US Consults owns 7 US Treasury certified CDE to facilitate the award of New Markets Tax Credits (39% of investment)

1. ew Markets Tax Credits
New Discretionary
Salable Federal Tax Credit Program

2. ew US Treasury Tax Credits
• What is it?
– Discretionary federal tax credit awarded for 39% of an investment
– Tax Credit is salable
– Tax Credit can be converted to a grant providing immediate cash payout
– Tax Credit can be monetized providing immediate cash payout
– New program: signed into law 2000, rules and regulations 2002, first
allocations 2003
• Who controls it.
– Special private entities called CDE (Community Development Entities)
certified by US Treasury
• How does a company qualify
– Capital spend in qualified census tracts – or census blocks
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3. ew Markets Tax Credits
• Fully-Funded $25+ Billion Program
– $26 Billion To Date
– $5 Billion Approximate New Allocations Annually
• Salable Federal Income Tax Credits
– 39% of Qualifying Investment
– $100 Investment Yields $39 Federal Income Tax Credits
• Discretionary: No Entitlements
– Can’t simply fill out a form
• Control: CDE’s
– Treasury allocates all credits to CDE’s
– CDE’s award credits to companies
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4. What Qualifies
• Type of Investments: Any Non-Housing Investment
– Manufacturing Equipment, Facilities
– Office Equipment, Computers, Etc.
• Location: Qualified Census Tract
– Average Household Income less than 80% of Statewide Average
– OR 20% + at Poverty Level
– OR Qualified by Block Data
• Decision Control: Community Development Entities
– Private, for Profit
– Certified by US Treasury
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5. CDE’s
• CDE’s - Certified by Treasury
• CDE’s - Only Parties Authorized to Award NMTC
• CDE’s - Assigned Geographic Service Area
~ National ~ Regional ~ Local
• CDE’s - Receive NMTC Allocations
• CDE’s - Can Transfer Allocations
• CDE’s – Determine Requirements
– Sole discretion not subject to further approval by Treasury
– CDE’s and agents have all the leverage
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6. MTC
• 39% of Investment
• Credits Vest Over 7-Year Period
@ 5% Each Year for 1st 3 Years @ 6% Each Year for Next 4 Years
• Example of Options
– Company Uses Credits: NPV ~ 32.0 Total Cash: 39.0
– Company Sells Credits at 10% Discount,
Receives Cash DAY 1: NPV ~ 25.9 Total Cash: 25.9
– Company Receives Grant from CDE
Receives Cash DAY 1: NPV ~ 25.9 Total Cash: 25.9
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7. MTC Schedule Options
Example: Company invests $100 MM in Qualifying Tracts
2003 2004 2005 2006 2007 2008 2009
Credit Award $39.00
NMTC Credit Vesting Schedule $5.00 $5.00 $5.00 $6.00 $6.00 $6.00 $6.00
Company Uses NMTC $5.00 $5.00 $5.00 $6.00 $6.00 $6.00 $6.00
1
Company Sells NMTC : Cash at Vest $4.50 $4.50 $4.50 $5.40 $5.40 $5.40 $5.40
2
Company Sells NMTC : Monetizes Sale / Receives CDE Grant $25.92
1
Assume 10% Discount from Face Value
2
Assume 10% Discount from Face Value and 5% Interest
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8. Tax Credit Cash Flow
INVESTMENT PARTNERSHIP Cash SOURCE OF FUNDS
Cash
PROCESS
CERTIFIED COMMU ITY DEVELOPME T E TITY
•INVESTOR INVESTS (LOANS, ETC.) IN
INVESTMENT PARTNERSHIP. INVESTOR
MAINTAINS SOLE CONTROL OF FUNDS.
CDE-IP LLC Tax Credits
•INVESTMENT PARTNERSHIP MAKES
INVESTMENT (LOAN, ETC.) IN CERTIFIED
COMMUNITY DEVELOPMENT ENTITY
THROUGH AN LLC. INVESTMENT
PARTNERSHIP MAINTAINS SOLE
CONTROL OF FUNDS.
•TAX CREDITS IMMEDIATELY AWARDED
TO INVESTMENT PARTNERSHIP WHICH
CAN IMMEDIATELY DISBURSE TAX
CREDITS IN ACCORDANCE WITH IRS
PROJECT REGULATIONS.
•CDE-IP LLC MAKES INVESTMENT IN
PROJECT (LOAN, ETC.).
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9. Value of US Consults
• Can Monetize Credits (Provides Critical
Present-Day Cash)
• Interest in numerous CDE
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