82 FR 26335 - Guaranteed Loanmaking and Servicing Regulations; Correction

DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service

Federal Register Volume 82, Issue 108 (June 7, 2017)

This document contains a correction to the final rule published in the Federal Register on June 3, 2016, entitled ``Guaranteed Loanmaking and Servicing Regulations.'' The Rural Business-Cooperative Service (Agency) is an agency within the Rural Development mission area of the United States Department of Agriculture (USDA) responsible for administering the Business and Industry (B&I) Guaranteed Loan Program. The B&I Guaranteed Loan Program is authorized by the Consolidated Farm and Rural Development Act and provides loan guarantees to banks and other approved lenders to finance private businesses located in rural areas.

[Federal Register Volume 82, Number 108 (Wednesday, June 7, 2017)]
[Rules and Regulations]
[Pages 26335-26336]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-11736]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
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under 50 titles pursuant to 44 U.S.C. 1510.

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Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Rules 
and Regulations

[[Page 26335]]



DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4279

RIN 0570-AA85


Guaranteed Loanmaking and Servicing Regulations; Correction

AGENCY: Rural Business-Cooperative Service and Rural Utilities Service, 
USDA.

ACTION: Correcting amendment.

-----------------------------------------------------------------------

SUMMARY: This document contains a correction to the final rule 
published in the Federal Register on June 3, 2016, entitled 
``Guaranteed Loanmaking and Servicing Regulations.'' The Rural 
Business-Cooperative Service (Agency) is an agency within the Rural 
Development mission area of the United States Department of Agriculture 
(USDA) responsible for administering the Business and Industry (B&I) 
Guaranteed Loan Program. The B&I Guaranteed Loan Program is authorized 
by the Consolidated Farm and Rural Development Act and provides loan 
guarantees to banks and other approved lenders to finance private 
businesses located in rural areas.

DATES: Effective June 7, 2017.

FOR FURTHER INFORMATION CONTACT: David Chestnut, Rural Development, 
Business Programs, U.S. Department of Agriculture, 1400 Independence 
Avenue SW., Stop 3224, Washington, DC 20250-3224; email: 
[email protected]; telephone number: (202) 401-0158.

SUPPLEMENTARY INFORMATION:

Need for Correction

    On June 3, 2016, the Agency published a final rule for the Business 
and Industry (B&I) Guaranteed Loan Program (81 FR 35984). Since then, 
the Agency has discovered the need for a correction to the regulation 
regarding provisions relating to the New Markets Tax Credit (NMTC) 
program.
    The preamble of the final rule publication noted that the rule has 
been expanded to include a lender's leveraged loan to accommodate the 
mechanics of the NMTC program. The Agency has received comments from 
many practitioners of the NMTC program that the Agency has incorrectly 
stated in Sec.  4279.116(b) that a ``sub-CDE'' is the borrower in a 
leveraged equity transaction for the NMTC program. A NMTC sub-CDE is 
not a borrowing entity; it is a lending entity established for a single 
specific NMTC investment. The correct borrower in the mechanics of a 
leveraged equity NMTC transaction is an investor fund entity owned by a 
NMTC investor and a leveraged lender, which has been established for a 
single specific NMTC project. The investor fund entity makes a 
qualified equity investment to the sub-CDE that in turn provides loans 
to an eligible business. To correct this error and accommodate the 
mechanics of a leveraged equity transaction within the NMTC program, 
the Agency is replacing the word ``sub-CDE,'' with the words ``investor 
fund entity'' as it relates to an eligible borrowing entity.

List of Subjects in 7 CFR Part 4279

    Loan programs--Business and Industry, Direct loan programs, 
Economic development, Energy, Energy efficiency improvements, Grant 
programs, Guaranteed loan programs, Renewable energy systems, Rural 
areas, and Rural development assistance.

    Accordingly, 7 CFR part 4279 is amended by making the following 
correcting amendments:

PART 4279--GUARANTEED LOANMAKING



0
1. The authority citation for part 4279 continues to read as follows:

    Authority:  5 U.S.C. 301; and 7 U.S.C. 1989.

