Treasury Department Announces $3.5 Billion in New Markets Tax Credit Allocation Awards

by Ballard Spahr LLP
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Eighty-five community development entities (CDEs) have been selected to receive $3.5 billion in New Markets Tax Credit (NMTC) allocation authority in the 2012 round of the NMTC Program. The announcement of the latest round of awards was made today by Donna Gambrell, Director of the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund.

The NMTC Program is designed to encourage private investment in operating businesses and real estate projects in low-income communities. The Program permits investors to receive a 39 percent tax credit against their federal income taxes, claimed over seven years, in exchange for equity investments in low-income communities.

The CDEs receiving awards were selected from a pool of 282 applicants that requested more than $21.9 billion in NMTC allocation authority. Allocation awards ranged in size from $15 million to $80 million. The average allocation amount was approximately $41 million. The recipients consisted of a variety of entities, including 49 nonprofit organizations, 26 community development financial institutions, 13 government-controlled entities, 12 banks, and eight real estate development companies.

As in previous years, awards were made to geographically diverse CDEs headquartered in 28 states and the District of Columbia. A large minority of awardees are CDEs with national service areas spanning the United States, while 14 of the CDEs will focus on multistate service areas, 15 will focus on statewide service areas, and 15 will serve local markets.

The 2012 round is the 10th round of NMTC allocation authority awards and is the first of two years of $3.5 billion in allocation authority approved by Congress in the American Taxpayer Relief Act of 2012. Since the Program's launch in 2000, more than $36.5 billion in NMTC allocation authority has been granted to 749 CDEs, and NMTC investments have been made in all 50 states, the District of Columbia, and Puerto Rico.

The 2012 round awards announcement follows news from Capitol Hill that the Obama administration’s proposed budget for fiscal year 2014 includes a plan to make the NMTC Program permanent with an annual allocation authority of $5 billion. The 2014 budget also proposes a Manufacturing Communities Tax Credit with $2 billion in tax credit authority each year until 2016 for communities affected by military base closures and mass layoffs.

Ballard Spahr has been an active participant in the NMTC Program since its inception, helping clients navigate the complex, multidisciplinary legal issues that arise in NMTC tax, compliance, and transactional matters. Clients include investors, leveraged lenders, community development entities, project sponsors, for-profit, nonprofit, and governmental developers, and qualified active low-income businesses. For more information, contact Stephanie L. Franklin-Suber at 215.864.8203 or franklinsubers@ballardspahr.com, or Jocelyn K. O'Brien at 215.864.8723 or obrienj@ballardspahr.com.

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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