NEW MARKETS TAX CREDITS
The New Markets Tax Credit Program is a $61 billion federal program created in 2000 pursuant to Section 45(D) of the Internal Revenue Code to encourage investment in low-income communities. The NMTC Program provides a reduction of tax liability to expand the capacity of financial institutions to provide capital, credit and financial services in underserved markets. Additional tax savings are provided through passive losses generated by qualified equity investments made pursuant to the Program. Section 45(D) credits are a permanent reduction of current and future tax liability, not a deferral of tax liability.
The Program is administered by the Community Development Financial Institutions Fund ("CDFI Fund"), a branch of the U.S. Department of the Treasury, and permits taxpayers to receive a credit against federal income taxes. The New Markets Tax Credit is 39% of the investment amount. The credit is claimed over a seven-year period, with 5% percent taken in each of the first three years and 6% taken in each of the next four years.
An allocation of credits is awarded to Community Development Entities by the CDFI Fund and then allocated to qualifying projects.
Qualified CDEs apply to the CDFI Fund for tax credit allocations that are awarded annually through a competitive application process. Since the NMTC Program's inception, the CDFI Fund has made 1032 awards, totaling $50.5 billion. Upon receiving an allocation of New Markets Tax Credits, CDEs have five-years to utilize the allocation. In order for an investment to qualify for the NMTCs, the investment must be made through a CDE to either a business or a non-residential, commercial property that is located in a designated low-income community.
We work in all areas of the NMTC Program, including investment (debt & equity), acquiring tax credits for project development, fund reporting and asset management.
For more information about our NMTC
projects, please click here.
$10,000,000 Qualified Equity Investment
The highly impactful Crosstown Concourse project will preserve the 1 million square-foot historic Sears distribution facility and redevelop the space into a mixed-use facility, anchored by arts, education and healthcare tenants. The Project serves as an anchor and catalyst to revitalization and economic development in the Crosstown neighborhood and will create at least 500 permanent new jobs. The Project, located in a severely disinvested area where the poverty rate is 37.6% and the unemployment is 2.29 times the national average.
Financing included $10 million in NMTC allocation from DV Community Investment, $12 million in NMTC allocation from Mid-City Community CDE, $10 million in NMTC allocation from the Low-Income Investment Fund, $10 million in NMTC allocation from SunTrust CDE, $9 million in NMTC allocation from MidWest Renewable Capital, $5 million in NMTC allocation from the National Trust Community Investment Corporation, $35.4 million in Historic Tax Credit equity provided by Goldman Sachs, sponsor equity and other subsidies. SunTrust Bank acquired the New Markets Tax Credits.
NMTCs provide an immediate and positive effect to low-income communities. The investment in these communities creates a catalytic effect, as the development makes them even more attractive to investors and spurs additional growth.
According to the New Markets Tax Credits Coalition1, since its inception through 2012, NMTC investments have generated almost $118 billion in economic activity creating 286,781 full time, permanent jobs and 457,487 construction jobs.
Rural communities have been a continued focus of many community development entities in an attempt to utilize NMTCs to spur job opportunities in these severely underserved areas. The NMTC Coalition’s study of CDFI Fund data2 found that between 2003 and 2011, an estimated $3.5 billion in NMTC financing was provided to over 600 rural businesses. These investments created over 47,000 full-time jobs and 20,000 construction jobs.
1 “A Decade of the New Markets Tax Credit,” New Markets Tax Credit Coalition (December 2014)
2 “NMTC 2014 Progress
Report,” New Markets Tax Credit Coalition (2014)