Announcement of New Market Tax Credit Allocation Awards Scheduled

February 2012Articles In the Zone

The latest allocation is expected to be released this month for the federal New Markets Tax Credit (NMTC) program. The program was created through the Community Renewal Tax Relief Act of 2000 to encourage economic development in distressed communities by providing investors with a 39 percent tax credit for making “qualified equity investments.” An investor may then apply the earned tax credit towards its federal income tax liability over a seven-year period. Monies generated by qualified equity investments are then deployed by community development entities (CDEs) to urban and low-income communities with other capital sources for qualified business projects.

The NMTC program is currently in its eighth round and was approved for a $3.5 billion award for 2011. CDEs will know soon whether they are chosen to receive a 2011 allocation as an announcement is projected to be made prior to the end of February. For property owners with holdings in inner city and low-income communities, the NMTC program provides an opportunity to attract significant equity capital to development projects.

To secure NMTC financing, property owners should be scheduling meetings with CDEs to discuss proposed projects before the awards are announced to maximize their likelihood of receiving an investment. For more information about the NMTC program, please click here.

For more information, please contact Daniel V. Madrid.