2010

February

HEALTHY FOOD PLAN INCLUDES $250 MILLION IN NMTC AUTHORITY

WASHINGTON, D.C. - February 22, 2010

The Obama Administration on Friday released details of a Healthy Food Financing Initiative to expand access to nutritious foods in underserved urban and rural communities not currently served by grocery stores and other healthy food retailers. The initiative will make available more than $400 million in federal tax credits, below-market rate loans, loan guarantees and grants to attract private sector capital that are expected to more than double the total investment, including $250 million in authority for the New Markets Tax Credit (NMTC) program devoted to helping finance healthy food options. Through the joint initiative, which was included in the President’s proposed budget for 2011, the departments of Treasury, Agriculture, and Health and Human Services would make available financial and technical assistance to community development financial institutions, not-for-profits and businesses with sound strategies for addressing the healthy food needs of communities.

Communities without access to grocery stores or other healthy food retailers are sometimes called “food deserts,” and the Administration says its proposal builds on the Community Development Financial Institutions (CDFI) Fund’s history of supporting these kinds of investments through the NMTC program. Click here to read about how the NMTC has helped bring grocery stores to these underserved communities.

CDFI FUND INVITES COMMENTS ON QUARTERLY REPORT FOR RECOVERY ACT NMTC ALLOCATEES

WASHINGTON, D.C. - February 19, 2010

The Community Development Financial Institutions (CDFI) Fund today invited comments on the Quarterly New Markets Report (QNMR) for new markets tax credit (NMTC) allocatees under the American Recovery and Reinvestment Act of 2009 (Recovery Act). No changes are being proposed at this time. Comments will be accepted through April 20, 2010.

GEITHNER ANNOUNCES PROPOSALS TO EXTEND, ENHANCE NMTC

WASHINGTON, D.C. - February 18, 2010

Treasury Secretary Tim Geithner today met with individual and small business recipients of New Markets Tax Credits (NMTC) to discuss how the credits can be used to attract additional investments to help revitalize distressed communities. Secretary Geithner described the President’s proposal to improve, extend and broaden the NMTC under the fiscal year 2011 budget. To restore demand and broaden the NMTC’s appeal, he announced today that the President is asking Congress to change the NMTC so it can be used to offset the Alternative Minimum Tax (AMT), including where NMTC allocations have been made but where money has not yet been invested. In addition, Treasury and the Internal Revenue Service (IRS) are developing guidance to help provide investors greater certainty whether they will qualify for and be able to benefit from the credit. Secretary Geithner today stressed that Treasury is committed to making further enhancements to the NMTC to encourage greater investment in small businesses. Click here for a Treasury Department fact sheet about the NMTC enhancements in the FY 2011 budget request.

BAUCUS, GRASSLEY RELEASE DRAFT JOBS BILL WITH TAX EXTENDERS

WASHINGTON, D.C. - February 11, 2010

Senate Finance Committee Chairman Max Baucus, D.-Mont., and Ranking Member Chuck Grassley, R-Iowa, today released a draft of jobs legislation called the Hiring Incentives to Restore Employment (HIRE) Act. The draft bill extends several tax provisions that expired on December 31, 2009; the HIRE Act would extend the Section 1602 low-income housing tax credit (LIHTC) cash grant exchange program that was created by the American Recovery and Reinvestment Act (Recovery Act); extend for one year the new markets tax credit (NMTC); and extend Gulf Opportunity (GO) Zone provisions. The tax extenders are estimated to cost about $31 billion over 10 years. Sens. Baucus and Grassley list three offsets for the cost of the HIRE Act, including codification of the economic substance doctrine.

Novogradac & Company will provide regular updates via e-mail to Industry Alert subscribers regarding the progress of jobs legislation and related proposals.

In addition, Michael Novogradac, CPA, will review the proposed legislation in detail in the next Tax Credit Tuesday podcast. You will find the podcast in iTunes or online at www.novoco.com/podcast.

In the meantime, you can also follow us on Twitter @taxcreditnews and @Novogradac.

