The Community Development Financial Institutions Fund (“CDFI Fund”) has completed the first stage of its transition to the new census data for eligibility under the Federal New Markets Tax Credit Program. The CDFI Fund has adopted a transition process which recognizes that community development entities may have already begun to structure potential “qualified low-income community investments” based on the 2000 census data. The CDFI Fund has announced that it will allow New Markets Tax Credit community development entities to use either the 2000 census data or the 2006-2010 ACS data applied for the 2010 census tracts to qualify for “qualified low-income community investments” closed between May 1, 2012 and June 30, 2012.
With New Markets Tax Credit allocation from community development entities the most competitive it has ever been, consideration should be given to alternative and complimentary federal tax credit and subsidy programs. As example, mixed use projects with a residential rental component which may be financed through the New Markets Tax Credit program provided that the property is non-residential rental property should consider bifurcating the project into commercial and residential components. The New Markets Tax Credit program may then be used for the commercial component and the Federal low-income housing tax credit program for the residential rental component. 4% low income housing tax credits will provide approximately the same amount of equity as the New Markets Tax Credit Program and 9% low income housing tax credits will provide significantly more tax credit equity. The tradeoff is the restriction of the rental units with respect to both the income of the tenants and the rents paid for 30 years.