# Presentation: 329602

## Community DevelopmentFinancial Institutions Fund

- U.S. Department of the Treasury

- New Markets Tax Credit

**Notes:**
Thank host
Introduce team
Thank people for coming
Go over agenda/schedule
Mention specific handouts/application package
Do individual/group introductions, depending on size of group
	How many have invested in CDFIs
	Credit Unions
	Banks and Thrifts
	Certified CDFIs
	CDFI intermediaries
	Prior Applicants
	Nonprofits
	Local government
	Foundations
	Others

## CDFI Fund Background	

- Created in 1994
- Supports financial institutions that provide credit and financial services to low-income persons or to distressed urban, rural, and Native American communities

- New Markets Tax Credit

**Notes:**
NOTES:
The Fund was authorized in 1994.  Its first funding round started in October 1995.  This is the fifth round of the CDFI Program and the third round of the TA Component.

CDFIs are financial institutions that specialize in serving underserved communities and the people who live there.  The Fund is based on the premise that one of the primary causes of economic distress is a lack of adequate access to capital -- people unable to get mortgages or home improvement loans; businesses unable to obtain the necessary funds for start-up or to grow or expand, etc.

## CDFI Fund Initiatives

- CDFI Program
- Core Component
- Intermediary Component
- SECA Component
- Bank Enterprise Award (BEA) Program

- New Markets Tax Credit

**Notes:**
NOTES:
This slide and the next slide provide an overview of all of the Fund’s programs and their purposes.  This slide describes Certification and the three components of the CDFI Program.  All three are governed by the same regulations.
Since1996, the CDFI Fund has provided more than $300 million to promote community and economic development and encourage private sector investment in underserved markets.
Note that not all of the Fund’s programs provide funding. FY 2000 funding levels are estimates, and are subject to the availability of funds.  The Fund may award over the indicated amounts if funding is available.  Overall, the Fund has received $95 million in its FY2000 appropriations (same amount as was provided in FY 1999).  For FY99, the CDFI Fund awarded a total of $112 million (an increase of 32% over FY98) to 260 applicants. 
As of January 12, there are 362 certified CDFIs.
Today’s session will focus on the Technical Assistance Component and CDFI certification (point to these two on the slide).

## CDFI Fund Initiatives (Cont’d)	

- Native American Technical Assistance                                  Program
- Training Program
- New Markets Tax Credit (NMTC) Program

- New Markets Tax Credit

## What is a CDFI?

- A community-based non-profit or for-profit financing institution certified by the CDFI Fund to meet criteria including:
- Primary mission of community development
- Serving a target market or population
- Providing financing
- Providing development services (such as counseling or training)
- Accountable to those it serves
- Non-governmental entity

- New Markets Tax Credit

## 
	Creates and Retains Jobs 
	Creates and Grows Businesses 			
	Develops Housing
	Builds Financial Skills and Capacity
	Creates Community Based Institution 

- 	Creates and Retains Jobs
- 	Creates and Grows Businesses
- 	Develops Housing
- 	Builds Financial Skills and Capacity
- 	Creates Community Based Institution** **

*How Can a CDFI Benefit Your Community?*

- New Markets Tax Credit

## Types of CDFIs

-  Community Development Banks & Bank   Holding Companies (Blackfeet National Bank)
-  Community Development Credit Unions
-  Community Development Loan Funds (Alaska- Growth Capital BIDCO, Inc., Tlingit-Haida Regional Housing Authority, and Hopi Credit Association )
-  Microenterprise Loan Funds (Lakota Fund)
-  Community Development Venture Capital Funds

- New Markets Tax Credit

##   The CDFI field - how big is it?

- As of Arpil 1, 2001, the CDFI Fund has certified over  412 CDFIs.

- New Markets Tax Credit

## CDFI Fund Awards

- CDFI Program
- 	**- **507 awards
**	****- **$294.4 Million
- BEA Program
**	****- **432 awards
**	****- **$135.2 Million

- New Markets Tax Credit

## The CDFI ProgramCore Component

- Invests in and builds the capacity of CDFIs.
- flexible types of assistance: grants, loans, equity                     investments, deposits & technical assistance
- demonstrate market & institutional needs through a 5-year business plan
- required one-to-one non-federal match
- evaluation factors include: financial performance, management capacity and market analysis

- New Markets Tax Credit

## The CDFI ProgramSmall and Emerging CDFI Assistance (SECA) Component

**Technical Assistance for CDFIs to strengthen the capacity of the organization to serve its Target Market.**
-  anticipated max of $ 50,000
-  awards in the form of a grant to purchase TA
-  no matching funds required
-  eligible uses include: consultants; technology; staff  training;
-  and staff support for targeted activities
**Financial Assistance for CDFIs to assist them to fulfill business plans.**
- max $150,000
- match required
- must request TA and FA, not FA alone

