U.S. Department of the Treasury Announces $3.5 Billion in Federal New Markets Tax Credit Allocation Authority

Yesterday the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (the “CDFI Fund”) announced the award of $3.5 billion in Federal New Markets Tax Credit (NMTC) allocation authority through its annual and competitive application process. Eighty-five organizations certified as Community Development Entities (CDEs) received the awards, while over 282 CDEs applied.

The NMTC Program is designed to spur employment and investment in low-income communities by allowing individuals and corporate investors to receive credit against their Federal income tax liability in exchange for making equity investments in CDEs that have been awarded allocation authority. The CDEs in turn use the investment proceeds to make loans and/or investments in businesses or real estate projects located in low-income communities. The credit totals 39 percent of the original investment and is claimed over a period of seven years (five percent for each of the first three years, and six percent for each of the remaining four years). A taxpayer’s investment in the CDE generally must remain outstanding throughout the seven year period. With the award of the additional $3.5 billion in allocation authority, $3.5 billion in loans and/or investments will be made in low-income communities and those investments will generate $1.365 billion in tax credits over the seven year period.

Please see full alert below for more information.

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Topics:  CDFI Fund, Community Development Entities, Income Taxes, NMTC, Tax Credits, U.S. Treasury

Published In: General Business Updates, Finance & Banking Updates, Commercial Real Estate Updates, Residential Real Estate Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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