What are New Markets Tax Credits? First tax credit program to stimulate commercial investment in “low-income communities” The program is administered by the US Treasury Department through a division call the CDFI Fund, in a unique public/private partnership with Community Development Entities (CDEs)

1. New Markets Tax Credits
An opportunity for your business

2. Agenda
1:00-1:30 Registration and Mingling
1:30-1:40 Welcome and General Remarks
1:40-2:00 Legislative and Local/National NMTC Economic Update
2:00-3:10 NMTC Basics and Lender/Investor Perspective
3:10-3:20 Break
3:20-3:35 Florida Community Loan Fund
3:35-3:50 Community Hospitality Healthcare Services
3:50-4:05 Raza Development Fund
4:10-4:30 Community Needs: Questions and Answers

3. Legislative and Local/National NMTC
Economic Update

4. Legislative Report: NMTC Status
 Expired December 31, 2014
 2014 awards ($3.5 billion) will be announced in May
or June
 If the tax reform effort fails this year, NMTC must be
extended before the end of 2015
 The next application round should open this summer,
regardless of the status of an extension

5. President’s FY2016 Budget
 Makes the NMTC
permanent
 Provides $5 billion in
annual allocation
authority

6. Extension Legislation: Senate (S. 591)
 New Markets Tax Credit Extension Act of
2015
 Increases allocation and makes the program
permanent
 Introduced by Senators Blunt (R-MO),
Schumer (D-NY), Daines (R-MT), and Cardin
(D-MD)
 6 cosponsors

7. Extension Legislation: House (H.R. 855)
Introduced by Representatives Tiberi (R-OH),
Neal (D-MA), and Reed (R-NY)
35 cosponsors
Increases allocation and makes the
program permanent

8. NMTC Awards to Local CDEs
Community Development Entity City Year Amount
Capital Trust Agency Community Development
Entity, LLC
Gulf Breeze 2008 $75,000,000
Community Hospitality Healthcare Services LLC Placida 2010 $63,000,000
Community Hospitality Healthcare Services LLC Placida 2012 $60,000,000
Community Hospitality Healthcare Services LLC Placida 2013 $60,000,000
Florida Community Loan Fund, Inc. Orlando 2003 $15,000,000
Florida Community Loan Fund, Inc. Orlando 2009 $45,000,000
Florida Community Loan Fund, Inc. Orlando 2010 $21,000,000
Florida Community Loan Fund, Inc. Orlando 2011 $30,000,000
Florida Community Loan Fund, Inc. Orlando 2012 $40,000,000

9. National Economic Impact (2003-2012)
 NMTC Coalition’s December
2014 Economic Impact
Report
 $31 billion in NMTC financing
to 3,800 projects totaling $63
billion in project costs
 Nearly 750,000 jobs (457,487
construction jobs and 286,781
full-time equivalent jobs)
 Jobs and economic activity
pay for the cost of the
program

10. $664 million in NMTC financing went to 81 projects
10,804 construction jobs
7,017 full-time jobs
Source: A Decade of
the NMTC (2014,
NMTC Coalition)

11. Arts
1%
Automotive
5%
Community Services
20%
Education
7%
Energy
2%
Grocery
6%
Health
9%
Hotel
5%
Housing
7%
Information
Technology
1%
Manufacturing
11%
Mining
2%
Office
10%
Restaurant
2%
Retail
5%
Science, Research &
Technology
4%
Timberlands
1%
Florida Projects by Industry Sector (2003-2012)

