The New Market Tax Credit Program (NMTC is an effective mechanism for overcoming the historical lack of investment in low-income communities (LICs). The NMTC Program attracts private investment that helps reinvigorate struggling local economies. How can we make it easier for low-income communities to utilize NMTCs so they may maximize those benefits they receive?
Based on limited economic resources, LICs have been harder hit by the coronavirus pandemic than other more financially stable communities. The good news is that more support is on the way to support our neediest communities with the Consolidated Appropriations Act of 2021 (the “Act”). Thus, a new round of New Market Tax Credit allocations will be available in the Fall of 2021.
The New Markets Tax Credit (NMTC) Program attracts private capital into low-income communities by providing investors with a federal tax credit. Investors who make equity investments in specialized financial intermediaries called Community Development Entities (CDEs) receive a credit over seven years that equals 39 percent of their original investment amount. A loan or investment by a CDE in a QALICB is known as a “Qualified low-income community investment” (QLICI).
More QALICBs = More Investment Opportunities
The availability of more NMTC allocations means more opportunities for growth and economic development in communities that need it most. “Qualified active low-income community businesses” (QALICBs) receive NMTC investments which they use to develop needed facilities in distressed communities. QALICBs in pursuit of NMTC-related financing should contact local and national CDEs directly for their projects to be considered and added to a CDEs pipeline. Businesses that receive NMTC-enhanced loans or equity investments must meet statutory requirements to qualify as a QALICB. The purpose of imposing these requirements is to ensure that community impact-driven businesses receive NMTC allocation while precluding certain businesses that the IRS have deemed unqualified to receive NMTC investment, such as golf courses, country clubs, massage parlors, hot tub facilities, tanning salons, casinos, and carry-out liquor stores.
Examples of QALICBs that have received NMTC allocation include several of the following: soup kitchens, hotels, shopping malls, restaurants, nonprofit theatres, student housing, mixed-use facilities, community facilities, research facilities, and charter schools. Many of these transactions have allowed QALICBs to create new full-time and part-time jobs in the communities with the most need.
Let’s Work Together to Develop our Communities
At Savage & Associates, we take great pride in our ability to help our QALICB clients structure creative and cutting-edge transactions. We can also help your business meet the requirements for becoming a QALICB. Dionne Savage can help you gain access to New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, Historic Tax Credits, and other vital economic development tools. At Savage & Associates, we help clients meet the requirements to qualify as a QALICB so they may successfully access NMTC allocations. Savage and Associates help clients utilize the NMTC program to create critical economic change in our communities.
If you have any questions about New Market Tax Credits or any other development financing program, call 215.880.9441 in Philadelphia, or 202.817.3941 in Washington D.C. to arrange a consultation. You can also visit our website at Savage & Associates 24 hours a day, seven days a week for more information.