New Markets Tax Credit Investments in Native Areas // Selected Case Studies and Best Practices | pg. 55
The intricacies and logistics of the NMTC - and the accompanying IRS regulations - have
generated an entire sub-industry of accounting, legal, and other specialists. Even the most
frequent users of or participants in the program often rely on outside experts to help them
negotiate specific transactions. It is not surprising, therefore, that tribes with comparatively little
exposure to the program frequently take longer to understand the program’s nomenclature,
regulations, and compliance issues.
Staff turnover within tribes and their economic development departments can widen the
knowledge gap. With smaller entities in particular, as well as those with limited engagement in
the program, the loss of a key staff member or two can eliminate much of the institutional
memory and knowledge about the NMTC Program. Such a scenario played out with the Washoe
Tribe of Nevada and California. The new director of the Washoe Development Corporation, who
had no previous experience in the NMTC Program, had to educate herself and others about not
only the program’s nuances, but also the particular methods employed or approaches taken in the
structuring and closing of the Wa She Shu Travel Plaza. She described the recent unwinding of
the transaction at the end of its 7-year compliance period as “hellacious,” largely due to a lack of
institutional memory or clear documentation around how the transaction had been structured by
previous leadership and the reasoning for their decisions.
Similarly, there has been considerable confusion about the exit fees associated with the Maniilaq
Health Center project in Alaska. These experiences are far from unique. Several other
interviewees noted the wide variation in staff capacity among tribal economic development
officials and NMTC Program sponsors. In many cases, projects are driven largely by outsiders,
with the tribal members being relative bystanders in the process. Key tribal officials were
presented with documents to sign but they did not have an in-depth understanding of the
rationale and ramifications associated with some of the agreements.
● Best Practice: Tribal Sponsors and Potential CDE Applicants Should Evaluate the
Cost and Benefit of Engaging NMTC Experts.
Because most Qualified Active Low-Income Community Businesses (QALICBs) and
project sponsors are one-time users of the NMTC Program, they frequently come to the
process with little (if any) experience closing NMTC transactions and face a steep
learning curve.
These realities underscore the potential benefit of taking advantage of outside NMTC
expertise. Several experienced project consultants, attorneys, and accountants active in
the NMTC field have particular expertise in helping to shepherd Native-sponsored
projects to completion. Engaging legal counsel that is familiar with both the NMTC
Program and some of the nuances of tribal law proves especially helpful in negotiating
issues of sovereign immunity and lender loan security. Project consultants can prove
invaluable in helping sponsors structure transactions and identify CDEs and leverage
lenders to finance them. It should also be noted that fees charged and scope of services
provided by these experts and consultants span a wide range. Some Native CDFIs and