Duane Morris Closes NMTC Targeted Population Transaction

Art Momjian of the Philadelphia Office, Chris Winter of the Wilmington Office, and Marc Kushner of the New York office represented Zagis USA, LLC in the closing of a Federal New Markets Tax Credit facility for the expansion of a cotton spinning facility in Louisiana. The expansion of the existing cotton spinning facility created additional employment in a non-metropolitant area of Louisiana. The financing qualified under the Federal New Markets Tax Credit targeted population regulations and was structured by Advantage Capital Partners.

CDFI Fund Announces Intent to Award $8.5 billion in NMTC Allocation

The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) released the Notice of Allocation Availability (NOAA), which officially opens the next round of competition under the New Markets Tax Credit Program (NMTC Program). The NOAA combines the calendar year (CY) 2013 and CY 2014 rounds, making $8.5 billion ($3.5 billion authorized by Congress for CY 2013 and $5 billion requested in the President’s 2014 Budget) in tax credit authority available, pending Congressional authorization.

The CDFI Fund seeks to combine the CY 2013 and CY 2014 rounds in order to achieve cost and efficiency savings to the government in addition to realigning the program calendar. The combined round would also prevent an anticipated deficit of available NMTCs and would allow the CDFI Fund to make additional allocation awards.

At this time, the CDFI Fund anticipates opening the CY 2015 round of the NMTC Program in the summer of 2014 with award decisions in the spring of 2015.

Bipartisan Coalition Proposes Hurricane Sandy Tax Releif Act of 2013

U.S. Rep. Bill Pascrell, Jr. (D-NJ-09) lead a bipartisan coalition including Reps. Joseph Crowley (D-NY), Rodney Frelinghuysen (R-NJ), Michael Grimm (R-NY), John Larson (D-CT), Frank LoBiondo (R-NJ), Charles Rangel (D-NY), Tom Reed (R-NY) and Carolyn McCarthy (D-NY) in introducing legislation to provide tax relief to the victims of the devastating storm that caused widespread destruction throughout the Northeast. The Hurricane Sandy Tax Relief Act of 2013 is aimed at providing tax relief for victims of Hurricane Sandy in areas designated as Federal Disaster Areas by the President. The bipartisan coalition will propose supplemental new market tax credit allocation authority for community development entities serving Hurricane Sandy disaster areas and increased low-incme housing tax credit allocation authority for delcared disaster areas.

CDFI Fund Releases 2012 Allocation Agreement

The form of 2012 New Markets Tax Credit Allocation Agreement has been released by the Community Development Financial Institutions (CDFI) Fund. Notably the form allocation agreement has two significant changes. First, the Allocation Agreement provides the following definition of a Real Estate Qualified Active Low-Income Community Business: “shall mean any QALICB whose predominant business activity (i.e. activity that generates more than 50 percent of the business’ gross income) includes the development (including construction of new facilities and rehabilitation/enhancement of existing facilities), management, or leasing of real estate.” In addition, the form of 2012 Allocation Agreement has the following disclosure requirement. “Disclosure to QALICBs. Each time the Allocatee makes one or more QLICs in the form of a loan(s) to, or investment(s) in, a QALICB, it shall disclose to the QALICB, in a separate stand-alone document, any and all direct and indirect NMTC related transaction costs related to the QLICI(s) (e.g. legal, accounting, compliance), fees and compensation that the Allocatee is assessing the QALICB or otherwise requiring the QALICB to incur prior to, during, and at the conclusion of the seven-year NMTC term.”

Treasury Announces New Markets Tax Credit Awards

Today the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced $3.5 billion in New Markets Tax Credit (NMTC) awards nationwide. The Treasury has awarded 85 certified community development entities with tax credit allocation authority under the tenth award round of the NMTC Program. A list of the certified community development entities which were awarded New Markets Tax Credit allocation can be found at http://www.cdfifund.gov/docs/2012/nmtc/2012%20NMTC%20Award%20Book.pdf

CDFI Fund to Announce NMTC Awards in April

The CDFI Fund announced today its plans to award $3.5 billion of Federal New Markets Tax Credit authority for the 2012 round in April of 2013. Earlier in the day President Obama signed the American Taxpayer Relief Act of 2012 which included an extension of the Federal New Markets Tax Credit Program for 2012 and 2013. The New Markets Tax Credit authority is $3.5 billion for each year. In addition the current Senate version of the Hurricane Sandy and National Relief Act of 2012 provides for $500,000,000 of additional annual New Markets Tax Credit authority for National Disaster areas, including areas affected by Hurricane Sandy.

Congress Extends New Markets Tax Credit Program, Minimum 9% LIHTC rate, Wind Credit, and Bonus Depreciation

The American Taxpayer Relief Act of 2012 passed by Congress yesterday extends several Federal tax credit benefits critical to the development of affordable housing, low-income community development, and renewable energy. The Act authorizes the extension of the Federal New Markets Tax Credit Program for two additional years at $3.5 billion dollars of New Markets Tax Credit authority for each year. The American Taxpayer Relief Act of 2012 also extends the minimum credit rate for the Federal low-income housing tax credit of not less than 9% for non-federally subsidized new buildings for allocations made prior to January 1, 2014, the Wind production tax credit for facilities placed in service before January 1, 2014, and bonus depreciation for an additional year.

Demand for NMTC Allocation Remains Strong

The Community Development Financial Institutions (CDFI) Fund announced that under the 2012 round of the New Markets Tax Credit (NMTC) program it had received 282 applications requesting an aggregate of $21.9 billion in NMTC authority. The CDFI Fund also described innovative uses of New Markets Tax Credit Authority which would be favored by the CDFI Fund. Innovative uses of NMTC Authority include the deployment of New Markets Tax Credit proceeds to underserved states, “qualified low-income community investments” (“QLICs”) of $2,000,000 or less, non-real estate QLICIs such as working capial and equipment loans, and revolving QLICs which would serve multiple “qualified active low-income community businesses”. In this vein, the emphasis on non-real estate QLICIs was recently supported by final NMTC Treasury Regulations which facilitate the redeployment of non-real estate QLICIs.

Treasury Issues Final NMTC Regulations

On September 28th the Department of Treasury issued final regulations modifying the New Markets Tax Credit Program to facilitate and encourage investments in non-real estate businesses in low-income communities. To address the concern that an investment in a non-real estate business would result in a liquidity event for the community development entity prior to the expiration of the 7 year compliance period, the final regulations provide that a CDE may reinvest a qualified low-income community investment during the compliance period in a “qualifying entity” provided that such reinvestment occurs within 30 days. A “qualifying entity” is defined as a certified CDFI or an entity designed by the Secretary of the Treasury. The regulations define a non-real estate qualified active low-income community business as any business whose predominant business activity (measured by more than 50% of the business’ gross income) does not include the development, management or leasing or real estate.

Freshman Members of Congress Urge Extension of NMTC Program

On September 18, 2012 twelve freshman members of the House of Representatives signed a letter addressed to the leaders of Congress urging the extension of the Federal New Markets Tax Program which expired on Dec. 31, 2011. The authors of the letter urged that the New Markets Tax Credit Program is a critical tool for financing small businesses and creating jobs. Proposed Senate Bill 3531 provides for a two year extension of the New Markets Tax Credit Program at $3.5 billion of allocation per year. The President had requested an extension of the New Markets Tax Credit Progam at $5 billion a year wth a specific set aside for super markets in food deserts.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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