[Federal Register Volume 68, Number 138 (Friday, July 18, 2003)]
[Notices]
[Pages 42806-42812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18213]


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DEPARTMENT OF THE TREASURY

Community Development Financial Institutions Fund


Notice of Allocation Availability (NOAA) Inviting Applications 
for the New Markets Tax Credit Program

AGENCY: Community Development Financial Institutions Fund, Department 
of the Treasury.

ACTION: Notice of allocation availability (NOAA) inviting applications 
for the New Markets Tax Credit Program.

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SUMMARY: Title I, subtitle C, section 121 of the Community Renewal Tax 
Relief Act of 2000 (the Act), as enacted by section 1(a)(7) of the 
Consolidated Appropriations Act, 2001 (Pub. L. 106-554, December 21, 
2000), amended the Internal Revenue Code (IRC) by adding IRC section 
45D, New Markets Tax Credit. section 45D requires the Secretary of the 
Treasury (Secretary) to establish a program that will provide an 
incentive to investors in the form of a tax credit over seven years, 
which is expected to stimulate the provision of private investment 
capital that, in turn, will facilitate economic and community 
development in low-income communities. Section 121(f) of the Act, among 
other things, requires the Secretary to issue guidance on how entities 
may apply to receive allocations of New Markets Tax Credits (NMTCs), 
the competitive procedure through which such allocations will be made, 
and the actions that will be taken to ensure that proper allocations 
are made to appropriate entities. The Secretary delegated such 
authority to the Under Secretary (Domestic Finance), who in turn 
delegated such authority to the Director of the Community Development 
Financial Institutions Fund (the Fund).
    In March 2003, in the inaugural round of the NMTC Program, the Fund 
issued Notices of Allocation to qualified community development 
entities (CDEs) authorizing such entities to issue to their investors 
up to $2.5 billion in equity as to which NMTCs may be claimed. In this 
second round of the NMTC Program, the Fund may allocate to CDEs the 
authority to issue to their investors up to the aggregate amount of 
$3.5 billion in equity as to which NMTCs may be claimed (the authority 
will include the aggregated amounts of $1.5 billion for calendar year 
2003 and $2.0 billion for calendar year 2004, as permitted under IRC 
sections 45D(f)(1) and 45D(f)(3)). The Fund reserves the right to 
allocate said authority to any, all or none of the entities that submit 
an application in response to this NOAA, and in amounts determined by 
the Fund.
    This NOAA provides guidance for the application for and allocation 
of NMTCs for the second round of the NMTC Program and should be read in 
conjunction with: (i) Guidance published by the Fund on how an entity 
may apply to become certified as a CDE (66 FR 65806, December 20, 
2001); (ii) the temporary regulations issued by the Internal Revenue 
Service (26 CFR 1.45D-1T, published on December 26, 2001) and related 
guidance, including Notice 2002-64, 2002-41 I.R.B. 690, Rev. Rul. 2003-
20, 2003-7 I.R.B. 465, Notice 2003-9, 2003-5 I.R.B. 369; and (iii) the 
application and related materials for this second NMTC Program 
allocation round. All such materials may be found on the Fund's Web 
site at http://www.cdfifund.gov. The Fund strongly encourages 
applicants to review these documents. Capitalized terms used but not 
defined in this NOAA shall have the respective meanings assigned to 
them in the allocation application, the Act or the IRS temporary 
regulations.
    Through this NOAA, the Fund encourages all entities proposing to 
make Qualified Low-Income Community Investments to apply for an 
allocation of NMTCs.

[[Page 42807]]

