New Markets Tax Credits
About the New Markets Tax Credits Program
New Markets Tax Credits (NMTCs) result in funding for development projects or businesses that cannot obtain financing through conventional sources. The New Markets Tax Credit Program permits taxpayers to receive a tax credit against Federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). These CDEs will then sell the tax credits to taxable investors in exchange for stock or a capital interest in the CDEs. NMTCs are allocated annually by the United States Department of Treasury’s CDFI Fund to CDEs under a competitive application process.
The CDEs then in turn invest equity or extend loans to qualified projects or businesses. These investments are in the form of real estate loans, small business loans and equity investments.
The New Markets Tax Credit is not received by the borrower, but rather by the equity investor that invests in the CDE that has received a New Markets Tax Credit allocation. Investors receive a tax credit of 39% over a 7-year credit allowance period. In each of the first 3-years, the investor receives a credit equal to 5% of the total amount paid for the stock or capital interest at the time of purchase. For the final 4-years, the value of the credit is 6% annually.
The New Markets Tax Credit program provides new capital specifically designed for mixed-use properties. It offers flexibility in the underwriting process while delivering competitive loan terms to help you meet your goals. Take advantage of this program to fulfill rehabilitation of blighted properties, update currently operating buildings, or to fund new in-fill construction.
Parameters for NMTC deals
- Community Impact
- Jobs and Increased wages
- Minority of women owned businesses
- Facilitate wealth creation
- Environmentally sustainable outcomes
Don’t miss any potential savings.
For more details on qualification, applicable tax rules and to initiate a tax credit application, contact Historic Consultants today.
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