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New Markets Tax Credit Lexicon

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- A -

Any legal entity that controls, is controlled by, or is under common control with the applicant CDE.

Allocation Agreement
A formal agreement, by and between the Fund and a community development entity that has been provided with a NMTC allocation, that specifies the terms and conditions of such NMTC allocation.

Applicant CDE
Any legal entity that is applying to the Fund to be certified as a certified development entity, either for itself or on behalf of its subsidiary applicants.

Authorized Representative
An officer, or other individual, who has the actual authority to sign for and make representations on behalf of the applicant CDE and/or subsidiary applicants.

- C -

CDE Certification Application
The application form, issued by the Community Development Financial Institutions Fund, to be completed and submitted by an applicant CDE in order to be certified as a CDE.

Community Development Entity (CDE)
See qualified Community Development Entity.

Community Development Financial Institutions Fund (CDFI)
A division of the U.S. Department of Treasury that administers the new markets tax credit program. The Fund is responsible for issuing guidance on the CDE application, certifying CDEs, and allocating the new markets tax credit.

Comprehensive Investment Plan
A document, to be included in a community development entity's application for an allocation of NMTCs, that provides historical information and a minimum five-year investment strategy that offers a detailed discussion of (a) the applicant's track record in making investments and promoting community development; (b) the applicant's financial and operational capacity, including its ability to track NMTC investment proceeds; (c) the capacity, skills, and experience of its management team; (d) an analysis of its target market; (e) its plan for raising capital with a NMTC allocation; and (f) its strategy for using the proceeds from such an allocation (including its financial and community development underwriting criteria).

Control (when defining control over subsidiary CDEs)
Control is defined as:
(1) Ownership, control, or power to vote more than 50 percent of the outstanding shares of any class of voting securities of any entity, directly or indirectly or acting through one or more other persons;
(2) Control in any manner over the election of a majority of the directors, trustees, or general partners (or individuals exercising similar fuctions) of any other entity; or
(3) Power to exercise, directly or indirectly, a controlling influence over the management, policies or investment decisions of another entity, as determined by the Fund.

Credit Allowance Date
The date on which the qualified equity investment is initially made in the CDE and each of the six anniversary dates of such date thereafter.

Credit Allowance Period
The seven-year period beginning on the date on which a qualified equity investment, as hereinafter, is initially made.

- E -

Equity Equivalent
Equity equivalent, or EQ2, is a capital product for community development financial institutions and their investors. It is a financial tool that allows CDFIs to strengthen their capital structures, leverage additional debt capital, and as a result, increase lending and investing in economically disadvantaged communities.

Equity Investment
Any stock (other than nonqualified preferred stock as defined in IRC §351(g)(2)) in a corporation and any capital interest in a partnership.

- F -

Financial Counseling and Other Services
Advice provided by the CDE relating to the organization or operation of trade or business.

- I -

Insured Credit Union
Any credit union, the member accounts of which are insured by the National Credit Union Share Insurance Fund.

Insured Depository Institution
Any bank or thrift, the deposits of which are insured by the Federal Deposit Insurance Corporation.

- L -

Low-Income Community
In general, any population census tract if:
(1) The poverty rate for such tract is at least 20 percent, or
(2) (a) 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 (b) 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. Possession-wide median family income shall be used (in lieu of statewide income) in assessing the status of census tracts located within a possession of the United States.

Low-Income Designated Credit Union
A credit union designated as such by the appropriate National Credit Union Administration Regional Director in accordance with the criteria set forth in 12 C.F.R. §701.34.

Low-Income Persons:
Individuals residing in low-income communities having an income, adjusted for family size, of not more than (i) for non-metropolitan areas, 80 percent of the statewide median family income; and (ii) for metropolitan areas, the greater of (a) 80 percent of the statewide median family income or (b) 80 percent of the metropolitan area median family income.

- M -

Metropolitan Area:
An area designated as such by the Office of Management and Budget pursuant to 44 U.S.C. §3504(e) and 31 U.S.C. §1104(d) and Executive Order 10253 (3 C.F.R. §§1949-1953 Comp., p. 758), as amended.

- P -

Officer, director, owner, partner, key employee, or other person within a participant with primary management or supervisory responsibilities; or a person who has a critical influence on or substantive control over a covered transaction, whether or not employed by the participant. Persons who have a critical influence on or substantive control over a covered transaction are:
(1) Principal investigators.
(2) [Reserved]
[Definition per § 19.105 Definitions., Code of Federal Regulations, Title 31 -- Money and Finance: Treasury, Subtitle A--Office of the Secretary of the Treasury, Part 19--Governmentwide Deparment and Suspension (Nonprocurement) and Governmentwide Requirements for Drug-Free Workplace (Grants) Subpart A--General, As of April 23, 2003; 68 FR 19948]

- Q -

Qualified Active Low-Income Community Business (QALICB):
Any corporation (including a nonprofit corporation) or partnership if, for any taxable year:

(1) At least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community;
(2) A substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income community;
(3) A substantial portion of the services performed for such entity by its employees are performed in any low-income community;
(4) Less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to collectibles (as defined in IRC §408 (m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such business; and
(5) Less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity (as defined in IRC §1397C(e)) is attributable to nonqualified financial property.

Qualified Community Development Entity (CDE):
Any domestic corporation or partnership if (a) the primary mission of the entity is serving, or providing 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 by the Fund as a CDE. A CDE may also be a limited liability company (LLC) that meets the above tests.

Qualified Equity Investment:
Any equity investment in a community development entity (CDE) if (a) such investment is acquired by the investor at its original issue (directly or through an underwriter) solely in exchange for cash; (b) substantially all of such cash is used by the CDE to make qualified low-income community investments (QLICI); and (c) the investment is designated by the CDE as a qualified equity investment (QEI). Qualified equity investment also includes the purchase of a QEI from a prior holder, to the extent provided in IRC §45D(b)(4). Qualified equity investment does not include any equity investment issued by a CDE more than five years after the date the CDE receives an NMTC allocation. For purposes of this guidance, "equity investment" means (a) any stock (other than nonqualified preferred stock as defined in IRC §351(g)(2)) in a corporation and (b) any capital interest in a partnership. A LLC shall be deemed to be either a corporation or a partnership, according to the LLC's treatment under federal tax law.

Qualified Low-Income Community Investment:
means (A) any capital or equity investment in, or loan to, any qualified active low-income community business; (B) the purchase from a CDE of any loan made by such entity that is a qualified low-income community investment; (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, any CDE.

- S -

Any legal entity that is owned or controlled directly or indirectly by the applicant CDE.

Subsidiary Applicant
An entity that is a subsidiary of an applicant CDE and that applies for CDE certification with the applicant CDE.


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