- New Markets Tax Credit

## The CDFI ProgramSmall and Emerging CDFI Assistance (SECA) Component

**Special eligibility requirements for applicants requesting financial assistance.**
- no prior financial assistance awards from Fund
- max $5 million in assets if not a bank/bank holding company
- if a bank/bank holding company, chartered for 3 years or less

- New Markets Tax Credit

## Investments In Indian Country

**Alaska Growth Capital BIDCO**, Anchorage, AK
**First American Credit Union**, Window Rock, AZ
**First Nations Oweesta Corporation**, Fredericksburg, VA
**Hopi Credit Association**, Keams Canyon, AZ
**Lakota Fund**, Kyle, SD
**Native American Development Corporation**, Billings, MT
**Nebraska Micro Enterprise Partnership Fund**, Walthill, NE
**New Mexico Community Development Loan Fund**, Alb, NM
**Rural Community Assistance Corporation**, Sacramento, CA
**South Dakota Rural Enterprise, Inc**., Sioux Falls, SD
**Tlingit-Haida Regional Housing**, Juneau, AK

- New Markets Tax Credit

## Provide Affordable Banking Services
Low-minimum savings accounts
Direct deposit accounts
Individual development accounts
“Drive to work” programs providing used car loans and related  training
Consumer loans for home and car repair
“School banking” programs
Provides:
Technical Assistance
Financial Literacy Programs
Homebuyer Counseling

- Low-minimum savings accounts
- Direct deposit accounts
- Individual development accounts
- “Drive to work” programs providing used car loans and related  training
- Consumer loans for home and car repair
- “School banking” programs
**Provides:**
- Technical Assistance
- Financial Literacy Programs
- Homebuyer Counseling

*Services being provided****Across the country, CDFI Fund Awards are helping to:***

- New Markets Tax Credit

## Services being provided(continued)

**Provide Financing For:**
- Single- and multi-family housing
- New and creative low-interest mortgage products
- Special needs mortgage products such as for the disabled
- Neighborhood revitalization and planning services
**Provide Venture Capital to Create and Maintain Jobs**
- Provide seed and expansion capital for small businesses
- Develop partnerships and leverage other private capital
**Provide Financing For:**
- Day care centers, health care clinics and community centers
- Small business loans
- Micro business loans

- New Markets Tax Credit

## Performance and Impact

- $3 billion in community development loans and investments _made by_ 1996 & 1997 _awardees_ have:
- supported up to 6,000 microenterprises & businesses;
- created or maintained up to 41,000 jobs;
- developed or rehabilitated up to 52,000 units of affordable housing;
- supported up to 823 community facilities, including childcare centers, health care centers, charter schools, and job training centers; and
- Provided 174,000 checking and savings accounts totaling over $442 million.

- New Markets Tax Credit

## The BEA Program

- The BEA Program provides incentives to banks and thrifts to **invest in CDFIs** and/or increase their lending, investments and the provision of financial services within distressed communities.
- Banks can receive CRA credit for these investments

- New Markets Tax Credit

## Activities of BEA Awardees

- The financial institutions awarded through the first five rounds of the BEA Program have provided:
- $683 million in equity investments and financial support to CDFIs; and
- $2.53 billion in direct lending and financial services in distressed communities.

- New Markets Tax Credit

## Native American Training & TA Program

_**PROGRAM**_**: **$ 5 Million for Training and Technical Assistance for Native American Communities
_**PURPOSE**_**: **To Increase Access to Capital in Native American, Native Hawaiian, and Alaska Native Communities
_**PROGRAM TO**_**:**** **
- Enhance Capacity to Provide Access to Capital and Credit
- Assist Financial Institutions Serving These Communities
- Assist Tribes, Villages and Native Hawaiian Communities to Establish CDFIs

- New Markets Tax Credit

## Native American Lending Study/Action Plan

**Congressionally authorized to**:
_**Identify**_** **_**barriers**_** **to private financing
_**Identify**_** **_**impacts**_** **of such barriers on access to capital and credit for Native American populations
_**Recommend**_** **necessary** **_**statutory**_** **_**and**_** **_**regulatory**_** **_**changes**_** **to existing federal programs
_**Make**_** **_**policy**_** **_**recommendations**_** **for community development financial, insured depository, secondary market, and private sector capital institutions
- Submit a** **_**final**_** **_**report**_** **to the President and Congress

- New Markets Tax Credit

## NEW MARKETS TAX CREDIT

*Spurring Investment for Business Growth in Urban and Rural Communities*

- New Markets Tax Credit

## New Markets Tax Credit

- Passed on December 21, 2000, as part of    the Community Renewal Tax Relief Act of 2000
- Allows taxable investors that make equity investments in Community Development Entities (CDEs) to receive tax credits covering a portion of their investments

## New Markets Tax Credit (cont’d)

- The credit provided to the investor covers a period of seven years
- The credit is valued at 5% of the total investment in each of the first three years, and 6% in each of the final four years
- The NMTC will spur $15 billion in business investments in Low-Income communities over seven years.

