Program Plan
Department of the Treasury - New Markets Tax Credit Recovery Plan
Updated 05/14/2009
Objectives
Program Purpose
The Recovery Act provides $3 billion of investment authority for which tax credits may be claimed. The NMTC Program has three key objectives: increase the flow of equity capital into entities financing businesses and real estate projects in low-income communities; provide capital to low-income community businesses and real estate projects at better rates and terms than would otherwise be available in the marketplace; and provide jobs, and other goods and services to low-income communities.
Public Benefits
NMTC proceeds may be used to finance a variety of community and economic development projects in low-income communities, including operating businesses; real estate projects (commercial, industrial, retail, mixed-used; homeownership housing); and community facilities such as charter schools and health care facilities. Depending on the type of project financed, these investments will help to create construction jobs (e.g., through real estate development or rehabilitation); permanent jobs (e.g., at operating businesses, manufacturing facilities, and via tenants of retail facilities); and valuable goods and services for residents of low-income communities (e.g., grocery stores; charter schools; health clinics).
The restrictions on the use of funds are detailed in Internal Revenue Service regulations, and ensure that substantially all of the dollars are continually invested in low-income communities for a seven-year period. Briefly:
1. Investors cannot redeem their investments for a seven-year period;
2. CDEs must invest at least 85% of dollars received from investors in qualifying projects in low-income communities;
3. Projects must be located in low-income communities; derive their revenues from low-income communities; and provide services in low-income communities;
4. Any returns of capital during the seven year period must generally be reinvested by the CDE into other qualifying projects in low-income communities.
Measures
The measures have been revised to enrich the performance metrics for Recovery targets. In some instances, targets will not be available until additional baseline data has been collected.
| Measure | Target/Actual |
|---|
| 2009 | 2010 | 2011 | 2012 |
|---|
[-]
Number of days between the date of award notification and the date by which at least 85% of allocation agreements have been signed by awardees. | 70/0 | - | - | - |
Measure Information
| Frequency : Quarterly | | Direction : Decreasing | | Type : Efficiency | | Explanation : The CDFI Fund is seeking to enter into allocation agreements with CDEs within 60 days of providing them with a Notice of Award. This is an improvement of 70 days (or approximately 50 percent) over the equivalent period of performance under the 2008 NMTC Program round, which was 130 days. Data supporting this measure will be available through the CDFI Fund's internal award tracking systems, and will be reported on a quarterly basis on the CDFI Fund's Recovery Act website. | | Unit : Days |
|
[-]
Percentage of total dollars that were invested by CDEs in "severely" distressed communities (i.e., census tracts with a poverty rate of a least 30 percent; a median family income at or below 60 percent of area median family income; and/or an unemployment rate at least 1.5 times the national average). | 0/0 | - | - | - |
Measure Information
| Frequency : Annual | | Direction : Increasing | | Type : Outcome | Explanation : The CDFI Fund anticipates that at least 75% of NMTC proceeds invested by CDEs will be invested in these severely distressed communities -- communities that far exceed the minimum qualifications of distress required under the NMTC statute (i.e., census tracts with a poverty rate of 20% or greater and/or a median family income at or below 80% of area median family income).
As stated earlier, competition for tax credit authority is extremely high and the application process is rigorous. Due to this competition, the CDFI Fund selects those CDEs willing to exceed the minimum requirements of the IRS regulations (e.g., by focusing on severely distressed communities; providing the most preferential rates and terms to their borrowers; by committing to invest more than the minimally required 85% of proceeds into low-income communities) and holds them to meeting these benchmarks as a condition of their allocation agreements.
The CDFI Fund collects data from its awardees on a number of elements, including: project address; type of project financed; description of project; total project costs; total amount of NMTC financing; rates and terms of financing; total number of temporary (construction) jobs created; total number of permanent jobs created or maintained; total square feet of real estate developed or rehabilitated; total number of housing units developed or rehabilitated; and total number of slots at community facilities (e.g., child care centers; charter schools; health care facilities).
This data is currently collected on an annual basis through the CDFI Fund's Community Investment Impact System (CIIS). Based on an analysis of performance by prior-year allocatees, the CDFI Fund anticipates that 75% of NTMC proceeds invested by Recovery Act awardees will be invested in communities that: (i) have poverty rates of 30% or greater; (ii) have median family incomes at or below 60% of the area median family income; and/or (iii) have unemployment rates at least 1.5 times the national average.
| | Unit : Percent |
|
[-]
Number of jobs (construction jobs and full-time equivalent jobs) created or maintained by businesses or real estate projects financed by NMTC investors. | 85000/0 | - | - | - |
Measure Information
| Frequency : Long-term | | Direction : Increasing | | Type : Outcome | Explanation : The CDFI Fund anticipates that Recovery Act NMTC Program awardees will be able to create or maintain approximately 85,000 jobs through the provision of loans and investments to businesses and real estate developers.
Through CIIS, the CDFI Fund collects data on jobs created and maintained, including construction jobs, at each of the businesses and real estate projects financed by the CDE. Based on a jobs-per-investment analysis of the current CIIS data collected from awardees, the CDFI Fund has determined that the $3 billion of Recovery Act NMTC allocation authority will create or maintain 85,000 construction and full time equivalent jobs.
