or liquidation of the organization,
bankruptcy proceedings, receivership, etc.). The filing of any bankruptcy proceeding for the
appointment of a conservator for the Allocatee or any of its Affiliates, including the Controlling
Entity.
e. An event which materially changes the strategic direction, mission, or business of the
organization such that the organization no longer meets one or more CDFI or CDE certification
requirement (e.g., no longer providing loans or equity investments).
f. Changes in business strategy resulting in the Allocation being used in a manner that is generally
inconsistent with the business strategy (including, but not limited to, the proposed product
offerings, business type, fees and markets served) set forth in the Allocation Application.
g. An event that results in a change in control of the Allocatee or Subsidiary Allocatee.
h. A change in the composition of the organization’s Board of Directors (or other governing body)
such that the percentage of the governing or advisory board members representing the
organization’s Service Area is reduced below the required percentage.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 32
i. A proceeding, including an enforcement action, instituted against the Allocatee, Affiliate of an
Allocatee (including the Controlling Entity) by or before any court, governmental or administrative
body or agency, which proceeding, or its outcome could have a material adverse effect upon the
financial condition or business operations of the Allocatee.
j. A material adverse change in the condition, financial or otherwise, or operations of the Allocatee
that would impair the Allocatee’s ability to carry out the authorized uses of the allocation.
k. The debarment, suspension, exclusion or disqualification, by the Department of Treasury, or any
other Federal department or agency, of any individual or entity (or principal thereof) that received
any portion of the allocation in a procurement or non-procurement transaction, as defined in 31
C.F.R. §19.970.
l. The receipt of an Adverse Opinion, Qualified Opinion, or Disclaimer of Opinion in audited financial
statements of the Allocatee.
m. The failure of the Allocatee to issue QEIs equal to the total amount of its NMTC Allocation under
the Allocation Agreement within five (5) years of the Allocation Effective Date.
n. The failure of a QALICB or project that received QLICIs including but not limited to bankruptcy or
liquidation of a QALICB.
41. Section 6.9 of the Allocation Agreement requires CDEs to report Material Events
to the CDFI Fund within a specified number of days of the occurrence stated in
the Allocation Agreement. How do I report a Material Event to the CDFI Fund?
The occurrence of a Material Event must be reported through the Certification of Material Events form
that is now required to be submitted via a specific module within an AMIS Service Request. Allocatees
must use this form to identify the nature of the event. The CDFI Fund will then determine whether it is
material and affects the Allocatee’s ability to remain certified as a CDE or remain compliant with its
Allocation Agreement.
To assist users, the CDFI Fund has provided the following
tools on its website:
• Answers to commonly asked questions about Material Events.
• A user guide on how to submit a Certification of Material Events form.
• A video tutorial demonstrating how to submit a Certification of Material Events form.
For reference purposes only, a hardcopy of the Certification of Material Events form is also available on
the CDFI Fund’s website.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 33
42. What are the restrictions on the use of Bond Proceeds under the CDFI Bond
Guarantee Program in NMTC related activities?
Bond Proceeds may only be combined with NMTC derived equity (i.e., leveraged loan) to make a QEI in
a CDE or to refinance a QLICI at the beginning of the seven-year NMTC compliance period under the
following circumstances.
If an Eligible CDFI uses Bond Loan proceeds to finance a leveraged loan in a NMTC transaction, the
Eligible CDFI must provide either or both:
(1) Additional collateral in the form of Other Pledged Loans or Cash Collateral;
(2) A payment guarantee or similar credit enhancement; and/or
(3) Other assurances that are approved by Treasury.
The additional collateral, credit enhancement, and/or assurances must remain in force during the entire
seven-year NMTC compliance period and comply with the Secondary Loan Requirements.
Further, Bond Proceeds may not be used to refinance a leveraged loan during the seven-year NMTC
compliance period. Bond Proceeds may be used to refinance a QLICI after the seven-year NMTC
compliance period has ended so long as all other programmatic requirements are met.
Allocatees are encouraged to review the latest Notice of Guarantee Availability (NOGA) for additional
details.
43. What are the restrictions on the use of QLICI proceeds to repay or refinance any
debt or equity provider, or an Affiliate of any debt or equity provider, whose
capital was used, directly or indirectly, to fund a QEI?
Beginning with the CY 2015-2016 round, any debt or equity provider, or Affiliate of any debt or equity
provider, whose capital was used, directly or indirectly, to fund a QEI, may receive QLICI proceeds to
repay or refinance reasonable expenditures that are incurred by the debt or equity provider (or Affiliate)
and that are directly attributable to the qualified business of the QALICB only if the expenditures (i) were
incurred no more than 24 months prior to the date on which the QLICI transaction closes, or (ii) represent
no more than 5% of the total QLICI proceeds from the QEI. These rules only apply to a debt or equity
provider (or Affiliate) whose capital was used, directly or indirectly, to fund a QEI and do not apply to
QLICI proceeds used to repay or refinance a debt provider to the QALICB, if such debt provider (or its
Affiliate) has not itself incurred expenditures in connection with the business of the QALICB and did not
(directly or indirectly) fund a QEI.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 34
Reasonable expenditures are those incurred for a legitimate business purpose that occur during the
normal course of operation and must be similar in amount and scope when compared to expenditures by
a similar entity for a similar project under similar circumstances. Refinance includes transferring cash or
property directly or indirectly to the debt or equity provider or Affiliate of the debt or equity provider.
Of note, the IRS has not issued guidance on what costs can be repaid or refinanced with QLICI proceeds
under IRC §45D. Until such guidance is issued, the CDFI Fund supports the use of the above parameters
for transactions involving the repayment or refinancing of expenditures. CDEs must be able to document
that the past expenditure and the corresponding payment occurred within the specified timeframes.
The following example is offered for additional clarity.
Example:
Entity A is a debt or equity provider, or Affiliate of a debt or equity provider, whose capital was
used, directly or indirectly, to fund a QEI the proceeds that were used to make a QLICI. Within 24
months prior to the closing of the QLICI transaction, Entity A expends $1,000,000 to obtain
development permits, begin construction, acquire or install equipment, and acquire other property
related to the project; all of which represent reasonable expenditures directly attributable to the
qualified business of the QALICB, and for which Entity A has retained documentation (i.e.,
invoices, receipts, proof of payment, etc.). More than 24 months prior to the closing of the QLICI,
Entity A expends $700,000 of documented, reasonable expenditures directly attributable to the
qualified business of the QALICB. The QALICB receives $10,000,000 in total QLICIs from the
QEI funded by Entity A.
24-month provision
Out of $10,000,000 in total QLICIs, up to $1,000,000 of the QLICI proceeds can be used
to repay Entity A for the documented expenditures which occurred within 24 months of
the closing of the QLICI or repay an Affiliate of Entity A whose capital was used directly
or indirectly to fund the QEI (e.g., a leverage loan). The remaining QLICI proceeds
($9,000,000) could be used for additional expenditures such as operating needs, working
capital needs, equipment, additional construction expenditures, or other needs related to
the project or business of the QALICB.
OR
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 35
5% provision
The QALICB may use up to 5% of QLICI proceeds to reimburse documented, reasonable
expenditures that are directly attributable to the qualified business of the QALICB
regardless of when those expenditures were incurred. In this scenario, if the total QLICIs
to the QALICB were $10,000,000, the QALICB could use up to $500,000 to reimburse
Entity A for expenditures that were incurred at any time prior to the QLICI closing.