- New Markets Tax Credit

**Notes:**
NOTES:
This slide and the next slide provide an overview of all of the Fund’s programs and their purposes.  This slide describes Certification and the three components of the CDFI Program.  All three are governed by the same regulations.
Since1996, the CDFI Fund has provided more than $300 million to promote community and economic development and encourage private sector investment in underserved markets.
Note that not all of the Fund’s programs provide funding. FY 2000 funding levels are estimates, and are subject to the availability of funds.  The Fund may award over the indicated amounts if funding is available.  Overall, the Fund has received $95 million in its FY2000 appropriations (same amount as was provided in FY 1999).  For FY99, the CDFI Fund awarded a total of $112 million (an increase of 32% over FY98) to 260 applicants. 
As of January 12, there are 362 certified CDFIs.
Today’s session will focus on the Technical Assistance Component and CDFI certification (point to these two on the slide).

## How the NMTC Will Work

**Step 1**: CDFI Fund will designate Community     Development Entities (CDEs)
**Step 2**: For-profit CDEs may apply to the Fund for allocation of tax credits
**Step 3:**  Fund will select CDEs to receive tax credit allocations
**Step 4:** Selected CDEs will issue tax credits to equity investors

- New Markets Tax Credit

## How the NMTC Will Work (cont.)

**Step 5**: CDEs will use the proceeds from the equity investment to:
- Invest in or lend to businesses located in Low-Income Communities;
- Provide technical assistance to such  businesses; or
- Invest in, lend to, or purchase loans from other CDEs   that support businesses in Low-Income Communities.

- New Markets Tax Credit

## How the NMTC Will Work (cont.)

*Purchase Investments & Loans*

*Investments, Loans or Counseling*

**Community Development Entity**
- (For Profit only)

- Tax Credit Allocation

*Equity** *

- Business

**How New Market Tax **
**Credits Work**

- CDE’s

- CDE’s

- Tax Credit Allocation

- Federal Gov’t

- Private Investors

*Investments & Loans*

- Business

- New Markets Tax Credit

## What is a CDE?

- Has a primary mission of serving Low-Income Communities or persons
- Is accountable to residents of its Low-Income Communities
- Is designated as a CDE by the Fund

**Note:** CDFIs and SSBICs automatically qualify as CDEs, but must apply to the Fund to receive their designation.

- New Markets Tax Credit

**Notes:**
NOTES:
See page 19 of the funding application for a detailed description of the Primary Mission requirements.

Reminder:  Any words in Italics (such as Affiliate) are defined in the Glossary enclosed in the  Application packet.

## Why Become a CDE?

- For-profit CDEs may apply to the Fund for the authority to issue tax credits to equity investors
- Certain CDEs (including non-profit CDEs) are eligible to receive loans and investments from those for-profit CDEs that have been allocated tax credits from the Fund

- New Markets Tax Credit

**Notes:**
NOTES:
See page 19 of the funding application for a detailed description of the Primary Mission requirements.

Reminder:  Any words in Italics (such as Affiliate) are defined in the Glossary enclosed in the  Application packet.

## Current Status 

- On May 1, 2001, the Fund and IRS each published documents for public comment in the Federal Register.
- The Fund is seeking comments relating to the designation of CDEs and the competitive allocation of tax credits.
- IRS is seeking comments relating to tax policy, including qualifying investment activities and recapture events.

- New Markets Tax Credit

**Notes:**
NOTES:
See page 19 of the funding application for a detailed description of the Primary Mission requirements.

Reminder:  Any words in Italics (such as Affiliate) are defined in the Glossary enclosed in the  Application packet.

## Next Steps

- Comments are due to the Fund and to IRS no later    than July 2, 2001.
- IRS will develop implementing regulations.
- The Fund will develop application materials.
- It is anticipated that the Fund will accept applications from organizations seeking designation as CDEs in the Fall.
- A Notice announcing the competitive allocation of tax credits will be published after IRS publishes the implementing regulations.

- New Markets Tax Credit

## CONTACTING THE FUND

- _CDFI Fund’s Main Number_ 	Phone:  (202) 622-8662
- 	Fax: (202) 622-9184
- 	        (202) 622-7754

- Main Website: www.treas.gov/cdfi
- E-mail Address: cdfihelp@cdfi.treas.gov

- New Markets Tax Credit

**Notes:**
Here are some contact numbers for getting materials and additional information.

The Fund’s web site has copies of all of the application materials, the regulations and Notice of Funds Availability (NOFA).  The web site also has information on previous awardees and certified CDFIs.