12. NMTC Eligibility
Statewide Tallahassee

13. NMTC Projects
Statewide Tallahassee

14. More Information
 Fact Sheets, target lists, co-sponsorship lists on the NMTC
Coalition website:
 nmtccoalition.org

15. New Markets Tax Credits
An opportunity for your business

16. Baker Tilly
 One of the top 12 accounting and advisory firms in the United
States according to Accounting Today’s 2014 list of “Top 100 Firms”
 One of nation’s foremost experts in NMTCs
• We operate our own CDEs (The Valued Advisor Fund and the Business
Valued Advisor Fund), which have received combined allocations
totaling $188.4 million in NMTCs
• Assisted in closing 150+ NMTC transactions to date, bringing
investment value of over $4.7 billion to distressed communities
nationwide through the deployment of $2.4 billion of NMTC allocation
• Worked with more than 60 CDEs on successfully structuring and
closing transactions
• Authored over 30 award winning allocation applications totaling more
than $2 billion in NMTC awards
• Provide back office operations to 9 CDEs managing over $900 million
in deployed NMTC
 Contact:
• Terri Preston at terri.preston@bakertilly.com or 608-240-2546

17. Overview
 What are New Markets Tax Credits?
• First tax credit program to stimulate commercial investment in “low-
income communities”
• The program is administered by the US Treasury Department
through a division call the CDFI Fund, in a unique public/private
partnership with Community Development Entities (CDEs)

18. Overview
 What is a “low-income community”?
• Based on census tract data – median income and/or poverty rate
• Qualifying vs. “Higher Distress”
― Includes unemployment, rural areas, Brownfield areas,
designated Hot Zones, medically underserved areas, food
deserts, Colonias and HUB Zones
• Qualifying census tracts in non-metropolitan counties automatically
qualify as “higher distress”
• Qualifying census tracts can be located using the mapping program
located on the CDFI Fund website at www.cdfifund.gov

19. Low-Income Community Investment

20. Overview
 What is a “Community Development Entity”?
• CDEs come in a variety of forms:
― An affiliate of a municipality to promote economic development
― An affiliate of a bank to help meet the bank’s community
reinvestment goal
― Non-profit and for-profit entities with a mission to serve low
income communities
• CDEs have defined geographic service areas and are charged with
evaluating each potential NMTC transaction for community impact
• CDEs can be found using a search engine on the CDFI Fund
website at www.cdfifund.gov

21. Overview
 How does the program work?
• Through a competitive application process, CDEs are annually
delegated NMTC allocation authority from the CDFI Fund.
• CDEs are able to attract capital investments in their allocation, and
the proceeds are used to fund low interest rate, convertible loans or
investments in qualifying businesses or commercial real estate
developments.
• CDEs will search for qualifying businesses and real estate
developments to provide NMTC-subsidized financing, which is also
a competitive process.

22. Overview
 How does the program work?
• The NMTC proceeds typically fund about 20-25% of a project and
is paired (or “leveraged”) with owner equity, borrowed funds, or
other grant/public funds, which in total must equal or exceed the
amount of NMTC allocated to a deal.
• The borrower benefits from obtaining 20-25% of their project
funding from a CDE that will offer flexible terms (e.g. subordination
to other lenders), a low rate of interest (around 2%), interest-only
terms for 7-years and may convert substantially all of the principal
at maturity.

23. NMTC Program Benefits
 Economic benefit to recipient
• Capital to fund projects, business expansion or debt refinancing
― Tax credits are monetized to bring additional capital to the
capital structure
• Low cost of capital
• Flexible loan terms including longer amortization and higher LTV
ratios
• Debt Conversion
― At the end of the 7-year compliance period a significant portion
of the NMTC benefit may be converted to equity or carried as
debt by an affiliate of the borrower or the borrower itself,
depending on the circumstances of the transaction.

24. NMTC Program Benefits
 Community benefit
• Create additional economic development for the local community
• Attract and retain skilled workforce
• Bring new goods or services to underserved communities
• Capital investment to underserved, qualified Low-Income
Communities (LIC)

25. Community Development Entity
 CDEs have a primary mission of providing investment capital for
low-income communities and are accountable to the residents of
that community through a governing or advisory board
 Responsibility for ongoing monitoring and maintenance of Sub-
CDE
 CDEs earn fees from deploying and managing the allocation,
and those affiliated with banks are commonly eligible for
Community Reinvestment Act (CRA) credit