In summary, of the $1,700,000 in documented, reasonable expenditures directly attributable to the
qualified business of the QALICB incurred by Entity A, the QALICB may elect to either reimburse the full
amount of reasonable expenditures incurred within 24 months of the QLICI closing date ($1,000,000) or
reimburse up to 5% of the QLICI proceeds ($500,000) of reasonable expenditures incurred at any time
prior to the QLICI closing date. It may not do both.
44. How will the CDFI Fund monitor the restriction on the use of QLICI proceeds to
directly or indirectly repay or refinance any debt or equity provider, or Affiliate to
any debt or equity provider, whose capital was used, directly or indirectly, to fund
the QEI required under the CY 2015-2016 NMTC Application?
CDEs must include such covenants in financing agreements with QALICBs as may be necessary to
reflect this restriction. The agreements containing such covenants must be available for inspection by the
CDFI Fund. In addition, the CDE should collect information as may be necessary and maintain
documentation to trace the use of QLICI proceeds by the QALICB at the time the initial QLICI is made
and at least annually thereafter. In situations where the QALICB will directly or indirectly repay or
refinance any debt or equity provider or Affiliate of any debt or equity provider, whose capital was used,
directly or indirectly, to fund a QEI under the 24-month or 5% exception rules, the CDE should maintain
documentation demonstrating that the reimbursements can be directly traced to actual expenditures by
the debt or equity provider (or their Affiliate) and are directly attributable to the qualified business of the
QALICB. This documentation must be available for inspection by the CDFI Fund. Documentation to
support compliance with this restriction must be retained for the entire period of the QLICI in the QALICB
plus three years or the seven-year compliance period plus three years, whichever is shorter.
45. Can a QALICB use QLICI proceeds to repay or refinance any debt or equity
provider, or Affiliate of any debt or equity provider, and to monetize an asset
owned by, contributed, sold, or otherwise transferred to the QALICB (or an
Affiliate of a QALICB) including but not limited to the accreted value of an asset?
Beginning with the CY 2015-2016 round, a QALICB is only permitted to use QLICI proceeds to repay or
refinance a debt or equity provider (or Affiliate of a debt or equity provider) whose capital was used
directly or indirectly to fund the QEI subject to the provisions outlined in Question 42 of this document.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 36
The QALICB may use QLICI proceeds to repay or refinance expenditures incurred by the debt or equity
provider (or their Affiliate) for the acquisition of any asset contributed, sold, or otherwise transferred to the
QALICB to the extent such asset represents a reasonable expenditure directly attributable to the qualified
business of the QALICB. The amount that can be repaid or refinanced for such an asset is limited to the
asset’s original cost and not to any accreted value obtained by appraisal or other valuation methods.
Such transactions remain subject to the 24-month rule or 5% rule indicated in Question 44 above.
Example: Limitation to actual costs of acquisition
Entity B is a debt or equity provider, or Affiliate of a debt or equity provider, whose capital was
used, directly or indirectly, to fund a QEI the proceeds of which were used to make a QLICI.
Entity B acquired property for $700,000 less than 24 months prior to the QLICI closing that
represents a reasonable expenditure directly attributable to the qualified business of the QALICB,
the current appraised value of the property is $1,000,000. More than 24 months prior to the
closing of the QLICI, Entity B acquired equipment for $500,000 (currently appraised at $600,000),
which represents a reasonable expenditure directly attributable to the qualified business of the
QALICB. The QALICB receives $10,000,000 in total QLICIs from the QEI funded by Entity B.
The QLICIs proceeds could only be used to reimburse up to the original cost of acquisition (not
the appraised value) of both the property and equipment ($700,000 + $500,000 = $1,200,000)
subject to the 24 month or 5% limitations. The QALICB may elect to either reimburse the full
amount of reasonable expenditures incurred within 24 months of the QLICI closing date
($700,000) or reimburse reasonable expenditures that represent up to 5% of the QLICI proceeds
incurred at any time prior to the QLICI closing date ($500,000). It may not do both.
The prohibition on the use of QLICI proceeds to repay or refinance any debt or equity provider, or an
Affiliate of any debt or equity provider, whose capital was used, directly or indirectly, to fund a QEI does
not apply to allocation awards made prior to the CY2015-2016 round. Question 43 and 44 of this
document supplement Question 45.
46. How will the CDFI Fund evaluate adherence to 3.3(i) of the Allocation Agreement
as it pertains to NMTC activities that are “generally consistent” with the
Application?
In order to satisfy Section 3.3(i) of the Allocation Agreement, an Allocatee must ensure that no more than
15% of any one Allocation is used to finance projects that are inconsistent with the business strategy,
including but not limited to the proposed product offerings, business type, fees and markets served (i.e.,
service area) and notable relationships, set forth in the Allocation Application related to that Allocation. A
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 37
special exception for the COVID-19 pandemic applies to CY2017, 2018, 2019 and 2020 NMTC
Allocations - see Question 81 for details.
Example 1: Business Type.
If the Allocation Application pipeline for CDE XYZ for a prior year Allocation Application includes
investments in business types consisting of retail-anchored mixed-use real estate as well as community
facilities, the CDFI Fund expects that CDE XYZ will provide QLICIs to these types of businesses.
Subsequently, CDE XYZ provided a QLICI to a hotel (i.e., hospitality business), which was not discussed
as a project or QALICB. This would be considered inconsistent with the business strategy proposed in the
Application if the amount of the QEI used for hotel QLICI is more than 15% of the Allocation, it will be
considered a violation of Section 3.3(i) of the Allocation Agreement.
Example 2: Fees.
XYZ Development Fund’s Allocation Application indicates that financial Product 1 (using an A/B note
structure) will have all-in fees of 7.5% consisting of 4% upfront fees (charged at the investment fund level
and/or charged at the Sub-CDE level) and 3.5% ongoing fees (charged during the seven-year compliance
period); and financial Product 2 (revolving small dollar fund) will have all-in fees of 8% consisting of 3%
upfront fee (charged at the investment fund and/or Sub-CDE level), 1% ongoing fee (during the seven-
year compliance period) and 4% back end fee (collected at close-out, i.e. after the seven-year compliance
period). If awarded, the CDFI Fund expects that XYZ Development Fund’s QLICIs for that allocation to
have fees with a weighted average of 7.5% for Product 1 and a weighted average of 8% for Product 2.
In the evaluation of fees, the CDFI Fund will consider all fees, payments, loans, or other remuneration,
whether paid or directed to the CDE, a CDE Affiliate, or other third parties. The CDFI Fund will also
assess all fees (including payments, loans or other remuneration collected) with the exception of legal
and accounting costs related to compliance with 45D, including transaction structuring, legal opinions,
financial models/projections, auditing and tax payments.
Of note, Allocatees may serve distressed areas under Section 3.2(h) of the Allocation Agreement that
they did not propose to serve in their Allocation Applications. Such transactions will not be considered a
violation of Section 3.3(i). Similarly, the CDFI Fund recognizes that the size of QLICI may fluctuate
depending on the need of the QALICB. Provided that the proposed product(s), fees, QALICB type(s)
funded; service areas, and notable relationships, etc. are generally consistent with the Application that
was awarded, the size of the QLICI would not be considered under Section 3.3(i).
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 38
47. What is the expectation of Allocatees regarding Section 4.13 of the Allocation
Agreement?
The intent of Section 4.13 of the Allocation Agreement is to ensure that Allocatees adhere to governing
body approved written policies and procedures for selecting projects or businesses prior to making a
QLICI, to determine whether the QALICB will be able to remain financially viable and operational
throughout the tax credit compliance period and through a successful exit of the QLICI.
