NMTC – Opportunity Zones – Insights From the Land of OZ

December 17, 2020 by Brad A. Molotsky

New Markets Tax Credits and Opportunity Zones – Bill Proposed in the US Senate to make NMTC Permanent and prioritize grant funding in OZs

Earlier this week, 4 Senators introduced legislation that would make the new markets tax credit (NMTC) permanent and would seek to encourage further investment in opportunity zones (OZs).

Senators Marco Rubio, R-Florida, Mike Crapo, R-Idaho, Kelly Loeffler, R-Georgia, and Thom Tillis, R-North Carolina, cosponsored the Economic Empowerment for Underserved Communities Act.

The bill, a summary of which is attached, makes the NMTC permanent with a $5 Billion annual allocation adjusted for inflation.

Per Novogradac and the Senator’s office announcement, the legislation also encourages investment in Opportunity Zones (“OZs) by establishing representatives to facilitate participation in the OZ program, prioritizes grant assistance in OZs through the Health Resource and Services Administration, allocates $7 Billion to Community Development Financial Institutions (CDFIs), establishes a Small Business Investment Company facility to enhance access to venture capital for underserved groups and businesses affected by COVID-19, and extends Small Business Administration debt relief provisions from the CARES Act.

The NMTC is authorized only through the calendar-year 2020 round.

Senator Loeffler’s office released a summary of the bill.

Duane Morris has an active Tax Credits and Opportunity Zone Team to help organizations and individuals plan, respond to, and invest in Opportunity Zones and low income areas throughout the USA, including the US Virgin Islands and Puerto Rico using tax credit equity and standard equity. We have closed over 61 OZ deals since their inception and are actively working on over 38 OZ projects for owner/developers, investors and business owners. We would be happy to discussion your proposed project with you. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

If you have any questions about this post, please contact Brad A. Molotsky, Art Momjian, Scott Gluck, Lee Potter, Keli Isaacson Whitlock, Anastasios Kastrinakis, or the attorney in the firm with whom you are regularly in contact.

December 15, 2020 by Brad A. Molotsky

New Markets Tax Credits – Expansion and Extension of $3.5 Billion proposed over the next 4 years – WOW!

Earlier this week on December 14, 2020, Reps. Terri Sewell, D-Alabama, and Tom Reed, R-New York, introduced legislation to extend and increase the new markets tax credit (NMTC).

The New Markets Stabilization Act would increase the NMTC allocation by $3.5 billion over four years, allow investors to carry back those credits for five years, exempt the NMTC from the 75% general business credit limitation, permanently exempt the NMTC from the alternative minimum tax and provide relief from certain debt modification rules for NMTC issuers and borrowers.

Per Novogradac, Sewell and Reed previously introduced legislation to make the NMTC permanent.

The NMTC expires at the end of this year, although the calendar-year 2020 round will be allocated next summer.

If you have any questions about this post, please contact Brad A. Molotsky, Art Momjian, Scott Gluck, Lee Potter, Keli Isaacson Whitlock, AK Kastrinakis, or the attorney in the firm with whom you are regularly in contact.

December 10, 2020December 10, 2020 by Brad A. Molotsky

New Markets Tax Credits – Record Number of 2020 Applications; $5B in credits to be awarded

The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced earlier this week that it received 208 applications under the calendar year (CY) 2020 round of the New Markets Tax Credit Program (NMTC Program).

Per Treasury, the NMTC Program advances economic development in economically distressed communities by making tax credit allocations available to Community Development Entities (CDEs) for targeted investments in eligible areas.

The CDEs that applied under the CY 2020 round are headquartered in 44 states, the District of Columbia, and Puerto Rico. These applicants requested an aggregate total of $15.1 billion in NMTC allocation authority, over 3x the $5.0 billion in authority available for the 2020 round.

Created by Congress in December of 2000, the NMTC Program permits individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in CDEs. The investor is provided a tax credit that equals 39% of the cost of the investment and is claimed over a seven-year period. Substantially all of the taxpayer’s investment must be used by the CDE to make qualified investments in low-income communities.

According to Treasury statistics, through the first 16 rounds of the NMTC Program, the CDFI Fund has made 1,254 awards totaling $61 billion in tax credit allocation authority. This $61 billion includes $3 billion in Recovery Act Awards and $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone.