26. Allocation authority history
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Amount($bil)
NMTC allocation authority history
*2009 includes an additional $1.5 billion round of authority from the American Recovery and Reinvestment Act
Through 2014, a total of
$40 billion of authority
has been allocated,
averaging $40.2 million
in the last round
2
6

27. Allocation authority history
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Amount($mil)
Average NMTC Award

28. Critical distinctions
Unlike other tax credit programs, the NMTC does not “belong to”
the qualified borrower. It was awarded to the CDE, to be
monetized, with the proceeds invested in (or loaned to) a
business that qualifies for the subsidy.
A NMTC Allocation Cash

29. NEWMARKETSTAXCREDITS
WORKING WITH 3RD PARTY ALLOCATEES - LEVERAGE MODEL STRUCTURE
Investment Fund
QALICB/Borrower
Sub CDE
CDE = Community Development Entity
QEI = Qualified Equity Investment
QLICI = Qualified Low Income Community Investment
QALICB = Qualified Active Low Income Community Business
NMTC Equity Investor
Project Sponsor
Leverage Lender
Provides leverage into NMTC
structure. Leverage loan sources
include traditional providers like
Chase or a regional bank, capital
campaign funds, or monies from
state or federal grant programs.
Invests capital to obtain tax credit
benefit via equity contribution to
investment fund, which flows
through the sub CDE to support
project financing needs.
.
Parent CDE
Receives NMTC allocation or
authority from Treasury which it sub-
allocates to sub CDEs, and makes
loans (QLICIs) to borrower.
Allocation Credit
Typically a single purpose entity (SPE)
created to act as the borrower for the
NMTC funding as a Qualified Active
Low-Income Community Business, per
Treasury regulation.
The parent entity of the QALICB.
$
Loan
$
Equity
$ QEI
$ QLICICreates SPE
Players in a leverage model structure
QEI

30. The Math
 Here’s how it works:
The Math (estimated)
NMTC allocation $10,000,000
NMTC rate 39%
Tax credits $3,900,000
Investor monetization ($0.82 per credit
example)
$3,198,000
Less estimated closing costs & fees $775,000
Net NMTC cash to the project: $2,423,000
*Numbers above are intended for purposes of an example only

31. NMTC Investor
 Tax credit buyer, typically a financial institution, receives the
benefit of the NMTCs and community reinvestment act credit
 Credits purchased from a CDE and realized over a 7 year period
• Years 1-3: 5%
• Years 4-7: 6%
• Total benefit of 39%
 Investor currently pays about $0.80-0.84 in this market for
NMTCs
 May act as leverage lender
 No economic interest in the QALICB
 Main concern is to avoid recapture

32. McDonogh 42 Elementary School
New Orleans, LA
• Generate strong returns on acceptable risk
profile
• Achieve Community Reinvestment Goals
• Make beneficial impacts on the communities
served
• make these investments?
Why Do Investors choose specific deals?

33. Lender/Investor at a Glance Checklist for NMTC Financing
 Business or real estate development is located in a designated
low-income community that’s considered higher distress
― Google Baker Tilly NMTC Mapping Tool or email us to ask
 A substantial portion of tangible assets, revenue and employees
are located in low-income community
 Business is not engaged in, or leasing to, a “sin” business
 Project creates tangible community and economic outcomes
 Total project financing meets $5 million threshold
 Project sponsor has secured other necessary sources of
financing
 Confirm client interest and next steps

34. Qualifying Business or Development—the “QALICB”
 Geographic restrictions
• Business located in a Low-Income Community
• Determined by census tract (see www.cdfifund.gov)
― Or Google: Baker Tilly NMTC Mapping Tool
 Technical requirements
• Over 50% of gross income is derived from the business activity
located within a Low-Income Community
• Over 40% of the tangible property of the business is located in a
Low-Income Community
• Over 40% of the services are performed by the employees are in a
Low-Income Community
• Must not have more than 5% in either collectibles or non-qualified
financial assets