Allocatees are expected to adopt and adhere to governing body approved written policies and procedures
in identifying how the Allocatee will select NMTC investments. In addition to ensuring that NMTC
investments meet §45D, the Allocatee’s policies and procedures will address a QALICB’s ability to remain
financially viable and operational during the term of the QLICI and through a successful exit of the QLICI.
At minimum, the policies and procedures will address the Allocatee’s due diligence activities, including
but not limited to: 1) the financial considerations of the borrower or investee, (e.g. the QALICB’s ability to
repay the QLICI that is in the form of a loan or to pay dividends, if in the form of an equity investment;
assessment of QALICB’s guarantees or other collateral, etc.); 2 the likelihood of project completion
related to the asset(s) financed with NMTCs; 3) assessment of management team’s experience and/or
expertise relevant to project completion and the successful operation of the QALICB; and 4) market
demand for the QALICB’s services and/or products.
The Allocatee’s policies and procedures are expected to address other due diligence areas as needed,
based on its business strategy and the types of businesses financed with its NMTC Allocation. The
policies should indicate the titles of the individual(s) that have the authority to approve QLICIs.
48. What does Section 6.12 of the Allocation Agreement require?
Section 6.12 of the Allocation Agreement is intended to add transparency between the Allocatee and the
QALICB. Allocatees are required to disclose to the QALICB, in a separate stand-alone document, any
and all direct and indirect NMTC-related transaction costs related to the QLICI(s) (e.g., legal opinions,
financial modeling/projections, audit, tax preparation, and accounting expenses), fees and compensation
that the Allocatee is assessing the QALICB or otherwise requiring the QALICB to incur prior to, during,
and at the conclusion of the seven-year QLICI compliance period (“QALICB Fees and Transaction
Costs”). All such amounts shall be consistent with amounts reflected in the closing documents for the
respective QLICIs, including any forecast document (such as a financial model or similar document) that
reflects any QALICB Fees and Transaction Costs. The QALICB Fees and Transaction Costs should also
be recorded in the TLR. The Allocatee is only required to make one disclosure for each set of QLICIs
related to a project (e.g., a discrete set of activities by the QALICB). For examples of QALICB Fees and
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 39
Transaction Costs, refer to the latest version of the NMTC Allocation Application, its guidance and the
Allocatee Transaction Level Report Data Point Guidance for AMIS.
Beginning with the CY2022 Allocatees, in multiple-CDE transactions, the Allocatee shall combine its
disclosure of QALICB Fees and Transaction Costs into one document that will include the QALICB Fees
and Transaction Costs of all CDEs involved in the transaction. If there are shared expenses (e.g., CDEs
agreed to share counsel or financial modeling consulting) each CDE should disclose that portion of the
fees that are attributed to its own QLICIs. For example, if your CDE agreed to share financial modeling
expenses with one other CDE equally, each CDE would attribute 50% of the costs of modeling expense
in the disclosure. The disclosure will be signed by the Allocatee’s Authorized Representative, and in the
case of a multiple-CDE transaction, the combined disclosure will be signed by the Allocatee’s Authorized
Representative and the Authorized Representatives of all other CDEs involved in the transaction. The
disclosure statement can be retained either in hard or electronic copy and should be available for review
upon request from the CDFI Fund.
Of note, pre-CY2022 Allocatees are not prohibited from employing a combined disclosure form for their
multi-CDE deals and can fulfil the “stand-alone document” requirement using a combined form.
A. What is the timing of providing the disclosure statement to the QALICB?
The Allocatee should provide the QALICB with a disclosure statement containing estimated costs
at the later of (i) execution of the initial term sheet, or (ii) the execution of the initial term sheet of
the last CDE in a multiple CDE transaction, recognizing that certain items will be subject to
change up to the closing of the transaction. In addition, the Allocatee must provide the QALICB
with a final copy of the disclosure statement at closing. For the estimated costs in the initial term
sheet, the CDFI Fund encourages Allocatees to avoid unrealistically low initial estimates of
QALICB Fees and Transaction Costs. Beginning with the CY2022 Allocatees, in multiple-CDE
transactions, the Allocatee shall combine its disclosure of QALICB Fees and Transaction Costs
into one disclosure statement that will be provided at (ii) as stated above and shall also provide a
final copy of the disclosure statement at closing.
B. Is the CDFI Fund proscribing the format of the disclosure statement?
The CDFI Fund is not endorsing or requiring Allocatees to adopt a specific disclosure statement
format. However, Allocatees are required to develop a disclosure statement format that provides
the QALICB with the level of detail outlined in Section 6.12 of the Allocation Agreement. The
disclosure statement should be a stand-alone document presented in a short, easy to understand
format approximately - ideally one page in length.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 40
C. Does the CDFI Fund have an example of a QALICB disclosure statement that meets the
requirements of Section 6.12 of the Allocation Agreement?
Below is a sample QALICB disclosure statement provided for illustration purposes only. The CDFI
Fund is not endorsing or requiring Allocatee to adopt a specific disclosure statement format.
D. On what basis should the “costs” be disclosed in the disclosure statement to the
QALICB?
The CDE should present the costs in dollar amounts and as a percentage of the total amount of
the NMTCs generated, similar to the sample QALICB disclosure statement in this FAQ. CDEs will
be responsible for collecting complete direct and indirect transaction costs related to the QLICIs,
including those paid to third parties (e.g., legal, accounting, audits, tax preparation, etc.).
E. How should the Net Benefit be calculated with respect to an Equity QLICI?
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 41
One possible method to calculate the “Net Benefit to Project” with respect to an equity QLICI may
be to determine the excess of (i) costs of an assumed market interest rate comparable as if the
investment were made as a loan over (ii) a zero-interest rate cost assigned to distributions made
with respect to the equity investment.
49. How should an Allocatee report QALICB consulting fees?
The QALICB disclosure form (and the Fees and Transaction Costs section of the TLR) should capture all
consulting fees and costs to the QALICB including those associated with consultants that the QALICB
chooses to engage if those fees and costs are being paid from NMTC proceeds at any level of the NMTC
transaction (e.g., investment fund, from the QEI, or from the QLICI).
If the CDE is requiring a QALICB to engage with a consultant as a condition of receiving QLICIs, this
should be considered an upfront fee and should be reported as such. If the CDE is not requiring a
QALICB to engage with a consultant, then this is an upfront transaction cost. In the case of a multiple-
CDE transaction, these fees and costs should be prorated among the participating CDEs.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 42
D. Reporting and Financial Statements
50. Which organizations are required to submit audited financial statements to the
CDFI Fund?
Only Allocatees are required to submit audited financial statements to the CDFI Fund. Submission of an
audited financial statement will be required beginning with the first fiscal year in which the Allocatee
issues a QEI. Effective June 30, 2011, Subsidiary Allocatees are no longer required to have audited
financial statements produced for the CDFI Fund. However, the CDFI Fund reserves the right to request
audited financial statements of a Subsidiary Allocatee, if audited financial statements are produced.
51. Will the CDFI Fund accept the audit of an Allocatee’s controlling entity, or parent
company, if the Allocatee is not separately audited?
Yes. The CDFI Fund will accept the audit of a CDE’s controlling entity or parent company if the CDE’s
activities are fully detailed in a schedule of assets, liabilities, income and expenses of the parent’s
financial statements. If the audit does not provide these details, the CDFI Fund may require the Allocatee
to submit an audit that includes such information.