SENATE JOBS BILL COULD INCLUDE TAX CREDIT EXTENSIONS

WASHINGTON, D.C. - February 9, 2010

Despite inclement weather that could delay a vote, Senate Majority Leader Harry Reid, D-Nev., is reported to be working to get a bill designed to spur job growth to the Senate floor by the end of this week. A draft of the bill circulated today features several tax extensions, including an extension of the Section 1602 low-income housing tax credit (LIHTC) cash grant exchange program that was created by the American Recovery and Reinvestment Act (Recovery Act); an extension for one year of the new markets tax credit (NMTC); and a retroactive extension of deadlines for Gulf Opportunity (GO) Zone provisions that expired in 2009. The draft bill also includes the codification of the economic substance doctrine, but reports indicate that the issue is still under discussion.

CDFI FUND SEEKS APPROVAL FOR NEW NMTC INFORMATION COLLECTION

WASHINGTON, D.C. - February 4, 2010

The Community Development Financial Institutions (CDFI) Fund today announced its intent to request approval from the Office of Management and Budget (OMB) for new information collection activities associated with an independent, multi-year evaluation of the New Markets Tax Credit (NMTC) program. In a notice in today’s Federal Register, the CDFI Fund describes a one-time information collection effort involving participants and stakeholders in the program, which is intended to describe and assess program activities as well as identify project-specific and community level outputs and outcomes. Click here for more information.

PLRS PROVIDE GUIDANCE ON USE OF 6-MONTH CURE PERIOD FOR NMTC

WASHINGTON, D.C. - February 3, 2010

The Internal Revenue Service (IRS) last week released two private letter rulings (PLRs) that discuss the eligibility of a six-month cure for failure to meet the substantially-all requirement within the initial 12 months as required by the new markets tax credit (NMTC) program. The IRS states in PLR 201004008 and PLR 201004021 that the six-month cure period is not automatically tacked on to the 12-month period; instead it begins when a community development entity (CDE) becomes aware (or reasonably should have become aware) of the failure to meet the substantially-all requirement.

“These two PLRs provide welcome guidance,” said Brad Elphick, CPA, a partner in the Atlanta office of Novogradac & Company LLP and head of the NMTC Working Group. “While it’s important to note that the letter rulings themselves cannot be used or cited as precedent, the position taken by the IRS provides some much needed clarification for the NMTC community regarding use of the cure period.”

Click here to access copies of PLR 201004008 and PLR 201004021. Additional analysis is also available in this article in the February issue of the Novogradac Journal of Tax Credits.

FEDERAL BUDGET PROPOSAL EXTENDS, ALLOWS NMTC TO OFFSET AMT

WASHINGTON, D.C. - February 1, 2010

Today President Barack Obama transmitted the fiscal year (FY) 2011 proposed budget to the Congress, which includes an extension of the new markets tax credit through 2011, with an allocation amount of $5 billion for each of 2010 and 2011. The proposal would also permit the NMTC to offset alternative minimum tax (AMT) liability. Click here for more information about NMTC extension proposals.

Tune in to the February 9 Tax Credit Tuesday podcast to hear more about this proposal and the next steps in the federal budget process.

January

REPORT: NMTC HELPS FUND PROJECTS IN LOW-INCOME COMMUNITIES

WASHINGTON, D.C. - January 29, 2010

Congress should consider options to simplify the structure of the new markets tax credit (NMTC) according to a report released today by the Government Accountability Office (GAO). The mandated report describes where and how community development entities (CDEs) are using NMTCs; assesses how CDEs use NMTCs to offer favorable financing terms to low-income community businesses and describes options for simplifying the NMTC; describes how NMTC investments support low-income community development; and determines how effective the Internal Revenue Service and the Community Development Financial Institutions (CDFI) Fund have been in monitoring NMTC compliance.

HISTORIC SCHOOLS REHABILITATION ACT INTRODUCED IN THE SENATE

WASHINGTON, D.C. - January 29, 2010

Senators Jim Webb, D-Va., and Mark Warner, D-Va., today introduced The Rehabilitation of Historic Schools Act of 2010. The bill, which provides a tax credit for communities to partner with private sector developers to rehabilitate the nation’s older school buildings, is a the companion bill to H.R. 4133, introduced in the House by Virginia Rep. Eric Cantor on November 19, 2009. The measure would change a provision in the federal rehabilitation tax credit that restricts renovation of older public school buildings, limiting the ability of local governments to partner with private developers to rehabilitate schools. A copy of the bill and a fact sheet about the legislation can be found here.

Novogradac & Company will follow the progress of the Rehabilitation of Historic Schools Act and provide updates during the Tax Credit Tuesday podcasts and in the newly expanded Novogradac Journal of Tax Credits.