35. Qualifying Business or Development
 Ineligible activities
• Residential rental property
― Mixed use is permitted so long as over 20% of the rental income is
derived from commercial tenants
• Straight acquisition or refinance of rental property – must have
“substantial rehab” (25% of acquisition basis) or be owner occupied
• Certain businesses:
― Race tracks & gambling facilities
― Golf courses & country clubs
― Liquor Stores
― Farming
― Massage & tanning businesses
― Undeveloped land holding

36. What makes a good QALICB candidate?
 Located in a “highly distressed” census tract – any one of the
following:
• Poverty > 30%
• Median Income < 60% of statewide
• Unemployment > 1.5 times national average
• Non-metropolitan county
• Two of any secondary criteria
 Community impact
• Tangible community benefit – measured by quality job creation,
providing unmet goods & services to low income communities (grocery
stores), environmentally sustainable construction, etc.
• Part of an existing plan for economic revitalization
• “But for” test – NMTC fills a real funding gap that would otherwise not
happen
 Ready to go
• Other sources of funding are committed
• Approvals all in place

37. Raza Development Fund

38. Raza Development Fund
• About Raza Development Fund
― Established 15 yrs ago as a 501 (c) 3 CDFI under the US Dept of Treasury
― National Service Area – Headquartered in Phoenix, AZ
― Lender
• Education & Childcare
• Healthcare
• Community Facilities
• Affordable Housing
3

39. Raza Development Fund
• About Raza Development Fund
― Invest in Leaders – Not Simply Projects
― Track Record
― Community Impact
3

40. • RDF NMTC Program
― Community Development Financing Augmented by NMTCs
― Community Development Entity
• 3 Awards - $103,000,000
• 11 Projects in 9 states
― Community Impact
• 3,100+ low-income student quality education
• 10,200 individuals access dignified health care options
• 1,600,0000+ individuals utilize benefits from community facilities
• Leveraged $150,000,000 private capital into severely distressed
communities
4
Raza Development Fund

41. Raza Development Fund
• RDF NMTC Applicant Criteria
― Must Meet NMTC Program Eligibility Requirements
― Must Be Aligned with RDF’s Allocation Application Agreement and Business
Strategy
― Timing
― Sources of Funds
― Completed RDF NMTC Intake Form
― “But For Test”
― Expectation of Community Benefits
― Commitment to Compliance Requirements
― Priority Given to NCLR Affiliates
4

42. Raza Development Fund
• Contacts
 Carlos de Quesada,
VeraCruz Advisory (RDF SE Region Representative)
(954) 829-2561
cdequesada@VeraCruzAdvisory.com
 Melissa McDonald,
RDF Investment Associate
(602) 417-1421
mmcdonald@razafund.org
4

43. Community Hospitality Healthcare Services

44. CHHS
 Community Hospitality Healthcare Services (CHHS) is a
national CDE that has received 3 allocations ($183 MM). The
CDE provides financing for development, modernization, and
operations of community facilities serving Low-Income Persons
(LIP) and Low-Income Community (LIC) residents in severely
distressed and Medically Underserved Areas nationwide.
 Project funding provides for:
• Expansion of services
• Construction and improvement of new and/or existing space
• Job training
• Workforce development
• Computer systems and medical equipment
4
4

45. CHHS - Impact
Community Impacts provided:
 1771 FTE jobs created
• 762 LIP accessible jobs
• 779 LIC resident accessible jobs
 1214 construction jobs created
 Annual services to 210,860 LIP
4
5

46. CHHS – Spectrum Health Services
The project involved the new construction of a 34,570 square foot
building whose primary tenant is a Federally Qualified Health
Center focused on serving the indigent and underinsured.
5201 Haverford Ave, Philadelphia, PA
4
6

47. CHHS – Spectrum Health Services
Distress Criteria
 37.5% Poverty
 47.8% of the AMI
 3.5 x National Unemployment Rate
 Medically Underserved Area
4
7

48. CHHS – Spectrum Health Services
4
8
Community Alignment
 In developing the new comprehensive plan for the City of
Philadelphia, the City Council paid significant interest relative to
stabilization and long-term growth of its neighborhoods. The
plan calls for eight primary areas of focus, including areas such
as preservation in such a historic city, increasing public green
space, and providing for housing growth. In addition to citing
economic development and growth in net jobs, the city council
also cited the following which specifically supports the project
under review: “Public services and utilities are customer service
oriented and service delivery is equitable” as a key to long-term
neighborhood success.” The project as designed conforms to
and is in alignment with these goals and objectives.