52. Is a Tax Basis financial statement acceptable in lieu of GAAP prepared financial
statement?
Yes. The CDFI Fund will accept financial statements prepared on a tax basis. However, Allocatees are
required to utilize the same basis of accounting from year to year. In the event that an Allocatee prepares
audited financial statements on a tax basis in one year and changes to GAAP the next year, the CDFI
Fund will require that the current year and prior two year’s statements be adjusted to GAAP. For example,
if Allocatee XYZ prepared its audited financial statements on a tax basis for fiscal year (FY) 2019 and
subsequently prepared its FY2020 audited financials using GAAP, the CDFI will require that the FY2019
and FY2018 statements also be revised to conform to GAAP.
53. How will the CDFI Fund treat an audit that has an opinion other than
“unqualified”?
The CDFI Fund would view such an occurrence as a Material Event under Section 6.9(b) of the Allocation
Agreement and it must be reported to the CDFI Fund. If the CDFI Fund determines that the underlying
reasons are significant, it may elect to find the Allocatee in default under Section 8.1 of the Allocation
Agreement and may impose one or more of the remedies outlined in Section 8.3.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 43
54. How will an Allocatee fulfill its reporting requirements as outlined in Section 6.5
of the Allocation Agreement?
An Allocatee will submit its Institution and Transaction Level Reports and its QEIs through AMIS. Audited
financial statements should be uploaded into AMIS using instructions found in the Allocatee ILR
Instructions guide. Allocatees are also required to report on QEIs that have reached the end of the seven-
year tax credit compliance period using the QEI “Closeout Report” portal available in AMIS. Guidance
documents are available on the CDFI Fund’s website for the following:
• Institution Level Report
• Transaction Level Report
• QEI Closeout Report
To formally submit a Transaction Level Report, the Allocatee must use the “Final Certification” feature in
AMIS. “Final Certification” involves both the reporting of new transactions and data point updates to
“active” transactions that were reported in the prior year. Final Certification of the TLR is due within 180
days of the end of an Allocatee’s Fiscal Year.
Interim Certification is a mechanism to time stamp and validate new transactions for the NMTC
Application Round and as a means to submit corrected compliance information. This feature enables
Allocatees to add transactions as they close throughout the Fiscal Year – thereby reducing the reporting
burden at Final Certification.
55. What is the QEI “Closeout Report”?
The CDFI Fund has deployed through AMIS, an electronic portal to assist in aggregating information
regarding an Allocatee’s use of QEI proceeds and additional information on the status of the QLICI and
QALICB at the end of the tax credit compliance period.
Effective April 2015, Allocatees are required to report on QEIs that have reached the end of the seven-
year tax credit compliance period. The QEI Closeout Report must be completed after the TLR and
Institution Level Report (ILR) have been submitted. The information entered into the TLR and ILR will
then be used to prepopulate the QEI Closeout Report.
The QEI Closeout Report should be completed within 30 days of the Allocatee submitting the annual TLR.
Additional guidance is available on the CDFI Fund’s website.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 44
56. Are Allocatees that have yet to issue a QEI required to submit ILRs and TLRs?
No. Submission of the ILR will be required beginning with the fiscal year in which the Allocatee or
Subsidiary Allocatee issues its first QEI. If the first QEI is made by a Subsidiary Allocatee then the
Allocatee will need to submit the ILR for the fiscal year in which the QEI was made. These reports will be
required for each fiscal year thereafter, until the Allocation Agreement is terminated.
Submission of the TLR will be required beginning with the fiscal year in which the Allocatee or Subsidiary
Allocatee makes its first QLICI. If the first QLICI is made by a sub-Allocatee then both the Subsidiary
Allocatee and the Allocatee will need to submit reports for the fiscal year in which the QLICI was made.
This report will be required for each fiscal year thereafter, until the Allocation Agreement is terminated.
57. What if the Allocatee and the sub-Allocatee have differing fiscal year end dates?
All reporting due dates are driven by the Allocatee’s fiscal year end date. ILR and TLR reports due dates
are always determined by the fiscal year of the Allocatee regardless if any or all of the allocation has been
transferred to a Subsidiary Allocatee.
58. Will there be any penalties for late reporting?
Failure to submit required reports by the required deadline may result in default of the Allocation
Agreement and penalization through the scoring of future applications to the CDFI Fund. Potential
remedies include termination or reallocation of any unused allocations. A default finding might make the
Allocatee ineligible to apply for future funding or allocation from the CDFI Fund. Section 8.3 of the
Allocation Agreement lists the remedies available to the CDFI Fund when an Allocatee defaults under the
terms of the Allocation Agreement. An Allocatee should also refer to the applicable Notice of Allocation
Availability
(NOAA) for eligibility requirements and any scoring deductions that will result from late
reporting.
59. What happens when a Subsidiary Allocatee has completed the seven-year NMTC
compliance period?
Once a Subsidiary Allocatee completes the seven-year NMTC compliance period, it may be removed as a
party to the Allocation Agreement upon notification to the CDFI Fund.
Should the Allocatee choose to
dissolve the Subsidiary Allocatee or should the Subsidiary Allocatee choose to become decertified as a
CDE, the Allocatee’s Authorized Representative must notify the CDFI Fund via the “Sub-CDE Dissolution”
portal available in AMIS. In the event that a Subsidiary Allocatee completes its compliance period, exits
the NMTC transaction and the Allocatee no longer controls the Subsidiary Allocatee, the CDFI Fund will
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 45
rescind the CDE certification status of the Subsidiary Allocatee. Additional instructions regarding Sub-
CDE dissolution is available on the CDFI Fund’s website.
By submitting the notice of dissolution via AMIS, the CDFI Fund and Allocatee mutually acknowledges
dis-enjoinment to the applicable Allocation Agreement(s). Notwithstanding the preceding, the Allocatee
will continue to bear responsibility for any additional reporting associated with the dissolved, decertified or
dis-enjoined Subsidiary Allocatee and any information regarding Events of Default, as set forth in the
termination section of the applicable Allocation Agreement(s).
60. What happens after an Allocatee completes its seven-year compliance period
after issuance of its last QEI?
After the seven-year compliance period, the CDFI Fund will no longer require the submission of audited
financial statements, ILR, and TLR. Per section 9.13 of the Allocation Agreement, the Allocation
Agreement will automatically terminate two years after the seven-year credit period (as defined in 26
C.F.R. Part 1.45D-1(c)(5)(i)) after the Allocatee issues its last QEI related to its NMTC allocation. An
Allocatee wishing to terminate the Allocation Agreement prior to that time should submit a request via the
CDFI Fund’s AMIS. The request should include name of the Allocatee, allocation control number, date of
the Allocation Agreement and the ending date of the final seven-year tax credit period.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 46
E. CDFI Fund’s Information Mapping System
61. Can Allocatees rely on data from the CDFI Fund’s Information Mapping System
(CIMS) for the purpose of determining whether transactions are located in NMTC
eligible low-income communities?
Both the CDFI Fund and the IRS will treat as eligible any otherwise qualifying QLICI that is made in a
census tract identified in CIMS as being in a NMTC eligible low-income community-provided that the
census tract in question was identified as eligible in CIMS at the time the QLICI was closed. Closed shall
be defined as an investment for which the Allocatee has distributed cash proceeds from a qualified equity
investment to the QALICB or CDE.