Applications and Dates

    Electronic Applications: Simultaneous with the publication of this 
NOAA, the Fund has made the NMTC Program allocation application 
available on its Web site at http://www.cdfifund.gov. The application 
is currently available in a read-only format. However, applicants are 
expected to submit completed applications electronically to the Fund 
using a web-based application. Submission of an electronic application 
will facilitate the processing and review of applications and the 
selection of Allocatees; further, it will assist the Fund in the 
implementation of electronic reporting requirements for Allocatees. 
Please note that the Office of Management and Budget is currently 
reviewing the application form for final approval in accordance with 
the requirements of the Paperwork Reduction Act. The Fund anticipates 
that the final and approved form of the Web-based application will be 
available on the Fund's Web site commencing no later than August 22, 
2003.
    Applicants will need access to Internet Explorer 5.5 or higher or 
Netscape Navigator 6.0 or higher, Windows 98 or higher (or other system 
compatible with the above Explorer and Netscape software) and optimally 
at least a 56Kbps Internet connection in order to meet the electronic 
application submission requirements. Electronic applications must be 
submitted solely by using the format made available at the Fund's Web 
site for the NMTC Program. The Fund's electronic application system 
will only permit the submission of applications in which all required 
questions and tables are fully completed.
    The deadline for receipt of electronic applications is 5 p.m. ET on 
September 30, 2003. Electronic applications cannot be transmitted or 
received after 5 p.m. ET on September 30, 2003. Each applicant that 
submits an electronic application by the deadline must submit an 
original signature page and all attachments not later than 5 p.m. ET on 
October 7, 2003. If the original signature page is not received by this 
date and time, the application will be rejected and returned to the 
sender. If the required attachments are not received by this date and 
time, they will not be considered and will be returned to the sender. 
The signature page and attachments must be sent by mail to the address 
listed below. Please see the application instructions, provided in the 
electronic application, for further details. Additional deadlines (if 
any) relating to the submission of general supporting documentation 
will be further detailed in the electronic application.
    Paper Applications: If an applicant is unable to submit an 
electronic application, it must submit to the Fund a request for a 
paper application using the NMTC Paper Application Submission Form, and 
the request must be received by the Fund by September 15, 2003. The 
NMTC Paper Application Submission Form may be obtained from the Fund's 
Web site at http://www.cdfifund.gov or the form may be requested by e-
mail at [email protected] or by calling the Fund's NMTC Program 
help desk at (202) 622-7373. The completed NMTC Paper Application 
Submission Form should be directed to the Fund's Chief Financial 
Officer and must be sent by facsimile to (202) 622-8911.
    The deadline for receipt of a paper application, including the 
requisite original signature page and all attachments, at the 
designated location is 5 p.m. ET on September 30, 2003. Paper 
applications received after that date and time will not be accepted for 
consideration and will be returned to the sender. Applications sent by 
facsimile or by e-mail will not be accepted.

ADDRESSES: Paper applications and the signature page and attachments 
for electronic applications must be sent to: CDFI Fund Grants 
Management & Compliance Manager, NMTC Program, Bureau of Public Debt--
Franchising, 200 Third Street, PCB, Room 10, Parkersburg, WV 26101-
5312. The telephone number to be used in conjunction with overnight 
mailings to this address is (304) 480-5450. Paper applications and the 
signature page or attachments for electronic applications will not be 
accepted at the Fund's offices in Washington, DC. Paper applications 
and signature pages or attachments for electronic applications received 
in the Fund's offices will be rejected and returned to the sender. 
Except for the signature page and attachments, electronic applications 
must be submitted solely by using the Fund's Web site and must be sent 
in accordance with the submission instructions provided in the 
electronic application form.

FOR FURTHER INFORMATION CONTACT: The Fund will provide programmatic and 
information technology support related to the allocation application 
between the hours of 9 a.m. and 5 p.m. ET through September 26, 2003. 
The Fund will not respond to phone calls or e-mails concerning the 
application that are received after 5 p.m. ET on September 26, 2003, 
until after the allocation application deadline of September 30, 2003. 
Programmatic support can be obtained by calling (202) 622-7373 or 
through e-mail by sending questions or requests for programmatic 
assistance to [email protected]. Information technology support 
can be obtained by calling (202) 622-2455 or through e-mail by sending 
questions or requests for information technology assistance to 
[email protected].
    Applications and other information regarding the Fund and its 
programs may be obtained from the Fund's Web site at http://www.cdfifund.gov. The Fund will post on its Web site responses to 
questions of general applicability regarding the NMTC Program. If you 
have any general questions about the NMTC Program, contact Matthew 
Josephs, the Fund's Acting NMTC Program Manager. The Acting NMTC 
Program Manager may be reached by e-mail at [email protected], by 
telephone at (202) 622-7373, by facsimile at (202) 622-8911, or by mail 
at CDFI Fund, 601 13th Street, NW, Suite 200 South, Washington, DC 
20005. For questions regarding the tax aspects of the NMTC Program, 
contact Branch Five, Office of the Associate Chief Counsel 
(Passthroughs and Special Industries), IRS, by telephone at (202) 622-
3040, by facsimile at (202) 622-4753, or by mail at 1111 Constitution 
Avenue, NW, Attn: CC:PSI:5, Washington, DC 20224. These are not toll 
free numbers.

SUPPLEMENTARY INFORMATION:

I. Background

    By providing an incentive in the form of a tax credit over seven 
years, NMTCs are intended to stimulate the provision of $15 billion of 
private investment capital in CDEs that, in turn, will make investments 
in low-income urban and rural communities, thus facilitating economic 
and community development. The goal is to address limitations of 
financial markets by facilitating the flow of equity capital into areas 
not being adequately served by conventional lenders and investors. This 
goal can be achieved, for example, by deploying investments in products 
or services that: (a) Provide services to creditworthy borrowers or 
investees not served by conventional sources of capital; (b) provide a 
catalyst for large-scale, self-generating flows of investments (for 
example, the increased provision of critical public services); or (c) 
serve borrowers or investees who may present greater risks than would 
be assumed by conventional providers of capital in

