In a previous Housing Plus blog post on January 7, 2015, I described the various updates to the CDFI Fund’s Frequently Asked Questions document for the New Markets Tax Credit (“NMTC”) program. The most significant update may be the guidance relating to dissolving or decertifying subsidiary Community Development Entities (“CDEs”) at the end of the 7-year NMTC compliance period. The previous FAQ (released in September 2011) stated only that the CDFI Fund was “developing guidance” that it would issue at a later date. Needless to say, this led to some uncertainty in the NMTC community about when and how a subsidiary CDE could be dissolved.
The updated FAQ confirms that an Allocatee may dissolve a subsidiary CDE, or request that it become decertified as a CDE, at any time after the end of the NMTC compliance period. In order to do so, the Allocatee must submit information confirming the subsidiary CDE’s dissolution or request to become decertified as a CDE, confirm that the applicable NMTC compliance period for the subsidiary CDE has been met, and certify that no further NMTC activity will be undertaken by the subsidiary CDE. Once the information has been submitted and reviewed, the CDFI Fund will provide an acknowledgement of the dissolution/decertification and confirmation that the applicable allocation agreement(s) no longer apply to the entity. Once acknowledged by the CDFI Fund, the Allocatee’s only continuing obligation with respect to the former CDE is that it would continue to be responsible for any additional information reporting and Events of Default reporting (to the extent applicable), as set forth in the termination section of the applicable allocation agreement(s).