It is the CDE’s responsibility to determine the location of the facility or project that is funded with a NMTC
investment is within a particular census tract. Using an address to geocode the location of the project is
one method of determining whether that investment is located in an eligible census tract. For NMTC
compliance purposes, it is the physical location of the facility or project that is of importance. As
such, if the actual location of the facility or project is not accurately represented by the address of the
business that the CDE is using for geocoding purposes, the CDE should use another method to
determine the census tract of the NMTC investment. There are several other ways for a CDE to
determine the location of an investment in a particular census tract including visually confirming that the
investment is located in an eligible tract using the street grid, using latitude and longitude coordinates of
the investment, or other means that establish and document the census tract where the investment will
take place.
CIMS utilizes U.S. Bureau of the Census data; however, slight variations may arise. While other data
sources or mapping systems may produce differing results than CIMS, the CDFI Fund and the IRS will
guarantee as being eligible only those qualifying areas identified in CIMS. The CDFI Fund will not pre-
approve any tracts as eligible that are not already identified as eligible in CIMS. CDEs that wish to make
investments in such census tracts do so at their own risk and are advised to maintain relevant reports and
maps, as necessary, to demonstrate to the CDFI Fund and/or to the IRS that a census tract was in fact
eligible at the time of investment.
62. CIMS indicated that an address is not valid. How do I geocode an address that
CIMS cannot validate?
The CDFI Fund offers the following guidance for obtaining a Federal Information Processing Standard
(FIPS) code and/or maps for addresses that cannot be validated in CIMS:
1. Log on to CIMS (through A
MIS or the public interface).
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 47
2. Select the NMTC link.
If you know the FIPS code:
1. In the left of the search bar, make sure the option for “2011-2015 NMTC Tract” (or the most
current Census date) is selected.
2. Enter the 11-digit FIPS code, click enter on keyboard and select the verified FIPS.
3. AMIS will then display a map and characteristics of the selected FIPS.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 48
If you do not know the FIPS code:
Using the Map Search Feature located in the top navigation menu, choose the appropriate criteria.
1. Choose either “County” or “State.”
2. Type the county or state name.
3. Selected the correct county or state from the provided list.
4. After the map is displayed, use the left navigator and zoom feature to establish the project’s
location, using the street grid or other map features as a guide.
5. Click on the map to identify the census tract. The FIPS Code will be displayed in the pop-up box.
The 11-digit FIPS Code number is comprised of a 2-digit state number, a 3-digit county number
and the 6-digit census tract number.
6. Print and retain this document for your files.
For more information on CIMS or AMIS, contact the CDFI Fund's IT Help Desk by email at
IThelpdesk@cdfi.treas.gov or by phone at (202) 653-0300. A CIMS tutorial is also available on the CDFI
Fund’s website.
63. Why do I get a different census tract location when I map the same address at a
later date? How will the CDFI Fund handle such differences?
The address geo-coding system used by CIMS is updated periodically to provide more accurate street
address locations. As such, some addresses that were mapped prior to a system upgrade may no longer
appear in the same census tract. In the event of such an occurrence, the CDFI Fund will accept the
previously mapped results provided that the CDE maintains documentation (e.g., CIMS maps)
demonstrating the location was previously in an eligible census tract.
64. What data should be used to determine qualifying census tracts?
As of September 1, 2023 Allocatees can use the 2016-2020 American Community Survey (ACS) eligibility
data to determine if QLICIs are located in NMTC-eligible Low-Income Communities. This data is currently
available in CIMS. The CDFI Fund released updated Island Area data as of December 19, 2023,
available in Excel on the CDFI Fund website and in CIMS as of January 25, 2024. More details on this
transition are provided in the 2016-2020 American Community Survey Data FAQs available on the CDFI
Fund’s website.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 49
CDEs with NMTC allocations should use the following guidance regarding the data used to qualify
potential investments made in the 50 states, the District of Columbia, Puerto Rico, American Samoa,
Guam, Northern Mariana Islands, and the US Virgin Islands:
QLICIs closed (meaning an investment for which the CDE has distributed cash proceeds from a
Qualified Equity Investment (QEI) to a Qualified Active Low-Income Community Business
(QALICB)) before September 1, 2023 must use 2011-2015 ACS data applied to the 2010 census
tracts for determining Low-Income Community eligibility.
QLICIs closed between September 1, 2023 and August 31, 2024 may use either 2011-2015 ACS
data applied to 2010 census tracts or 2016-2020 ACS Low-Income Community eligibility data
applied to the 2020 census tracts for determining Low-Income Community eligibility.
QLICIs closed on or after September 1, 2024 must use 2016-2020 ACS Low-Income Community
eligibility data applied to the 2020 census tracts for determining Low-Income Community
eligibility.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 50
F. CDE Certification
65. Am I required to notify the CDFI Fund if a certified CDE has been dissolved?
Yes. The CDFI Fund considers the dissolution of a certified CDE as a material event to the extent that it
finalized a QEI or is enjoined to an active Allocation Agreement. The CDFI Fund has deployed an
electronic portal in AMIS to assist Allocatees in reporting on the dissolution of a Subsidiary Allocatee or
the termination of NMTC activities for a Subsidiary Allocatee. In circumstances where the CDE is a
Subsidiary Allocatee and has submitted a request for the CDFI Fund to acknowledge its dissolution,
submission of dissolution notification via the Sub-CDE Dissolution Report portal is acceptable in lieu of
the submission of a Material Event form. A user guide is available on the CDFI Fund’s website.
If the dissolved CDE was not an Allocatee or Subsidiary Allocatee, the Authorized Representative must
contact the Office of Certification, Compliance Monitoring and Evaluation via the CDFI Fund’s AMIS and
provide the name, certification control number of the dissolved CDE.
66. How will an Allocatee maintain their CDE Certification status?
An Allocatee will be required to certify on an annual basis that they continue to meet the CDFI Fund’s
CDE certification requirements. The certification will be completed electronically at the time the Allocatee
submits its reports. If the Allocatee has transferred any portion of its allocation to a Subsidiary Allocatee,
the Allocatee will be required to certify on behalf of the Subsidiary Allocatee as well.
Should the Allocatee (or any of its Subsidiary Allocatees) no longer meet the CDE certification
requirements at any time, it must inform the CDFI Fund of such a Material Event as required under
Section 6.9 of the Allocation Agreement. If the CDFI Fund determines that an Allocatee (or any of its
Subsidiary Allocatees) can no longer meet the CDE certification requirements, it will be found in default
and an event of recapture declared.
67. Does the CDE certification have an expiration date?
A CDE’s designation will last for the life of the organization, provided the CDE continues to comply with
the NMTC Program requirements. The CDFI Fund may require each CDE, on an annual basis, to certify
to the CDFI Fund that it continues to meet its primary mission and accountability requirements.
An entity that is a certified CDFI or Small Business Investment Company
(SSBIC) will be deemed to
automatically meet the requirements for CDE certification and will be certified as a CDE on the basis of its
CDFI or SSBIC certification. However, once so certified, the CDE’s certification is no longer dependent on
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 51
its CDFI or SSBIC certification, but rather is dependent on continuously meeting the qualifications for
certification as a CDE, as described above.
If a CDFI is decertified for failure to demonstrate that it meets the criteria of legal entity, primary mission,
and/or accountability, and upon the determination by CDFI Fund staff that the failure to demonstrate
these CDFI certification criteria affects the entity’s ability to meet corresponding criteria required for its
CDE certification, the CDFI Fund will notify the CDE of that determination and provide a period of 60 days
to submit a new application for CDE certification.