[[Page 42808]]

order to generate benefits distributed broadly throughout the 
community.
    Through the NMTC Program, an entity may apply to the Fund to be 
certified as a CDE. Nonprofit entities and for-profit entities may be 
certified as CDEs by the Fund. Both for-profit and non-profit entities 
may apply to the Fund for an allocation of NMTCs, but only CDEs that 
are for-profit entities are eligible to issue Qualified Equity 
Investments with respect to which investors will be entitled to claim 
NMTCs. A taxpayer that makes a Qualified Equity Investment in a CDE 
that has received a NMTC Allocation from the Fund may claim a five 
percent tax credit on the investment amount as of the date on which the 
investment is initially made and on each of the next two anniversary 
dates and a six percent tax credit for each of the next four 
anniversary dates.
    In this NOAA, the Fund addresses specifically how an entity may 
apply to receive an allocation of NMTCs, the competitive procedure 
through which NMTC Allocations will be made, and the actions that will 
be taken to ensure that proper allocations are made to appropriate 
entities. Applicants should consult the temporary regulations and 
related guidance issued by the IRS for the NMTC Program to obtain 
guidance on tax issues related to the NMTC Program.

II. Eligibility

    IRC section 45D specifies certain eligibility requirements that 
each applicant must meet to be eligible to apply for an allocation of 
NMTCs. The following sets forth additional detail and certain 
additional dates that relate to the submission of applications under 
this NOAA:
    (1) CDE Certification: For purposes of this NOAA, the Fund will not 
consider an application for an allocation of NMTCs unless: (a) The 
applicant is certified as a CDE at the time the Fund receives its NMTC 
Program allocation application; or (b) the Fund receives from the 
applicant an application for certification as a CDE no later than 5 
p.m. ET on August 29, 2003. The Fund will not provide allocations of 
NMTCs to applicants that are not certified as CDEs. Applicants for 
certification may obtain a CDE certification application through the 
Fund's Web site at http://www.cdfifund.gov. Applications for CDE 
certification must be submitted as instructed in the application form.
    If an applicant that has already been certified as a CDE wishes to 
change its designated CDE service area, it must submit its request for 
such a change; said request must be received by the Fund by no later 
than 5 p.m. ET on September 30, 2003. The CDE service area change 
request must be sent from the applicant's authorized representative and 
include the applicable CDE control number, the revised service area 
designation, and an updated accountability chart that reflects 
representation from low-income communities in the revised service area. 
The service area change request must be sent by e-mail to 
[email protected] or by facsimile to (202) 622-8911.
    (2) Entities that Have Received NMTC Allocations in the Prior NMTC 
Program Allocation Round: Applicants are hereby notified that success 
in a prior round of the NMTC Program or any of the Fund's other 
programs is not a predictor of success under this NOAA. A prior 
Allocatee of the NMTC Program is not eligible to receive a NMTC 
Allocation pursuant to this NOAA unless the Allocatee can demonstrate 
via the Fund's allocation tracking system that, as of February 17, 
2004, it has issued and the Allocatee has received cash from its 
investors for 50 percent of its Qualified Equity Investments relating 
to its prior NMTC Allocation. Further, an entity is not eligible to 
receive a NMTC Allocation pursuant to this NOAA if another entity that 
Controls the applicant, is Controlled by the applicant or shares common 
management officials with the applicant (as determined by the Fund), 
has not, as of February 17, 2004, issued and received cash from its 
investors for 50 percent of its Qualified Equity Investments relating 
to a prior NMTC Allocation. For purposes of this section of the NOAA, 
the Fund will only count as ``issued'' those Qualified Equity 
Investments that have been recorded in the Fund's allocation tracking 
system by February 17, 2004. Allocatees and their Subsidiary 
transferees, if any, are advised to access the Fund's allocation 
tracking system to record each Qualified Equity Investment that they 
issue to an investor in exchange for cash.
    (3) Entities that Have Received Awards from the Fund in Prior Award 
Rounds of Other Fund Programs: Prior awardees of any component of the 
Fund's Community Development Financial Institutions (CDFI) Program, the 
Bank Enterprise Award (BEA) Program, or any other Fund program are 
eligible to apply under this NOAA, except as follows:
    (a) The Fund will not consider an application submitted by an 
applicant that is a prior Fund awardee under any Fund program or 
component of the CDFI Program if the applicant has a balance of 
undisbursed funds under said prior award(s), as of the application 
deadline of this NOAA. Further, an entity is not eligible to apply for 
a NMTC Allocation pursuant to this NOAA if another entity that Controls 
the applicant, is Controlled by the applicant or shares common 
management officials with the applicant (as determined by the Fund), is 
a prior Fund awardee under any Fund program or component of the CDFI 
Program, and has a balance of undisbursed funds under said prior 
award(s), as of the application deadline of this NOAA. For the purposes 
of this section, undisbursed funds are defined as: (i) In the case of 
prior BEA Program awards, any balance of award funds greater than 
$5,000 that remains undisbursed more than three (3) years after the BEA 
Program awardee executes an award agreement with the Fund, and (ii) in 
the case of prior CDFI Program or other Fund program awards, any 
balance of award funds greater than $5,000 that remains undisbursed 
more than one (1) year after the CDFI Program or other Fund program 
awardee executes an assistance agreement with the Fund; and
    (b) The Fund will not consider an application submitted by an 
applicant that is a prior Fund awardee under any Fund program or 
component of the CDFI Program if the applicant has failed to meet its 
reporting requirements, set forth in a previously executed assistance 
or award agreement(s), or has been debarred from applying under any 
Fund program, as of the application deadline of this NOAA. Further, an 
entity is not eligible to apply for a NMTC Allocation pursuant to this 
NOAA if another entity that Controls the applicant, is Controlled by 
the applicant or shares common management officials with the applicant 
(as determined by the Fund), is a prior Fund awardee under any Fund 
program or component of the CDFI Program, and has failed to meet its 
reporting requirements, set forth in a previously executed assistance 
or award agreement(s), or has been debarred from applying under any 
Fund program, as of the application deadline of this NOAA.
    Accordingly, applicants that are prior awardees under any other 
Fund program are advised to:
    (i) Submit all required reports by the deadlines specified in the 
assistance or award agreements governing said prior awards and to 
comply with all requirements found therein;
    (ii) Contact the appropriate Program Operations representative of 
the Fund to ensure that all necessary actions are underway for the 
disbursement of any outstanding balances of said prior awards; and

