The New Markets Tax Credit (“NMTC”) program is administered by Treasury Department’s Community Development Financial Institutions (“CDFI”) Fund. The program is designed to stimulate job creation, and encourage investment in and revitalization of low-income urban and rural communities (“LIC”). The primary financial benefit of the program is a substantial federal tax credit to the investor. As a result of the credit, the investor is willing to accept a lower rate of return which results in significantly lower borrowing costs to our clients. Additionally, our clients receive a gift of 25% - 33% equity contribution in their project. This means that after seven years our clients frequently do not have to repay this sizable equity contribution.
The program is available nationwide to qualified projects located within a target zone or an LIC. An LIC consists of a census tract where at least 20% of its population is at the poverty level or the area median income is not more than 80% of the statewide or metropolitan area median income. The Washington DC based Reed Smith typically represents Qualified Low Income Community Businesses in connection with NMTC transactions. Our clients’ operations are located all across the country and span all areas of business including a meatpacking warehouse, Alzheimer’s facility, biodiesel manufacturing plant, mixed-use facility including an ice arena, restaurants, hotel, banquet hall and residential, etc.
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