Request for Public Comments, New Markets Tax Credit Program, 28766-28767 [E7-9832]

Agencies

• Community Development Financial Institutions Fund
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 72, Number 98 (Tuesday, May 22, 2007)]
[Notices]
[Pages 28766-28767]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9832]


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DEPARTMENT OF THE TREASURY

Community Development Financial Institutions Fund


Request for Public Comments, New Markets Tax Credit Program

AGENCY: Community Development Financial Institutions Fund, Department 
of the Treasury.
SUMMARY: This document invites comments from the public on certain 
issues regarding how, for purposes of the New Markets Tax Credit (NMTC) 
Program, the Community Development Financial Institutions (CDFI) Fund 
should ensure that non-metropolitan counties receive a proportional 
allocation of Qualified Equity Investments (QEIs). All materials 
submitted will be available for public inspection and copying.

DATES: All comments and submissions must be received by July 6, 2007.

ADDRESSES: Comments should be sent by mail to: NMTC Program Manager, 
CDFI Fund, U.S. Department of the Treasury, 601 13th Street, NW., Suite 
200 South, Washington, DC 20005; by e-mail to cdfihelp@cdfi.treas.gov; 
or by facsimile at (202) 622-7754. This is not a toll free number.

FOR FURTHER INFORMATION CONTACT: Information regarding the CDFI Fund 
and its programs may be downloaded from the CDFI Fund's Web site at 
https://www.cdfifund.gov.

SUPPLEMENTARY INFORMATION: Section 121(a) of the Community Renewal Tax 
Relief Act of 2000 (Pub. L. 106-554), enacted on December 21, 2000, 
amended the Internal Revenue Code (IRC) by adding IRC section 45D, New 
Markets Tax Credit. Taxpayers that make QEIs in qualified Community 
Development Entities (CDEs) may claim the NMTC. Under section 
45D(a)(2), the NMTC is equal to five percent of the QEI the first three 
years and six percent for the next four years for a total of 39 
percent. The CDE must use substantially all of the cash from a QEI to 
make Qualified Low-Income Community Investments (QLICIs). IRC section 
45D(d)(1) defines a QLICI as: (A) Any capital or equity investment in, 
or loan to, any Qualified Active Low-Income Community Business 
(QALICB); (B) the purchase from another CDE of any loan made by such 
entity which is a QLICI; (C) financial counseling and other services to 
businesses located in, and residents of, low-income communities; and 
(D) any equity investment in, or loan to, a CDE.
    Under IRC section 45D(c)(1), a CDE is any domestic corporation or 
partnership if: (A) The primary mission of the entity is to serve, or 
provide investment capital for, low-income communities or low-income 
persons; (B) the entity maintains accountability to residents of low-
income communities through their representation on any governing board 
of the entity or on any advisory board to the entity; and (C) the 
entity is certified as a CDE by the Secretary.
    The term low-income community, as defined under IRC section 
45D(e)(1), means any population census tract in which: (A) The poverty 
rate is at least 20 percent; or (B)(i) in the case of a tract not 
located within a metropolitan area, the median family income for such 
tract does not exceed 80 percent of statewide median family income, or 
(ii) in the case of a tract located within a metropolitan area, the 
median family income for such tract does not exceed 80 percent of the 
greater of statewide median family income or the metropolitan area 
median family income. In addition, pursuant to the American Jobs 
Creation Act of 2004 (Pub. L. 108-357), certain other census tracts and 
Targeted Populations may be treated as low-income communities.
    Section 102(b)(6) of the Tax Relief and Health Care Act of 2006 
(Pub. L. 109-432) (the 2006 Act) amended IRC section 45D(i)(6) to 
provide that the Secretary shall prescribe regulations to ensure that 
non-metropolitan counties receive a proportional allocation of QEIs.
    For purposes of the NMTC Program, the CDFI Fund defines 
metropolitan area and non-metropolitan area in accordance with OMB 
Bulletin No. 04-03 (Update of Statistical Area Definitions and 
Additional Guidance on Their Uses) and based on 2000 Census data.
    The CDFI Fund is seeking comments from the public regarding how it 
should ensure that non-metropolitan counties receive a proportional 
allocation of QEIs. Commentators are encouraged to consider, at a 
minimum, the following issues:
    1. Allocations of QEIs. IRC section 45D(i)(6) requires that the 
Secretary ensure that non-metropolitan areas receive a proportional 
allocation of QEIs. However, the CDFI Fund does not allocate QEIs to 
geographic areas, per se. Rather, the CDFI Fund allocates NMTCs to 
CDEs, the vast majority of which have service areas encompassing 
statewide, multi-state or national markets, and which include both 
metropolitan and non-metropolitan counties. Further, the location of an 
allocatee CDE's headquarters is neither indicative of the geographic 
locations of its investors (the sources of its QEIs), nor of where it 
intends to make its QLICIs. An allocatee headquartered in a non-
metropolitan area may make QLICIs in metropolitan areas, just as an 
allocatee headquartered in a metropolitan area may make QLICIs in non-
metropolitan areas. Similarly, an allocatee's investors may be located 
in metropolitan or non-metropolitan counties. Consequently, 
commentators are asked to consider several possible alternatives for 
ensuring that non-metropolitan areas receive a proportional allocation 
of QEIs:
    (a) Location of investors. Should the CDFI Fund endeavor to ensure 
that a desired proportion of investors (those persons or entities 
making QEIs in CDEs) reside or be headquartered in non-metropolitan 
counties?
    (b) Location of allocatees. Should the CDFI Fund endeavor to ensure 
that either: (i) A desired proportion of NMTC allocatees (as a 
percentage of the total number of allocatees) in any given NMTC 
allocation round is headquartered in non-metropolitan counties; or (ii) 
a desired proportion of NMTC allocation authority (as a percentage of 
the total dollar amount of allocation authority) in any given NMTC 
allocation round is provided to CDEs