Subpart B--Business and Industry Loans



0
2. In Sec.  4279.116, revise paragraphs (b) introductory text, 
(b)(1)(i) through (iii), (b)(2) through (4), and (b)(6),(8),(11),(12), 
and(13) to read as follows:


Sec.  4279.116   New Markets Tax Credit program.

* * * * *
    (b) Loan guarantees for the leveraged lender. The provisions of 
Sec.  4279.117(s) notwithstanding, an investor fund entity, such as an 
investor partnership or investor LLC, may be an eligible borrower as 
specified in paragraph (b)(1) of this section. Paragraphs (b)(2) 
through (13) of this section identify modifications to subpart B of 
this part that apply when the eligible borrower is an investor fund 
entity.
    (1) * * *
    (i) The investor fund entity must be established for a single 
specific NMTC investment;
    (ii) The lender is not an affiliate of the investor fund entity;
    (iii) One hundred percent of the guaranteed loan funds are or will 
be invested in one or more sub-CDEs that will then be loaned directly 
to a Qualified Active Low Income Community Business (QALICB), as 
defined by applicable regulations of the Internal Revenue Service and 
are or will be used by the QALICB in accordance with Sec. Sec.  
4279.113 and 4279.117. All of the B&I guaranteed loan funds must be 
``passed through'' the sub-CDE to the QALICB through a direct tracing 
method. The QALICB's project must be the ultimate use of the B&I 
guaranteed loan funds; and
* * * * *
    (2) The provisions of Sec.  4279.119 apply except that the loan 
guarantee limits apply to the QALICB and not to the investor fund 
entity, who would otherwise be understood to be the ``borrower.''
    (3) Section 4279.126 applies to both the borrower (investor fund 
entity) and the QALICB. The terms and payment schedule of the lender's 
loan to the investor fund entity must be at least equal to the terms 
and payment schedule of the sub-CDE's loan to the QALICB. An Agency 
approved unequal or escalating schedule of principal and interest 
payments may be used for a NMTC loan. The lender may require additional 
principal repayment by a co-borrower, such as an owner or principal of 
the QALICB. The lender or sub-CDE may require a debt repayment reserve 
fund or sinking fund; however, such fund is not in lieu of a principal

[[Page 26336]]

repayment schedule in accordance with Sec.  4279.126 as amended by this 
paragraph.
    (4) Except for Sec.  4279.131(b), Sec.  4279.131 applies to both 
the lender's loan to the investor fund entity and the sub-CDE's loan to 
the QALICB. Section 4279.131(b) applies only to the sub-CDE's loan to 
the QALICB. Section 4279.116(a)(4) also applies when calculating 
tangible balance sheet equity.
* * * * *
    (6) Section 4279.137 applies to both the borrower (investor fund 
entity) and the QALICB.
* * * * *
    (8) Section 4279.161 applies to both the borrower (investor fund 
entity) and the QALICB. As part of the application completed by the 
lender in accordance with Sec.  4279.161, the application documentation 
must include comparable information for the loan (using the B&I 
guaranteed loan funds) between the sub-CDE and QALICB. The requirements 
of Sec.  4279.161 apply to the loan application, application analysis 
and underwriting, and loan documents between the sub-CDE and QALICB. 
The lender must include these materials in its guaranteed loan 
application to the Agency.
* * * * *
    (11) When complying with the planning and performing development 
provisions in Sec.  4279.167, the lender is responsible for ensuring 
that both the sub-CDE's loan to the QALICB and the QALICB's project 
comply with the provisions in Sec.  4279.167.
    (12) Section 4279.180 applies to both the borrower (investor fund 
entity) and the QALICB.
    (13) Section 4279.181 applies to both the borrower (investor fund 
entity) and the QALICB.
* * * * *

    Dated: May 18, 2017.
Chad Parker,
Acting Administrator, Rural Business-Cooperative Service.
    Dated: May 25, 2017.
Chris McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2017-11736 Filed 6-6-17; 8:45 am]
 BILLING CODE 3410-XY-P