Duane Morris has an active Tax Credits and Opportunity Zone Team to help CDCs and other organizations and individuals plan, respond to, and invest in typical deals as well as Opportunity Zones and low income areas throughout the USA, including the US Virgin Islands and Puerto Rico. We have closed over 61 OZ deals since their inception and are actively working on over 38 OZ projects for owner/developers, investors and business owners. We would be happy to discussion your proposed project with you. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

July 16, 2020 by Brad A. Molotsky

Whopper of a New Markets Tax Credit (NMTC) Allocation from US Treasury ($3.5B) – these funds can be matched with OZ Funds

The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced $3,548,485,000 in New Markets Tax Credits that are intended to spur investment and economic growth in low-income urban and rural communities nationwide.

A total of 76 Community Development Entities (CDEs) were awarded tax credit allocations, made through the calendar year (CY) 2019 round of the New Markets Tax Credit Program (NMTC Program).

“Today’s action demonstrates the Administration’s commitment to promoting economic growth and jobs in distressed communities, and to ensuring that every American can get back to work as quickly as possible,” said Treasury Secretary Steven T. Mnuchin.

”For almost 20 years, the New Markets Tax Credit has attracted private capital into businesses and communities as they recover from significant shocks to our economy,” said CDFI Fund Director Jodie Harris. “Projects that spur job creation, enable access to technology infrastructure and develop community facilities like federal qualified health centers, are examples of how New Markets Tax Credit investments are especially critical for low-income communities across the country.”

The 76 CDEs receiving awards were selected from a pool of 206 applicants that requested an aggregate total of $14.7 billion in tax credit allocation authority. The award recipients are headquartered in 30 different states and the District of Columbia. One-fifth (20%) of the investments will be made in rural communities. It is estimated that these award recipients will make more than $706 million in New Markets Tax Credit investments in non-metropolitan counties.

Yesterday’s announcement brings the total amount awarded through the NMTC Program to $61 billion. Historically, NMTC Program awards have generated $8 of private investment for every $1 invested by the federal government.

Through the end of fiscal year 2018, the most recent data available, NMTC Program award recipients deployed nearly $52.5 billion in investments in low-income communities and businesses; with impacts such as the creation or retention of more than 836,000 jobs, and the construction or rehabilitation of more than 218.3 million square feet of commercial real estate.

As we have discussed here before, NMTC funds CAN be matched with Opportunity Zone equity as OZ deals can stack with other tax programs to really drive a return for OZ projects. Worthy of consideration.

If you have any questions about this blog post or other NMTC or OZ questions, do not hesitate to reach out, we are happy to discuss at your convenience. Be well and stay safe.

September 4, 2019January 3, 2020 by Brad A. Molotsky

New Markets Tax Credits – Application process and key dates announced by the CDFI

Earlier today, September 4, 2019, the Community Development Financial Institutions (CDFI) Fund announced the opening of the calendar year 2019 allocation round of the new markets tax credit (NMTC).

For those who participate in the New Markets arena, applications are due Oct. 28, 2019.

The CDFI Fund anticipates announcing 2019 NMTC awards in summer 2020.

If of interest to you, the NMTC program application, a notice of allocation availability, an introduction to the NMTC program, an Awards Management Information navigation guide, a frequently asked questions guide, and an application road map presentation are all available on line.

Copies of these materials can be found at www.newmarketscredits.com. If you have any questions, please do not hesitate to call or contact us – bamolotsky@duanemorris.com

June 28, 2019January 3, 2020 by Brad A. Molotsky

Proposed Federal Bill targets an Additional $500 Million in NMTC Allocation for Rural Job Zones

Despite the DC gridlock and Democratic Presidential debates, the Rural Jobs Act was introduced this week in the House and Senate to authorize an additional $500 Million Dollars in annual new markets tax credit (NMTC) allocation for 2019 and 2020 that would go to rural job zones.

The rural job zones are defined as low-income communities with a population of 50,000 residents or less that are not adjacent to any urbanized area.

At least 25% of the new NMTC allocation authority would be prioritized for counties with persistent poverty and high migration.

Lead sponsors of the bicameral and bipartisan legislation are Reps. Terri Sewell, D-Ala., and Jason Smith, R-Mo., and Sens. Mark Warner, D-Va., Roger Wicker, R-Miss., Shelley Capito, R-W.V., and Ben Cardin, D-Md.

Glimmers of hope. Have a super weekend. -Brad

#DuaneMorris