[[Page 42809]]

    (iii) Confirm that any entity that Controls the applicant, is 
Controlled by the applicant or shares common management officials with 
the applicant, and is a prior Fund awardee, has submitted all required 
reports to the Fund and is taking all necessary actions for the 
disbursement of any outstanding balances of any prior Fund awards.
    (4) Entities that Propose to Transfer NMTCs to Subsidiaries: Both 
for-profit and non-profit CDEs may apply to the Fund for allocations of 
NMTCs, but only a for-profit CDE is permitted to provide NMTCs to its 
investors. A non-profit applicant wishing to apply for a NMTC 
Allocation must demonstrate, prior to entering into an Allocation 
Agreement with the Fund, that: (1) It controls one or more Subsidiaries 
that are for-profit entities; and (2) it intends to transfer the full 
amount of any NMTC Allocation it receives to said Subsidiary. The 
Subsidiary transferee must: (i) Submit a CDE certification application 
to the Fund within 30 days after the non-profit applicant receives a 
Notice of Allocation from the Fund; and (ii) must be certified as a CDE 
prior to entering into an Allocation Agreement with the Fund. The NMTC 
Allocation transfer must be pre-approved by the Fund, in its sole 
discretion, and will be a condition of the Allocation Agreement. A for-
profit applicant that receives a NMTC Allocation may transfer such NMTC 
Allocation to its for-profit Subsidiary or Subsidiaries, provided that 
said Subsidiary transferees have been certified as CDEs and such 
transfer is pre-approved by the Fund, in its sole discretion, which 
transfer will be a condition of the Allocation Agreement.
    An applicant wishing to transfer all or a portion of its NMTC 
Allocation to a Subsidiary is not required to create the Subsidiary 
prior to submitting a NMTC allocation application to the Fund. Rather, 
the Fund will require each applicant to indicate, in its NMTC 
allocation application, whether it intends to transfer all or a portion 
of its NMTC Allocation to a Subsidiary and its timeline for doing so. 
As stated above, in no circumstance will the Fund authorize such a 
transfer until the Fund has certified the Subsidiary transferee as a 
CDE.
    (5) Entities that Propose to Submit Applications Together With 
Affiliates: If an applicant and its Affiliates wish to submit 
allocation applications, they must do so collectively, in one 
application; an applicant and its Affiliates may not submit separate 
allocation applications.
    (6) Entities Created as a Series of Funds: An applicant whose 
business structure consists of an entity with a series of funds may 
apply for CDE certification and an allocation of NMTCs as a single 
entity, or as multiple entities. If such an applicant represents that 
it is properly classified for Federal tax purposes as a single 
partnership or corporation, it may apply for CDE certification as a 
single entity. If an applicant represents that it is properly 
classified for Federal tax purposes as multiple partnerships or 
corporations, then it may submit a single application on behalf of the 
entire series of funds, and each fund must be separately certified as a 
CDE. Applicants should note, however, that receipt of CDE certification 
as a single entity or as multiple entities is not a determination that 
an applicant and its related funds are properly classified as a single 
entity or as multiple entities for Federal tax purposes. Regardless of 
whether the series of funds applies as a single partnership or 
corporation or as multiple partnerships or corporations, an applicant 
may not transfer any NMTC Allocations it receives to one or more of its 
funds unless the transfer is pre-approved by the Fund, in its sole 
discretion, which will be a condition of the Allocation Agreement.
    (7) Entities that are BEA Program Awardees: An insured depository 
institution investor (and its Affiliates and Subsidiaries) may not 
receive a NMTC Allocation in addition to a BEA Program award for the 
same investment in a CDE. Likewise, an insured depository institution 
investor (and its Affiliates and Subsidiaries) may not receive a BEA 
Program award in addition to a NMTC Allocation for the same investment 
in a CDE.