49. CHHS – Spectrum Health Services
4
9
Community Impacts
Impacts
Sustained Jobs 60
Created Jobs 68
Construction Jobs 58
Services 82,000

50. Florida Community Loan Fund

51. FCLF is a statewide CDFI
Founded in 1994 to provide a statewide
source of flexible financing for non-
profits working in community
development.
3 Lending Programs
Through June 30, 2014:
Lending
 188 loans and 14 NMTC Transactions
 Over $195 million
 Projects totaling over $670 million.
Impact
 3,482 housing units
 1.3 million sf of facility space
 6,424 jobs created or retained
 33,614 clients served annually

52. NMTC projects that FCLF looks for:
 Community facilities
 Community health centers or health care related projects serving low income clients
 Charter schools serving exclusively low-income students
 Green-driven projects
 Solar
 Renewable energy
 High impact economic development projects
 Job creation (substantially from within the community)
 Part of community redevelopment master plan
 LEED-certified
 Bringing new services to a low-income community
 a grocery store in a neighborhood that hasn't seen one in 20 years
 a new or renovated building in a high distress CT that brings new business, services and jobs to the
neighborhood.
 Some of the projects that are qualified but FCLF will not do:
 museums;
 hotels;
 fast food restaurants

53. NEWMARKETSTAXCREDITS
Investment Fund
QALICB/Borrower
Sub CDE
CDE = Community Development Entity
QEI = Qualified Equity Investment
QLICI = Qualified Low Income Community Investment
QALICB = Qualified Active Low Income Community Business
NMTC Equity Investor
Project Sponsor
Leverage Lender
Parent CDE
Allocation Credit
$
Loan
$
Equity
$ QEI
$ QLICICreates SPE
Players in a leverage model structure
QEI

54. The Math in Action
 Here’s how it worked:
The Math (actual transaction)
NMTC allocation (2 CDEs) $16,000,000
NMTC rate 39%
Tax credits $6,240,000
Investor monetization (avg. $0.78 per credit) $4,860,700
Less estimated closing costs & fees $1,098,858
Net NMTC cash to the project: $3,761,842
*Numbers above are intended for purposes of an example only

55. Borrower saw these benefits:
 EQUITY
 Lower loan amount
 Construction interest costs lower due to significant project funding from
cash rather than debt
 Capital campaign focus for non-profit shifted to future phases rather than
focusing on completion of initial phase, building substantial momentum
and community support
 Begin project now, instead of waiting 2-4 years
 Jump starting the work on Phase II expansion of school and into another
county
 Broader exposure in local community and state and in business world for
project
 Exposed to completely new financial partners

56. Miracle Place before/after construction:

57. Community saw these benefits:
 158 construction or permanent jobs
 94 units of homeless housing created or renovated
 172 daycare spaces
 New commercial kitchen assisting the borrowers provision of 20,000 meals annually
 Jump-starting Phase II
 Expansion of public school to 192 students
 Creation of multi-use building on campus
 Expansion of food and client services into Pasco County
 Jump starting Phase III – housing services in Pasco County

58. Q & A

59. Thank you for your interest in serving our nation’s
distressed communities
Please feel free to contact:
Emily@actimpact.org
Terri.preston@bakertilly.com
En.jung.kim@chase.com
tpreston@valuedadvisorfund.com
mmcdonald@razafund.org
nblack@fclf.org
paul@rapoza.org
To distress your project, please use the following link:
http://www.bakertilly.com/insights/new-markets-tax-credit-and-low-income-housing-
tax-credit-mapping-tool/