Unless and until the CDFI Fund has made a final determination of the CDE’s continued compliance with
CDE certification requirements under the NMTC Program, the CDE certification remains in full force and
effect. Under these circumstances, the entity will be decertified as a CDE only if: (1) it fails to submit a
new application for CDE certification within the 60-day time period prescribed by the CDFI Fund; or (2)
the new application for CDE certification is determined by the CDFI Fund not to demonstrate that the
entity meets the criteria for CDE certification.
Should a CDE desire to relinquish its certification, it should provide a written notice via a Service Request
in AMIS.
68. If a CDE loses its status as a CDE, will it be offered an opportunity for a cure
period?
Yes. The loss of CDE certification is an Event of Default and the Allocation Agreement provides for a cure
period, not to exceed 90 days. Loss of CDE certification is also an event of recapture.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 52
G. Amendments
69. Can an Allocatee request an amendment to its Allocation Agreement?
Yes. An Allocatee may request an amendment to its Allocation Agreement by submitting a request to the
CDFI Fund. The request, at a minimum must:
1. Identify the name and control number of the Allocatee;
2. Identify the portion(s) of the Allocation Agreement that need to be modified;
3. State the reasons why the Allocatee is making the request; and
4. Explain the extent to which the proposed modifications are consistent with what the Allocatee had
proposed in its initial application to the CDFI Fund and will help to further the goals of the NMTC
Program.
The request can be submitted via the CDFI Fund’s AMIS. Justification for approving an amendment to an
Allocation Agreement includes but is not limited to a determination that the amendment request is:
1. Consistent with the intent of the NMTC Program statute and regulations and furthers the goals of
the NMTC Program;
2. Consistent with (or not a substantive departure from) the business strategy proposed in the initial
application for an allocation; and
3. Sufficiently narrow in scope that it does not disadvantage other Allocatees or other applicants
from the same allocation round.
While an amendment request can be submitted at any time, it must be submitted no later than 90
calendar days before the Allocatee needs the determination. The amendment can be submitted via the
CDFI Fund’s AMIS. Once processed, the Allocatee will receive a letter amendment which will need to be
counter-executed and returned to the CDFI Fund.
70. How can Allocatees add additional Subsidiary Allocatees to Section 3.2?
Step 1: If the proposed entities have not yet been certified as CDEs, the Allocatee MUST first submit a
CDE certification application on behalf of the non-certified entities. Without the CDE Certification, the
Allocatee will NOT be able to add these Subsidiaries to its Allocation Agreement. The Allocatee must
submit its CDE Certification application for the certification of Subsidiaries through the CDFI Fund’s AMIS.
Please be aware that obtaining a certification decision could take up to 90 days.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 53
Step 2: Once the Subsidiaries have been certified, the Allocatee must submit a complete amendment
package to the CDFI Fund. Please note that all Subsidiaries must be Certified CDEs prior to the
submission of the amendment package; the CDFI Fund will not process requests while certification is
pending. The enjoinment request can be submitted via the CDFI Fund’s
Awards Management Information
System (AMIS) through a Service Request. A complete amendment package includes the following
documents:
• Request Letter: a letter signed by the registered Authorized Representative of the Allocatee
including the name of the Allocatee, the control number of the Allocation Agreement to be
amended, and the names and control numbers of each of the certified Subsidiaries to be added.
• Certification Letter(s): copies of the certification received by Allocatee from the CDFI Fund
confirming the CDE certification and control number of each of the Subsidiaries to be added.
• Draft Legal Opinion: The legal opinion format should be similar to that used when the original
Allocation Agreement was executed but may be limited solely to the new Subsidiaries. The legal
opinion should also contain language confirming that the Allocatee Controls the Subsidiaries
including having a controlling influence over the investment decisions of the Subsidiaries. For
more information concerning this provision, please refer to applicable section of this document.
Once processed, the Allocatee will receive a letter amendment which will need to be counter-executed
and returned to the CDFI Fund along with the final legal opinion. Upon receipt of these counter-executed
documents, the CDFI Fund will enter an Effective Date for the amendment and return a copy to the
Allocatee. Please be aware that enjoining a certified CDE to an Allocation Agreement could take up
to 30 days.
71. Can a CDE amend the Service Area stipulated in the Allocation Agreement?
Allocatee and their Subsidiary Allocatees are required to make substantially all of their QLICIs in areas for
which they are certified to serve and are deemed accountable to, as specified in the applicable Allocation
Agreement. Before an Allocatee can request an amendment to the Service Area identified in Section
3.2(b) of the Allocation Agreement, the Allocatee must first amend its CDE certification service area. The
Allocation Agreement reflects the Service Area of the Allocatee only and not the Subsidiary Allocatees.
Requests to amend an Allocatee’s CDE certification service areas must be submitted through the CDFI
Fund’s AMIS system, which is available on the CDFI Fund website. The CDFI Fund accepts CDE
certification service area amendment requests on an ongoing basis.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 54
After receiving notification that the CDE’s certification service area has been successfully amended, an
Allocatee may request a Service Area amendment to their Allocation Agreement through the process
described in this document. Please note that approval of a change to a CDE’s certification service area is
no guarantee that it will also be approved as an addition to the Service Area listed in Section 3.2 (b) of the
Allocation Agreement.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 55
H. Controlling Entities, Control of Allocatees and Subsidiary
Allocatees.
72. Are New Markets Tax Credit Program (NMTC) allocation recipients (Allocatees)
permitted to transfer their tax credit authority to other entities?
Yes. Allocatees may transfer all or a portion of their allocation authority to subsidiary entities (Subsidiary
Allocatees), provided that each such subsidiary:
i. Has been certified as a qualified CDE by the CDFI Fund;
ii. Is enjoined as a Subsidiary Allocatee to an Allocation Agreement, either at the time of initial
execution or through a subsequent amendment; and is “controlled” (as defined in the Allocation
Agreement) by the Allocatee at all times throughout the term of the Allocation Agreement.
73. How does the CDFI Fund define “Control,” for the purpose of demonstrating that
an Allocatee controls a subsidiary entity?
The CDFI Fund defines “Control” as:
(a) Ownership, control or power to vote more than 50% of the outstanding shares of any class of
Voting Securities of any entity, directly or indirectly or acting through one or more other persons;
or
(b) Control in any manner over the election of a majority of the directors, trustees, or general
partners (or individuals exercising similar functions) of any other entity; or
(c) Power to exercise, directly or indirectly, a controlling influence over the management policies
or investment decisions of another entity, as determined by the CDFI Fund.
An Allocatee demonstrates Control of a subsidiary entity by meeting any one of these three criteria. An
Allocatee does not have to satisfy all three criteria in order to be deemed to Control a subsidiary entity.
Notwithstanding the above, beginning with the CY 2005 Allocatees, the CDFI Fund requires that in order
for an Allocatee to transfer its allocation authority to a Subsidiary Allocatee, the Allocatee must
demonstrate, at a minimum, that it exercises and will maintain a controlling influence over the investment
decisions of the Subsidiary Allocatee.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 56
74. If an Allocatee designated a Controlling Entity in its NMTC Allocation Application
for the purpose of demonstrating a track record, is the Controlling Entity required
to maintain control during the entire NMTC term of the Allocation Agreement?
Beginning with the CY 2013 round, the entity that is designated as the Controlling Entity in the Allocatee’s
NMTC Allocation Application must continue to serve in that capacity throughout the term of the Allocation
Agreement with the CDFI Fund, unless otherwise approved in writing by the CDFI Fund via an
amendment request.