III. Application Packet

    An applicant under this NOAA must submit all of the materials 
described in the application, which is available at the Fund's Web site 
at http://www.cdfifund.gov. An application must include a valid and 
current Employer Identification Number (EIN) issued by the Internal 
Revenue Service and assigned to the applicant and, if applicable, its 
Controlling Entity; electronic applications without a valid EIN are 
incomplete and cannot be transmitted to the Fund; paper applications 
submitted without a valid EIN will be rejected as incomplete and 
returned to the sender. For more information on obtaining an EIN, 
please contact the Internal Revenue Service at (800) 829-4933 or http://www.irs.gov. An applicant may not submit more than one application. In 
addition, an applicant and its Affiliates must collectively submit only 
one allocation application; an applicant and its Affiliates may not 
submit separate allocation applications.

IV. Evaluation

    Eligibility and Completeness Review: All applications for NMTC 
Allocations will be reviewed for eligibility and completeness. The Fund 
may consult with the IRS on the eligibility requirements under section 
45D. Once the application has been determined to be eligible and 
complete, the Fund will conduct the substantive review of each 
application in accordance with the criteria and procedures described 
generally in this NOAA and the allocation application.
    Application Evaluation: In the first part of the substantive 
review, each Fund reviewer will evaluate the following application 
elements based on a 100-point, plus 10-priority point, scale (for a 
total of 110 points):
    (1) Business Strategy (25-point maximum plus up to 5 points for 
each of the two statutory priority items). In assessing an applicant's 
business strategy, reviewers will consider, among other things: the 
applicant's products, services and investment criteria; the prior 
performance of the applicant or its Controlling Entity, particularly as 
it relates to making similar kinds of investments as those it proposes 
to make with the proceeds of Qualified Equity Investments; the 
applicant's prior performance in providing capital or technical 
assistance to disadvantaged businesses or communities; the projected 
level of the applicant's pipeline of potential investments; and the 
extent to which the applicant intends to make Qualified Low-Income 
Community Investments in one or more businesses in which persons 
unrelated to the entity hold a majority equity interest.
    Under the business strategy criterion, an applicant will generally 
score well to the extent that it will deploy debt or investment capital 
in products or services which: (a) Are designed to meet the needs of 
underserved markets; (b) are flexible or non-traditional in form; and 
(c) focus on customers or partners that typically lack access to 
conventional sources of capital. An applicant will also score well to 
the extent that it: (i) Has a track record of successfully providing 
products and services similar to those it intends to use with the 
proceeds of Qualified Equity Investments; (ii) has identified, or has a 
process for identifying, potential transactions; (iii) demonstrates a 
likelihood of issuing Qualified Equity Investments and making the 
related Qualified Low-Income Community Investments in a time period 
that is

[[Page 42810]]