With respect to Recovery Act reporting requirements, the CDFI Fund will require its awardees to report jobs information on a quarterly basis to the CDFI Fund. It will roll this information into an annual jobs measure that will be reported on the CDFI Fund's Recovery Act website.
| | Unit : Number |
|
Schedule and Milestones
The milestones for the use of Recovery Act assistance is to:
1. Announce the CDEs that were selected to receive a total of $1.5 billion in Recovery Act allocation authority that was set aside for applicants under the 2008 NMTC allocation round.
2. Enter into allocation agreements with CDEs selected to receive the 2008 round Recovery Act allocation authority.
3. Announce all of the CDEs that were selected to receive the $5 billion of allocation authority that is to be made available under the 2009 NMTC allocation round. This $5 billion includes the $1.5 billion of additional allocation authority made available under the Recovery Act, which will likely be distributed amongst 30 or so CDEs.
4. Enter into allocation agreements with the CDEs that receive the 2009 round allocation authority, including those that receive the Recovery Act allocation authority.
An implementation plan is available on the CDFI Fund’s website at:
http://www.cdfifund.gov/recovery/implementationplan.pdf
Milestones
| Milestone |
Completion Date |
| Announce $1.5 billion in Recovery Act allocation awards for CDEs from the 2008 NMTC allocation round. |
05/31/2009 |
| Provide allocation agreements to the CDEs from the 2008 NMTC allocation round. |
06/30/2009 |
| Announce the $1.5 billion in NMTC allocation authority for CDEs from the 2009 NMTC allocation round. |
10/15/2009 |
Projects and Activities
The CDEs that receive tax credit allocation authority finance a diversity of projects that spur economic development in distressed urban and rural communities throughout the United States, including operating businesses; retail, commercial, industrial, manufacturing, and mixed-use real estate projects; homeownership housing; and community facilities, such as charter schools, health care centers and child care facilities. These projects provide construction and permanent jobs and provide needed services to communities that lack such services.
Specific projects and activities that the CDEs will engage in will be reported after they have been financed. A total of 60 awards will be made available from the additional $3 billion in Recovery Act allocation authority.
Review Process
5.1 RISK MANAGEMENT/INTERNAL CONTROL PLAN
• For each Recovery Act program involving implementation of provisions or obligations of Recovery Act funds in FY 2009, the bureaus will perform actions 5.1.1 through 5.1.4 by April 15, 2009, with completion of 5.1.6 shortly thereafter
• Step 5.1.5 will be ongoing
• Supporting documentation will be maintained by each bureau so that it is readily accessible in the event of an audit or other needs
5.1.1 Identify and Document Program-Specific Risks
• Review pertinent existing risk assessments
• Review pertinent OMB Circular A-123/Appendix A test results, Improper Payments Information Act assessments, etc.
• Review pertinent GAO/OIG/TIGTA audit reports and related corrective action plans
5.1.2 Identify and Document Applicable Current Process Internal Controls
5.1.3 Assess Program-Specific Risks in View of Existing Controls
• Take the Risk/Impact Questionnaire to rate risks and impacts, taking into consideration the findings identified in 5.1.1 and all OMB-prescribed Recovery Act transparency and accountability objectives
• Use the “Consequence-Probability Table” (Risk/Impact Matrix) to determine the overall (combined) Risk/Impact rating
• Document assessments
5.1.4 Mitigate Risks and Impacts
• For each Program with an overall Risk/Impact rating of “High” or “Medium”:
• Identify and update existing risk mitigation plans to implement Recovery Act-related controls; plans should include regularly scheduled monitoring and testing of risk mitigation plans and controls
• Develop and execute new risk mitigation plans as needed; plans should include regularly scheduled monitoring and testing of risk mitigation plans and controls
5.1.5 Monitor Risk Mitigation Plans
• As outlined in each risk mitigation plan (per 5.1.4), each risk mitigation plan must be monitored regularly for timely and effective implementation of corrective actions and testing of controls
• Bureaus with responsibility for Recovery Act programs will leverage existing organizations and entities (e.g., A-123/Appendix A Senior Assessment Team, Senior Management Council, et al) to review, assess, and manage Recovery Act risk
• Bureaus will provide monthly progress reports on risk management to the Treasury DCFO for each program
5.1.6 Certify Completion of Risk Assessment/Development of Mitigation Plan
• Bureau Recovery Act Senior Accountable Official will sign/date a certification for each program
• Submit signed certification to Treasury DCFO
Cost and Performance Plan
The CDFI Fund’s Chief Operating Officer has been designated as the CDFI Fund’s Accountable Official (AO) with respect to the Recovery Act dollars. CDFI’s AO has established a working group consisting of representatives from the CDFI Fund’s CDFI Program office, the Resource Management office, the office of Legal Counsel, the Compliance office, and the Research office to ensure that all Recovery Act requirements are coordinated across the various units. To further this coordination, the CDFI Fund has posted a position announcement for a senior level staff person to serve as Recovery Act Program Manager. This person will be directly responsible for implementing all aspects of the Recovery Act program requirements.
CDFI’s AO has daily conference phone calls with Treasury’s Senior Accountable Official (SAO) to monitor the program. During these conference calls and on a monthly basis, the AO and the SAO monitor and review several items including obligations and outlays, acquisitions, performance measures, and accountability metrics. Corrective and/or preventive actions that are established as a result of the reviews will be tracked for implementation.
Energy Efficiency Spending Plans
NMTC Program awards will not be used to invest in Federal infrastructure projects.
Program Plan Award Types
No Data Available