[[Page 28767]]

headquartered in non-metropolitan counties?
    (c) Principal service area of allocatees. Should the CDFI Fund 
endeavor to ensure that either: (i) A desired proportion of NMTC 
allocatees (as a percentage of the total number of allocatees) in any 
given NMTC allocation round is ``principally serving'' (i.e., making 
QLICIs in) non-metropolitan counties; or (ii) a desired proportion of 
NMTC allocation authority (as a percentage of the total dollar amount 
of allocation authority) in any given NMTC allocation round is provided 
to CDEs principally serving non-metropolitan counties? If so, what is 
the appropriate meaning of ``principally serving'' (e.g., 85 percent of 
total QLICIs made by the CDE, 50 percent of total QLICIs made by the 
CDE, or another calculation)?
    (d) Location of QLICIs. Should the CDFI Fund endeavor to ensure 
that a desired proportion of QLICIs is provided in non-metropolitan 
counties, without consideration of where the CDE is headquartered or 
which counties (metropolitan vs. non-metropolitan) that it is 
principally serving?
    2. ``Proportionality.'' Commentators are asked to consider, in 
accordance with one or more of the alternatives presented under issue 1 
above, the most appropriate definition of the term ``proportional.''
    (a) With respect to alternatives (a) and (d) under issue 1, should 
the CDFI Fund define the term ``proportional'' to mean: (i) The 
proportion of the U.S. population that resides in non-metropolitan 
areas (approximately 17.4 percent); (ii) the proportion of low-income 
communities that are located in non-metropolitan areas (approximately 
25 percent); or (iii) another calculation?
    (b) With respect to alternatives (b) and (c) under issue 1, should 
the proportion be based upon: (i) the total applicant pool for a given 
NMTC allocation round (for example, if 25 percent of the applicant pool 
consists of CDEs that predominantly serve non-metropolitan areas, the 
CDFI Fund would ensure that 25 percent of the allocatees predominantly 
serve rural areas); or (ii) that portion of the applicant pool that, 
after the first phase of application review and scoring, met or 
exceeded the minimum scoring threshold to be eligible for NMTC 
allocations?
    (c) With respect to alternatives (c) and (d) under issue 1, should 
the percentage of QLICIs made in low-income communities be based upon 
the total number of QLICIs made by a CDE, or the total dollar amount of 
those QLICIs?
    3. Review Process. Commentators are asked to consider what changes 
the CDFI Fund should consider making to the allocation application 
review and decision-making process. What modifications could be made to 
the CDFI Fund's review process to ensure that there is a proportional 
allocation of QEIs in non-metropolitan areas? For example:
    (a) Priority points. In prior allocation rounds, the CDFI Fund has 
provided up to five priority points to applicants that demonstrated a 
track record of having successfully provided capital or technical 
assistance to disadvantaged businesses or communities, pursuant to IRC 
section 45D(f)(2). Should the CDFI Fund adopt priority points based on: 
(i) The CDE's track record of serving non-metropolitan areas (e.g., an 
applicant could get up to five priority points based on the percentage 
of its historic activities serving non-metropolitan areas); (ii) a 
forward-looking commitment to serving non-metropolitan areas (e.g., up 
to five points based on the percentage of activities that will be 
directed to non-metropolitan areas); or (iii) both the track record and 
the forward-looking commitments?
    (b) Re-ranking of applicants. Should the CDFI Fund consider 
advancing lower scoring applicants that predominantly serve non-
metropolitan areas over higher scoring applicants so that the desired 
proportionality is achieved?
    4. Compliance. The CDFI Fund must have a mechanism to ensure that 
allocatees comply with any non-metropolitan area proportionality 
requirement. Commentators are asked to consider whether the CDFI Fund 
should require that applicants specify in their applications the 
percentage of their QEI proceeds that they will use to make investments 
in non-metropolitan areas and then be held to those percentages as a 
condition of their allocation agreements.

    Authority: 26 U.S.C. 45D; Tax Relief and Health Care Act of 
2006, Pub. L. 109-432; 26 CFR 1.45D-1.

    Dated: May 16, 2007.
Kimberly A. Reed,
Director, Community Development Financial Institutions Fund.
[FR Doc. E7-9832 Filed 5-21-07; 8:45 am]
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