significantly shorter than the time period permitted by the Act; and 
(iv) in the case of an applicant proposing to purchase loans from CDEs, 
the applicant will require the CDE selling such loans to re-invest the 
proceeds of the loan sale to provide additional products and services 
to low-income communities.
    In addition, as provided by IRC section 45D(f)(2), the Fund will 
ascribe additional points to entities that meet either or both of the 
statutory priorities. First, the Fund will give up to five (5) 
additional points to any applicant that has a record of having 
successfully provided capital or technical assistance to disadvantaged 
businesses or communities. Second, the Fund will give five (5) 
additional points to any applicant that intends to satisfy the 
requirement of IRC section 45D(b)(1)(B) by making Qualified Low-Income 
Community Investments in one or more businesses in which persons 
unrelated to an applicant (within the meaning of IRC section 267(b) or 
IRC section 707(b)(1)) hold the majority equity interest. Applicants 
may earn points for either or both statutory priorities. Thus, 
applicants that meet the requirements of both priority categories can 
receive up to a total of ten (10) additional points. A record of having 
successfully provided capital or technical assistance to disadvantaged 
businesses or communities may be demonstrated either by the past 
actions of an applicant itself or by its Controlling Entity (e.g., 
where a new CDE is established by a nonprofit corporation with a 
history of providing assistance to disadvantaged communities). An 
applicant that receives additional points for intending to make 
investments in unrelated businesses and is awarded a NMTC Allocation 
must meet the requirements of IRC section 45D(b)(1)(B) by investing 
substantially all of the proceeds from the aggregate amount of its 
Qualified Equity Investments in unrelated businesses.
    (2) Capitalization Strategy (25-point maximum). In assessing an 
applicant's capitalization strategy, reviewers will consider, among 
other things: The extent to which the applicant has secured 
investments, commitments to invest, or indications of interest in 
investments from investors, commensurate with its requested amount of 
tax credit allocations; the applicant's strategy for identifying 
additional investors, if necessary, including the applicant's (or its 
Controlling Entity's) prior performance with raising equity from 
investors, particularly for-profit investors; the extent to which the 
applicant identifies how existing investors will leverage their 
investments in Low-Income Communities or how new investors will be 
brought into such investments; the extent to which the applicant 
intends to invest the proceeds from the aggregate amount of its 
Qualified Equity Investments at a level that exceeds the requirements 
of IRC section 45D(b)(1)(B), including the extent to which the 
applicant has identified the financial resources outside of the NMTC 
investments necessary to support its operations or finance its 
activities; and the applicant's timeline for utilizing an NMTC 
Allocation.
    An applicant will generally score well under this section to the 
extent that: (a) It has secured investor commitments, or has a 
reasonable strategy for obtaining such commitments; (b) its request for 
allocations is commensurate with both the level of Qualified Equity 
Investments it is likely to raise and its expected investment strategy 
to deploy funds raised with NMTCs; (c) it is likely to leverage other 
sources of funding in addition to NMTC investor dollars; (d) it intends 
to invest the proceeds from the aggregate amount of its Qualified 
Equity Investments at a level that exceeds the requirements of IRC 
section 45D(b)(1)(B). In the case of an applicant proposing to raise 
investor funds from organizations that also will identify or originate 
transactions for the applicant or from affiliated entities, said 
applicant will score well to the extent that it will offer products 
with more favorable rates or terms than those currently offered by the 
investor and/or will target its activities to areas of greater economic 
distress than those currently targeted by the investor.
    (3) Management Capacity (25-point maximum). In assessing an 
applicant's management capacity, reviewers will consider, among other 
things, the qualifications of the applicant's principals, its board 
members, its management team, and other essential staff or contractors, 
with specific focus on: Experience in deploying capital or technical 
assistance, including activities similar to those described in the 
applicant's business strategy; experience in raising capital; asset 
management and risk management experience; experience with fulfilling 
compliance requirements of other governmental programs, including other 
tax programs; and the applicant's (or its Controlling Entity's) 
financial health. Reviewers will also consider the extent to which an 
applicant has protocols in place to ensure ongoing compliance with NMTC 
Program requirements, and the level of involvement of community 
representatives and other stakeholders in the design, implementation or 
monitoring of an applicant's business plan and strategy.
    An applicant will generally score well under this section to the 
extent that its management team or other essential personnel have 
experience in: (a) Deploying capital or technical assistance in Low-
Income Communities, particularly those likely to be served by the 
applicant with the proceeds of Qualified Equity Investments; (b) 
raising capital, particularly from for-profit investors; (c) asset and 
risk management; and (d) fulfilling government compliance requirements, 
particularly tax program compliance. An applicant will also score well 
to the extent it has policies and systems in place to ensure ongoing 
compliance with NMTC Program requirements, and to the extent that Low-
Income Community stakeholders play an active role in designing or 
implementing its business plan.
    (4) Community Impact (25-point maximum). In assessing the impact on 
communities expected to result from the applicant's proposed 
investments, reviewers will consider, among other things, the degree to 
which the applicant is likely to achieve significant and measurable 
community development and economic impacts in its Low-Income 
Communities, and whether the applicant is working in particularly 
economically distressed markets and/or in concert with Federal, state 
or local government or community economic development initiatives 
(e.g., Empowerment Zones, Enterprise Communities, and Renewal 
Communities).
    An applicant will generally score well under this section to the 
extent that: (a) It articulates how its strategy is likely to produce 
significant and measurable community development and economic impacts 
that would not be achieved without NMTCs; and (b) it is working in 
particularly economically distressed or otherwise underserved 
communities and/or in concert with other Federal, state or local 
government or community economic development initiatives.
    Determination of Highly Qualified Applicants: Fund reviewers will 
evaluate and score each application in the first part of the review 
process. An applicant must exceed a minimum overall aggregate base 
score threshold (the sum of the total scores provided by the reviewers, 
minus priority points) and exceed a minimum aggregate section score 
threshold (minus priority points) in each of the four application 
sections (Business Strategy, Capitalization Strategy, Management 
Capacity, and Community Impact) in order to advance from the first part 
of

