New Markets Tax Credit Program Extended for Two Years by American Taxpayer Relief Act of 2012

by BakerHostetler

On January 2, 2013, President Barack Obama signed the American Taxpayer Relief Act of 2012 (H.R. 8) into law which, in addition to addressing other "fiscal cliff" issues, extends the New Markets Tax Credit ("NMTC") Program for two years. The Act provides for an annual maximum limit on allowable qualified equity investment of $3.5 billion for each year, mirroring the limits in 2010 and 2011.

This much anticipated, widely endorsed extension of the NMTC Program will continue to support and incentivize investment in qualified low-income community businesses. The legislation effectively permits $7 billion of new investments to generate NMTCs. Industry experts anticipate that the Community Development Financial Institutions ("CDFI") Fund will announce the community development entities ("CDEs") selected to receive $3.5 billion in NMTC allocations under the tenth round of the NMTC Program in February, consistent with the timing of the announcement for the prior round. (An additional $3.5 billion of awards will be announced in 2014).

BakerHostetler's Real Estate Tax Transactions Team and its Tax Credit Practice group have substantial experience assisting qualified active low-income community businesses ("QALICBs"), developers and sponsors of projects nationwide with the planning, financing and structuring of their tax credit transactions using NMTC equity combined with various other sources of financing. Our attorneys aim to maximize project financing proceeds through leveraging and other creative legal structures in order to efficiently utilize tax credits while ensuring compliance with complex federal, state and local statutory regimes. We also have significant experience working successfully on these projects with CDEs, leveraged lenders, tax credit investors, project accountants and other parties to NMTC transactions and their counsel in order to help our clients achieve desired results and favorable outcomes.

Some examples of very recent BakerHostetler NMTC transactions include: development of a community health center utilizing federal and state NMTCs and leveraging outside financing sources; development of a community recreation center sponsored by a non-profit entity upon land leased from a state institution utilizing federal and state NMTCs; and development of a hotel and conference center serving a college campus utilizing federal and state NMTCs by a private developer working closely with a foundation and a state university. We also have extensive experience working on historic rehabilitation projects involving the monetization of federal and state historic tax credits and twinning these with federal and state NMTCs in order to obtain very substantial tax credit financing for our clients' projects.

If you would like to discuss the possible opportunities this new legislation could provide for your business, organization, or an upcoming project, please contact any member of BakerHostetler's Tax Credit Practice Group including the following attorneys: David J. Strauss at or 216.861.7472; Alexander J. Szilvas at or 216.861.7883; Nathan F. Ware at or 216.861.7427; or Christina Novotny at or 216.861.7295.

Authorship Credit: Alexander J. Szilvas, Nathan F. WareChristina Novotny and George R. Skupski

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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