n-03-9.pdf

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Part III - Administrative, Procedural, and Miscellaneous

Section 45D.--New Markets Tax Credit

26 CFR 1.45D-1T: New Markets Tax Credit

Notice 2003-9
PURPOSE
The purpose of this notice is to announce that the Treasury Department and
Internal Revenue Service will amend § 1.45D-1T(c)(3)(ii) of the temporary Income Tax
Regulations to extend a deadline relating to certain equity investments made before the
receipt of a new markets tax credit allocation from the Secretary under § 45D(f)(2) of the
Internal Revenue Code.
BACKGROUND
Section 45D(a)(1) provides a new markets tax credit on certain credit allowance
dates described in § 45D(a)(3) with respect to a qualified equity investment in a
qualified community development entity (CDE).
Section 45D(b)(1) provides that an investment in a CDE is a qualified equity
investment only if, among other requirements, the CDE designates the investment as a
qualified equity investment.
Section 45D(c)(1) provides that an entity is a CDE only if, among other
requirements, the entity is certified by the Secretary as a CDE.

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Section 45D(b)(2) provides that the maximum amount of equity investments
issued by a CDE that may be designated by the CDE as qualified equity investments
shall not exceed the portion of the new markets tax credit limitation set forth in §
45D(f)(1) that is allocated to the CDE by the Secretary under § 45D(f)(2).
Section 1.45D-1T(c)(3)(i) provides that, except as provided in § 1.45D-
1T(c)(3)(ii), an equity investment in an entity is not eligible to be designated as a
qualified equity investment if it is made before the entity enters into an allocation
agreement with the Secretary. An “allocation agreement” is an agreement between the
Secretary and a CDE relating to a new markets tax credit allocation under § 45D(f)(2).
Section 1.45D-1T(c)(3)(ii) provides that, notwithstanding § 1.45D-1T(c)(3)(i), an
equity investment in an entity is eligible to be designated as a qualified equity
investment if -- (A) the equity investment is made on or after April 20, 2001; (B) the
entity in which the equity investment is made is certified by the Secretary as a CDE
under § 45D(c) before January 1, 2003; (C) the entity in which the equity investment is
made receives notification of the credit allocation (with the actual receipt of such credit
allocation contingent upon subsequently entering into an allocation agreement) from the
Secretary before January 1, 2003; and (D) the equity investment otherwise satisfies the
requirements of § 45D and § 1.45D-1T.
The Secretary of the Treasury Department has delegated certain administrative
functions relating to the new markets tax credit program to the Under Secretary
(Domestic Finance), who in turn has delegated those functions to the Community
Development Financial Institutions Fund (CDFI Fund). The delegated administrative

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functions include CDE certifications and new markets tax credit allocations.
The CDFI Fund published a Notice of Allocation Availability (NOAA) in the
Federal Register on June 11, 2002 (67 FR 40112) covering, among other things, how
an entity applies for an allocation under § 45D(f)(2). The NOAA set a deadline for
receiving all allocation applications (electronic and written) of no later than 5 p.m. ET on
August 29, 2002.
DISCUSSION
The CDFI Fund will not complete new markets tax credit allocations before
January 1, 2003. Accordingly, the Treasury Department and Service intend to amend §
1.45D-1T(c)(3)(ii) to provide that, notwithstanding § 1.45D-1T(c)(3)(i), an equity
investment in an entity is eligible to be designated as a qualified equity investment
under § 1.45D-1T(c)(1)(iii) if:
1. The equity investment is made on or after April 20, 2001;
2. The designation of the equity investment as a qualified equity investment is
made for a credit allocation received pursuant to an allocation application submitted to
the CDFI Fund no later than August 29, 2002; and
3. The equity investment otherwise satisfies the requirements of § 45D and §
1.45D-1T.
The temporary regulations will be revised to incorporate the guidance set forth in
this notice. The revision to the temporary regulations reflecting this notice will be
effective for equity investments made on or after April 20, 2001.
DRAFTING INFORMATION

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The principal author of this notice is Paul Handleman of the Office of Associate
Chief Counsel (Passthroughs and Special Industries). For further information regarding
this notice, contact Mr. Handleman on (202) 622-3040 (not a toll-free call).