[[Page 42811]]

the substantive review process. If, in the case of a particular 
application, a reviewer's total base score or section score(s) (in one 
or more of the four application sections), varies significantly from 
the median of the reviewers' total base scores or section scores for 
such application, the Fund may, in its sole discretion, obtain the 
comments and recommendations of an additional reviewer to determine 
whether the anomalous score should be replaced with the score of the 
additional reviewer.
    The Fund will consider the applicant's total score (inclusive of 
priority points) from each reviewer and will award allocations to the 
most highly qualified applicants; provided, however, that: (1) The Fund 
has not decided at this time on a maximum allocation amount per 
applicant and the Fund, in its sole discretion, reserves the right to 
set such a maximum award amount if the Fund deems it appropriate; and 
(2) the Fund, in its sole discretion, reserves the right to reject an 
application that receives scores that are not at or above the minimum 
scoring range required for a total base score or for any one or more of 
the four application evaluation criteria outlined above and detailed 
more fully in the application materials.
    As a part of the substantive review process, the Fund may permit 
reviewer(s) to make telephone calls to applicants for the sole purpose 
of obtaining, clarifying or confirming application information. In no 
event shall such contact be construed to permit an applicant to change 
any element of its application. Reviewers will not contact applicants 
without the prior approval of the Fund. At this point in the process, 
an applicant may be required to submit additional information about its 
application in order to assist the Fund with its final evaluation 
process. Such requests must be responded to within the time parameters 
set by the Fund. The selecting official(s) will make a final allocation 
determination based on an applicant's file, including without 
limitation, eligibility under section 45D, the reviewers' scores and 
the amount of allocation authority available.
    In the case of an applicant that has previously received financial 
or technical assistance from the Fund under the CDFI Program, the Fund 
will consider the applicant's level of success in meeting the terms, 
conditions and other requirements contained in its prior or existing 
assistance agreement(s) with the Fund. In the case of an applicant that 
has previously received an NMTC Allocation from the Fund under the NMTC 
Program, the Fund will consider the applicant's level of success in 
meeting the terms, conditions and other requirements contained in its 
prior or existing Allocation Agreement(s) with the Fund and its 
demonstrated need for additional allocations. The Fund reserves the 
right to reject any NMTC allocation application in the case of a prior 
Fund awardee, if such applicant has failed to comply with the terms, 
conditions, and other requirements of the prior or existing assistance 
or award agreement(s) with the Fund. The Fund reserves the right to 
reject any NMTC allocation application in the case of a prior Fund 
Allocatee, if such applicant has failed to comply with the terms, 
conditions, and other requirements of its prior or existing Allocation 
Agreement(s) with the Fund. Further, if an entity that Controls the 
applicant, is Controlled by the applicant or shares common management 
officials with the applicant (as determined by the Fund) is a prior 
Fund awardee or Allocatee, the Fund will consider such entity's level 
of success in meeting the terms, conditions and other requirements of 
its prior assistance agreement, award agreement, and/or Allocation 
Agreement requirements with the Fund. The Fund reserves the right to 
reject any NMTC allocation application in the case of any applicant, if 
an entity that Controls the applicant, is Controlled by the applicant 
or shares common management officials with the applicant (as determined 
by the Fund), has failed to meet the terms, conditions and other 
requirements of any prior or existing assistance agreement, award 
agreement or Allocation Agreement with the Fund.
    The Fund's allocation award decisions are final, with no right to 
appeal such decisions.
    In the case of applicants or their Affiliates that are regulated by 
the Federal government, the Fund's selecting official(s) reserve(s) the 
right to consult with and take into consideration the views of the 
appropriate Federal banking and other regulatory agencies. In the case 
of applicants or their Affiliates that are also Small Business 
Investment Companies, Specialized Small Business Investment Companies 
or New Markets Venture Capital Companies, the Fund reserves the right 
to consult with and take into consideration the views of the Small 
Business Administration.
    The Fund reserves the right to conduct additional due diligence, as 
determined reasonable and appropriate by the Fund, in its sole 
discretion, related to the applicant and its officers, directors, 
owners, partners and key employees.
    The Fund further reserves the right to change these evaluation 
procedures, if the Fund deems it appropriate; if said procedural 
changes materially affect the Fund's award decisions, the Fund will 
provide information regarding the procedural changes through the Fund's 
Web site.

