Lexicon of Relevant Terms

Affiliate

Any legal entity that Controls, is Controlled by, or is under common Control with the Applicant CDE.

Community Development Entity (CDE)

see Qualified Community Development Entity.

Community Development Financial Institutions Fund (CDFI)

http://www.cdfifund.gov/
A division of the US 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.

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.

Financial Counseling and Other Services

Advice provided by the CDE relating to the organization or operation of trade or business.

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 Persons:

means 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.

Metropolitan Area:

means 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.

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):

means 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:

means any equity investment in a Community Development Entity 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; and (C) the investment is designated by the Community Development Entity as a Qualified Equity Investment. Qualified Equity Investment also includes the purchase of a Qualified Equity Investment 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 Community Development Entity more than five years after the date the Community Development Entity receives a 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. An 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.

Subsidiary

Any legal entity that is owned or Controlled directly or indirectly by the Applicant CDE.

 
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