The requirement of the Allocatee to maintain the same Controlling Entity does not apply in situations
where there is a merger, acquisition, bankruptcy, or similar legal actions. However, the Allocatee must
notify the CDFI Fund of any change to the designated Controlling Entity via a Material Event submission
.
In addition, the Allocatee may only replace its Controlling Entity with the organization that will Control the
Allocatee as a result of such action. Please note that the CDFI Fund does not consider common control
transactions (e.g., when there is no change in control of the net assets by an Affiliated entity) to be a
merger, acquisition or similar reorganization. The steps to replace a Controlling Entity in the case of
merger, acquisition, bankruptcy, or similar legal actions are different from those to remove a Controlling
Entity. Please see Questions 75 and 76 below relating to procedures for requesting removal of a
Controlling Entity.
75. Can a Controlling Entity be removed from an Allocation Agreement?
An Allocatee may request that the CDFI Fund amend its Allocation Agreement to remove its Controlling
Entity in cases where there is not a merger or acquisition. In order for the CDFI Fund to consider this type
of amendment request, the Allocatee must demonstrate that:
i) It has been five (5) years since the Allocatee issued 100 percent of its Qualified Equity
Investments (QEIs) pursuant to the Allocatee’s first Allocation Agreement in or after the CY 2013
round; and the Allocatee has used at least the designated percent of the total dollar amount of
those QEIs, as listed in Section 3.2(j) of that Allocation Agreement, to make QLICIs.
ii) It has not received a notification of default on any of its Allocation Agreements for the five years
immediately preceding the date of the request to remove the Controlling Entity.
iii) It is financially and operationally self-sufficient, i.e., that it has sufficient net assets and projected
revenues to cover its operations for the remaining compliance period of its first Allocation on or
after the CY 2013 round and has the necessary resources and personnel to carry out its existing
Allocation awards.
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The CDFI Fund may consider an Allocatee’s request to remove the Controlling Entity before the five-year
mark under extreme circumstances. For example, the Controlling Entity faces regulatory or legal
proceedings that render the Controlling Entity’s continued involvement detrimental to the Allocatee’s
ability to carry out the activities as required by its NMTC Allocation Agreement. Under these
circumstances, the Allocatee must not have received a final notification of default on any of its Allocation
Agreements in the five years immediately preceding the date of the request to remove the Controlling
Entity.
76. Procedures for requesting an amendment to remove the designated Controlling
Entity?
To request an amendment to the designated Controlling Entity, the Allocatee must provide a written
request on its letterhead, signed by the Authorized Representative and Controlling Entity Representative,
and submitted using an AMIS service request. The amendment request must also include:
1. The Allocatee’s and Controlling Entity’s audited financial statements for the last three (3)
completed fiscal years.
2. The Allocatee’s unaudited financial statements for the current fiscal year.
3. Operating agreements between the Controlling Entity and the Allocatee, or other documents
noting current operational and financial responsibilities between the Allocatee and the Controlling
Entity.
4. Updates to the organizational chart as well as updates to Management Capacity Table C2 of the
last submitted Allocation Application, including any personnel from the Controlling Entity that will
or will not remain with the Allocatee.
77. What are the requirements to be a Controlling Entity?
For Allocatees in the CY 2013 through CY 2020 rounds, a Controlling Entity must Control the Allocatee at
the time of the Allocation Application and throughout the term of the Allocation Agreement, including
continuously maintaining a controlling influence over the management policies, and day-to-day
management and operations (including investment decisions) of the Allocatee, as determined by the
CDFI Fund.
Beginning with the CY 2021 Allocation Round, for Allocatees that have not previously been awarded an
Allocation in CY 2013–CY 2020, a Controlling Entity must, at the time of Allocation Application and
throughout the term of the Allocation Agreement, meet the following requirements:
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 58
a) Controlling Entities for For-profit CDEs must demonstrate:
(i) Ownership, control, or power to vote more than 50% of membership interests or the
outstanding shares of any class of voting securities of the CDE; and
(ii) Control in any manner over the election of a majority of the directors, trustees, or general
partners (or individuals exercising similar functions) of the CDE, including control over the
appointment and removal of the CDE’s Executive management team (e.g., CEO, COO,
CFO); and
(iii) Approval authority over the management policies and investment decisions of the CDE
as explicitly established in organizational documents (e.g., articles of incorporation,
operating agreements and/or bylaws)
b) Controlling Entities for Not-for-profit CDEs must demonstrate:
(i) Control in any manner over the election of a majority of the directors, trustees, or general
partners (or individuals exercising similar functions) of the CDE, including control over the
appointment and removal of the CDE’s Executive management team (e.g., CEO, COO,
CFO); and
(ii) Approval authority over the management policies and investment decisions of the CDE
as explicitly established in organizational documents (e.g., articles of incorporation,
operating agreements, and/or bylaws).
78. What does the CDFI Fund deem to be a “controlling influence over the
management policies” of another entity?
In order to demonstrate a controlling influence over the management policies of an Allocatee/Subsidiary
Allocatee, an entity must be, at a minimum:
a) Identified in all appropriate organizational documents as the managing entity of the
Allocatee/Subsidiary Allocatee (e.g., the general partner, managing partner, managing member or
similar managing entity of the Allocatee/Subsidiary Allocatee);
b) At all times be in principal control over the day-to-day operations of the Allocatee/Subsidiary
Allocatee, and no other parties (including investors) may impose unreasonable limitations on the
rights and privileges of the entity to carry out such general management functions or undermine
the entity’s control over the management of the Allocatee/Subsidiary Allocatee. The entity may
enter into contracts with other entities to perform general management functions (e.g.,
underwriting transactions; compliance and monitoring), but the entity must retain the authority to
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 59
remove the contracted parties with or without cause. Some indicia of management control
include, but not limited, the authority to:
i. Make all material decisions affecting the business and affairs of the Allocatee/Subsidiary
Allocatee;
ii. Act for and bind the Allocatee/Subsidiary Allocatee and to operate and administer the
business;
iii. Make strategic, governance, and contract decisions;
iv. Establish all policies governing operations of the Allocatee/Subsidiary Allocatee;
v. Acquire and dispose of interests in real or personal property;
vi. Establish and maintain bank accounts;
vii. Employ and terminate all officers, employees, consultants, and agents of the
Allocatee/Subsidiary Allocatee; and
viii. Exercise responsibility for business development, raising capital, underwriting, portfolio
monitoring, reporting and compliance.
The existence of any one of these indicia, by itself, will not necessarily meet the management control test.
Instead, when making a control determination the CDFI Fund will evaluate the totality of all of the facts
and circumstances in each particular matter, including the existence of the factors listed above.
Please also note that there are certain factors that may amount to an unreasonable limitation on an
entity’s management control, which include, but are not limited to:
i. A prohibition on the sale, disposition or transfer of any assets of the Allocatee/Subsidiary
Allocatee;
ii. A prohibition on entering into contracts valued above an unreasonably low threshold
(e.g., $5,000); or
iii. The hiring of agents/organizations controlled by investors in the Allocatee/Subsidiary
Allocatee.
The existence of any one of these factors could result in a determination that the entity does not have
management control over an Allocatee/Subsidiary Allocatee.
79. What does the CDFI Fund deem to be a “controlling influence over the investment
decisions” of another entity?