V. Notice of Allocation

    The Fund will signify its selection of an applicant as an Allocatee 
by delivering a signed Notice of Allocation to the applicant. The 
Notice of Allocation will contain the general terms and conditions 
underlying the Fund's provision of an NMTC Allocation including, but 
not limited to, the requirement that an Allocatee and the Fund enter 
into an Allocation Agreement. The applicant must execute the Notice of 
Allocation and return it to the Fund. By executing a Notice of 
Allocation, the Allocatee agrees that, if prior to entering into an 
Allocation Agreement with the Fund, information comes to the attention 
of the Fund that either adversely affects the Allocatee's eligibility 
for an award, or adversely affects the Fund's evaluation of the 
Allocatee's application, or indicates fraud or mismanagement on the 
part of the Allocatee, the Fund may, in its discretion and without 
advance notice to the Allocatee, terminate the Notice of Allocation or 
take such other actions as it deems appropriate. Moreover, by executing 
a Notice of Allocation, an Allocatee agrees that, if prior to entering 
into an Allocation Agreement with the Fund, the Fund determines that 
the Allocatee is not in compliance with the terms of any prior 
assistance agreement, award agreement, and/or Allocation Agreement 
entered into with the Fund, the Fund may, in its discretion and without 
advance notice to the Allocatee, either terminate the Notice of 
Allocation or take such other actions as it deems appropriate. The Fund 
will rescind its award if the Allocatee fails to return the Notice of 
Allocation, signed by the authorized representative of the Allocatee, 
along with any other requested documentation, within the deadline set 
by the Fund.

VI. Allocation Agreement

    Each applicant that is selected to receive a NMTC Allocation 
(including the applicant's Subsidiary transferees) must enter into an 
Allocation Agreement with the Fund. The Allocation Agreement will set 
forth certain required terms and conditions of the NMTC Allocation 
which may include, but not be limited to, the

[[Page 42812]]

following: (i) The amount of the awarded NMTC Allocation; (ii) the 
approved uses of the awarded NMTC Allocation (e.g., loans to or equity 
investments in Qualified Active Low-Income Businesses or loans to or 
equity investments in other CDEs); (iii) the approved service area(s) 
in which the proceeds of Qualified Equity Investments may be used; (iv) 
the time period by which the applicant may obtain Qualified Equity 
Investments from investors; and (v) reporting requirements for all 
applicants receiving NMTC Allocations. If an applicant has represented 
in its NMTC allocation application that it intends to invest 
substantially all of the proceeds from its investors in businesses in 
which persons unrelated to the applicant hold a majority equity 
interest, the Allocation Agreement will contain a covenant whereby said 
applicant agrees that it will invest substantially all of said proceeds 
in businesses in which persons unrelated to the applicant hold a 
majority equity interest.
    In addition to entering into an Allocation Agreement, each 
applicant selected to receive a NMTC Allocation must furnish to the 
Fund an opinion from its legal counsel, the content of which will be 
further specified in the Allocation Agreement, to include, among other 
matters, an opinion that an applicant (and its Subsidiary transferees, 
if any): (i) Is duly formed and in good standing in the jurisdiction in 
which it was formed and/or operates; (ii) has the authority to enter 
into the Allocation Agreement and undertake the activities that are 
specified therein; (iii) has no pending or threatened litigation that 
would materially affect its ability to enter into and carry out the 
activities specified in the Allocation Agreement; and (iv) is not in 
default of its articles of incorporation, bylaws or other 
organizational documents, or any agreements with the Federal 
government.

VII. Monitoring

    The Fund will collect information, on at least an annual basis, 
from all applicants that are awarded NMTC Allocations and/or are 
recipients of Qualified Low-Income Community Investments, including 
such audited financial statements and opinions of counsel as the Fund 
deems necessary or desirable, in its sole discretion. The Fund will use 
such information to monitor each Allocatee's compliance with the 
provisions of its Allocation Agreement and to assess the impact of the 
NMTC Program in Low-Income Communities. The Fund may also provide such 
information to the IRS in a manner consistent with IRC section 6103 so 
that the IRS may determine, among other things, whether the Allocatee 
has used substantially all of the proceeds of each Qualified Equity 
Investment raised through its NMTC Allocation to make Qualified Low-
Income Community Investments. The Allocation Agreement shall further 
describe the Allocatee's reporting requirements.
    The Fund reserves the right, in accordance with applicable Federal 
law and if authorized, to charge allocation reservation and/or 
compliance monitoring fees to all entities receiving NMTC Allocations. 
Prior to imposing any such fee, the Fund will publish additional 
information concerning the nature and amount of the fee.

VIII. Information Session

    In connection with this NOAA, the Fund will broadcast a video 
teleconference information session on August 6, 2003, from 1 pm to 5 pm 
ET. Registration is required, as the video teleconference information 
session will be broadcast to secured federal facilities. The video 
teleconference information session will be produced in Washington, DC, 
and will be downlinked via satellite to local Department of Housing and 
Urban Development offices in certain cities. For further information on 
the video teleconference information session, locations, or to 
register, please visit the Fund's Web site at http://www.cdfifund.gov 
or call the Fund at (202) 622-8401.

    Authority: 26 U.S.C. 45D; 31 U.S.C. 321; 26 CFR 1.45D-1T.

    Dated: July 14, 2003.
Tony T. Brown,
Director, Community Development Financial Institutions Fund.
[FR Doc. 03-18213 Filed 7-17-03; 8:45 am]
BILLING CODE 4810-70-P