In order to demonstrate a controlling influence over the investment decisions of an Allocatee/Subsidiary
Allocatee, an entity must, at a minimum, have the authority to propose potential NMTC investments and
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 60
the authority to approve all proposed transactions involving the use of NMTC proceeds. In other words, at
no time can a QLICI be made without the authorization of the entity. This rule applies to initial NMTC
investments as well as re-investments of NMTC proceeds that occur during the seven-year compliance
period. The entity’s approval authority may be either explicit (e.g., the operating agreement clearly states
the approval rights) or implicit (e.g., the final investment decision authority rests with an investment
committee, the majority of whose members are appointed by the entity and are not affiliated with the
investor).
An entity may share its control of the investment decisions of with an investor (e.g., both parties have the
right to veto a proposed investment transaction), provided that the investor does not exercise undue
influence over the decision-making authority of the entity. The CDFI Fund would likely determine that
undue influence exists in situations where, for example: (a) the Allocatee/Subsidiary Allocatee is required
to decide on an investment proposed by the investor within an unreasonable amount of time (i.e., less
than 30 days); or (b) the investor can stop the payment of management fees or other contractual
payments to the Allocatee/Subsidiary Allocatee if the Allocatee/Subsidiary Allocatee does not approve an
investment proposed by the investor.
80. Will the CDFI Fund review operating agreements submitted by Allocatees to
determine whether they “control” Subsidiary Allocatees?
The CDFI Fund no longer requires Allocatees, as a matter of course, to submit such documentation in
advance of executing or amending Allocation Agreements. The CDFI Fund reserves the right, however, to
request such documentation from Allocatees at any time, and will likely do so as part of its compliance
and monitoring procedures. Allocatees may also be required to submit certifications confirming their
control of Subsidiary Allocatee as part of annual reporting requirements. Allocatees are therefore advised
to follow the guidelines contained in this document to ensure that they maintain sufficient control over
their Subsidiary Allocatee.
The CDFI Fund will also require that Allocatees obtain legal opinions which confirm that they control their
Subsidiary Allocatees both at the time of initial closing of the Allocation Agreement and at the time of any
subsequent amendments.
The CDFI Fund will not review operating agreements submitted voluntarily by Allocatees or investors that
wish to obtain control determinations from the CDFI Fund.
NOTE: The CDFI Fund has the discretion to consider additional factors when determining the
extent to which an Allocatee demonstrates control over its Subsidiary Allocatees.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 61
81. How does the CDFI Fund view investor rights to remove the Allocatee as the
managing entity of the Subsidiary Allocatee?
The CDFI Fund is aware that many operating agreements for Subsidiary Allocatees may afford investors
with the right to remove a managing entity for malfeasance or negligence. However, if such removal rights
include: (a) the right to remove the managing entity without cause or (b) the right to remove the managing
entity for violation of any provision of the operating agreement or any misconduct or breach of contractual
obligations which does not have a material adverse effect on the business of the entity, the CDFI Fund
could determine that the Allocatee does not have management control over its Subsidiary Allocatee. In
addition, if the investor decides to exercise its removal rights and, as a result, the Allocatee no longer has
any control over its Subsidiary Allocatee, the CDFI Fund may determine that such occurrence is an event
of default under the terms of the Allocation Agreement and the CDFI Fund has the discretion to impose
any or all of the remedies contained in the Allocation Agreement.
NOTE: The CDFI Fund has the right to approve all successors of the Allocatee’s interests as a
party to the Allocation Agreement (see Section 9.4 of the Allocation Agreement).
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 62
I. Contacting the CDFI Fund’s Compliance Unit
82. How to contact the CDFI Fund’s Office of Compliance Monitoring and Evaluation?
Helpline: (202) 653-0423
Email: ccme@cdfi.treas.gov
Fax: (202) 508-0086
Mail: U.S. Department of the Treasury
Community Development Financial Institutions Fund
Attention: Compliance Monitoring and Evaluation
1500 Pennsylvania Avenue, NW
Washington, DC 20220
In addition, the CDFI Fund’s AMIS has a Service Request function that allows users to make general
inquiries and/or request specific changes. This function facilitates smooth communication between
Allocatees and CDFI Fund staff. Allocatees can track issues or requests that have been submitted to the
CDFI Fund and their resolutions in a central area. For AMIS IT support, please contact
AMIS@cdfi.treas.gov or (202) 653-0422.
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 63
J. Additional Guidance for COVID-19 Pandemic.
83. Can an Allocatee request an amendment to Schedule 1- Authorized Uses of
NMTC of the Allocation Agreement in response to the COVID-19 pandemic?
Yes. Changes to Schedule 1 will be adjudicated on a case-by-case basis. The request must be submitted
via AMIS. Justification for approving an amendment to an Allocation Agreement includes but is not limited
to a determination that the amendment request is:
1. Consistent with the intent of the NMTC Program statute and regulations and furthers the
goals of the NMTC Program;
2. Sufficiently narrow in scope that it does not disadvantage other Allocatees or other applicants
from the same allocation round; and
3. Demonstrates that any changes in business strategy addresses the economic impact of
COVID-19 and clearly benefit QALICBs and LICs.
While an amendment request can be submitted at any time, it must be submitted no later than 90
calendar days before the Allocatee needs the determination. Once processed, the Allocatee will receive
an amendment letter which will need to be counter-executed and returned to the CDFI Fund.
84. How will the CDFI Fund evaluate changes in an Allocatee’s business strategy in
response to the COVID-19 pandemic in terms of compliance with the Allocation
Agreement and future eligibility for the NMTC Program?
This COVID-19 pandemic exception only applies to CY2017, 2018, 2019 and 2020 NMTC Allocations.
An Allocatee that wishes to change their business strategy, such that an amount of QEIs greater than
30% of any one NMTC Allocation will be used to finance one or more projects or businesses that are not
generally consistent with the business strategy in the Allocation Application (specifically the business
types), must submit an AMIS service request seeking formal pre-approval from the CDFI Fund. The
request, at a minimum must:
1. Identify the name and control number of the Allocatee;
2. State the reasons why the Allocatee is making the request;
3. Explain how the revised business strategy is a substantive departure from the business strategy
proposed in the initial Allocation Application; and
CDFI FUND | NMTC Compliance & Monitoring FAQs | July 2024 64
4. Demonstrate that any changes in business strategy address the economic impact of COVID-19
and clearly benefit QALICBs and LICs.
85. What relief will the CDFI Fund provide for compliance with Section 3.3(j) in light
of the COVID-19 pandemic?
In an effort to mitigate the impact of the COVID-19 pandemic on compliance, Section 3.3(j)(i) of Allocation
Agreements for CY2015-2016, CY2017, CY2018, and CY2019 were unilaterally amended by the CDFI
Fund in October of 2020 to allow the use of QLICI proceeds to repay or refinance documented
reasonable expenditures that are directly attributable to the qualified business of the QALICB, if such
expenditures were incurred no more than 36 months prior to the QLICI closing date.
Language was also
included in the CY2020 Allocation Agreement to incorporate this temporary relief, which was applicable to
NMTC transactions closed between June 1, 2020 and May 31, 2022.
Section 3.3(j)(i) of the CY2021 Allocation Agreements allows QLICI proceeds to be used to repay or
refinance documented reasonable expenditures of the debt or equity provider (or its Affiliate), that are
directly attributable to the qualified business of the QALICB, and such expenditures were incurred no
more than 36 months prior to the QLICI closing date for QLICIs closed on or before December 31, 2022
and 24 months prior to the QLICI closing date for QLICIs closed after December 31, 2022.
