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New Markets Tax Credits News Briefs - July 2013

Sens. Roy Blunt, R-Mo., and Jay Rockefeller, D-W.Va., introduced a bipartisan bill to make the new markets tax credit (NMTC) program permanent on June 11. S. 1133 would amend the Internal Revenue Code (IRC) of 1986 to permanently extend the NMTC program. The NMTC program provides private investors with a 39 percent federal tax credit for investments made in businesses or economic development projects in some of the most distressed communities in the nation. The NMTC program was first part of the Community Renewal Tax Relief Act of 2000. The program was most recently extended for two years through 2013, with $3.5 billion in annual credit provided for each year. A copy of S. 1133 can be found online at www.newmarketscredits.com.

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The Community Development Financial Institutions (CDFI) Fund released a frequently asked questions (FAQ) document addressing issues raised by the CDFI industry and the recertification effort for CDFIs. Topics covered include those related to recertification, award round eligibility and the impact on community development entity (CDE) certification. This involves cure periods for applicants, how entering a cure period or becoming decertified affects an applicant’s eligibility and how entering a cure period or becoming decertified affects an organization’s current CDFI program and Native American CDFI Assistance (NACA)program awards. A copy of the FAQ can be found at www.cdfifund.gov.

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The New Markets Tax Credit Coalition (NMTCC) released its 2013 NMTC Progress Report in June. The report is designed to inform policy makers and practitioners about how the NMTC program is working and to document the success of the program by highlighting findings from the annual survey of CDEs receiving NMTC allocations. NMTCC collected data from CDEs on their progress raising capital and making loans and investments in FY 2012. For the first time, this year’s survey also asked CDEs to provide project-specific information. Survey findings show that the NMTC continues to be an effective incentive for community revitalization. In total, the CDE survey respondents created 47,000 jobs in 2012. These jobs were created in communities with poverty rates above 20 percent and median incomes below 80 percent of the area median. The report is available at nmtccoalition.org.

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Arkansas enacted the state’s New Markets Jobs Act of 2013. Act 1474 creates a state NMTC, which is expected to promote access to capital for job creation and economic development in low-income communities. The bill was sponsored by Rep. Mark Lowery. According to fiscal impact reports on Act 1474, the credit can be used to offset insurance premium tax liability. The credit is for a total of 7 years. There is no credit for the first two years, but the amount of the credit for each of years 3 through 5 is 12 percent of the amount of the investment, while the amount of the credit for years 6 and 7 is 11 percent. More information can be found online at www.newmarkets.com.

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Gov. Paul LePage signed L.D. 1109, also known as H.P. 778, into law on May 7. Introduced by Rep. Thomas Stanley, the bill clarifies the Maine New Markets Capital Investment program tax credit. The limitation on the amount of investment that may be made with respect to certain qualified active low-income community businesses is now established. The limit is $40 million per project constructed, maintained or operated. A copy of the bill can be found at www.newmarketscredits.com.

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BioNitrogen Corporation received a $10 million NMTC allocation from a subsidiary of Stonehenge Community Development LLC that was supported by the Florida NMTC program. The clean energy company signed the term sheet for the $10 million and it will equal a cash investment of about $1.95 million for BioNitrogen. The investment will go to a recently established subsidiary of BioNitrogen. The proceeds will finance equipment and land developments for the subsidiary in Hardee County, Fla. According to the terms of the term sheet, BioNitrogen will pay 3 percent of the allocation amount at closing plus 0.5 percent per annum to be paid over the seven-year term of the investment. The investment is anticipated to close before July 16.

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Building America CDE, subsidiary of AFL-CIO Housing Investment Trust, allocated $5 million in NMTCs to the $48 million Paseo Verde development in North Philadelphia. Paseo Verde, or “green way,” will be constructed by co-developers Jonathan Rose Companies and Asociación Puertorriqueños en Marcha, and will comprise 120 units of affordable housing and around 30,000 square feet of retail and community services, commercial space and parking. A primary healthcare facility will also be brought to the area. The NMTCs will go to help finance the mixed-use development, which is designed to revitalize North Philadelphia’s distressed Ludlow Community. The property is expected to create more than 300 construction jobs.

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El Sol Science and Arts Academy will receive $2.5 million in NMTC equity provided by U.S. Bank. The allocation will go to the development of a 12-classroom dual-immersion charter school building. The academy is located in Santa Ana, Calif. in a community where 75 percent of residents speak Spanish. U.S. Bancorp Community Development Corporation, subsidiary of U.S. Bank, made the investment and partnered with NCB Capital Impact, Local Initiatives Support Corporation (LISC) and LA Charter School New Markets CDE LLC, a subsidiary of ExED, on the financing. Construction is anticipated to be completed in the fall of this year.

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The NMTC community has new resources available to express support for the NMTC program in the context of tax reform. Senate Finance Committee Chairman Max Baucus, D-Mont., and House and Ways Committee Chairman Dave Camp, R-Mich., launched the website TaxReform.gov to urge the public to share their concerns, stories and suggestions regarding reforming the tax code. Also established was the accompanying Twitter handle @simplertaxes. NMTC fact sheets, state economic impact reports and other resources are available on the NMTC Coalition’s website http://nmtccoalition.org/.

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Warner Norcross & Judd LLP welcomed Christin Decker Petroski to its Midland Office. Pretorski’s experience lies in corporate law with an emphasis on transactions, such as corporate acquisitions, dispositions, mergers and NMTC transactions. Before joining the firm, Petroski was an attorney with Holland & Knight LLP. Petroski earned a bachelor’s degree in psychology from Florida State University, and a juris doctor from the University of Florida Levin College of Law, where she was Order of the Coif.

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The IRS released Notice 2013-38, Empowerment Zone Designation Extension, to provide clarification on how state and local governments can amend its nomination of an empowerment zone and to provide for a new termination date of Dec. 31, 2013. Prior to the enactment of section 1391 of the Internal Revenue Code (IRC), the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and the American Taxpayer Relief Act of 2012, designation of an empowerment zone ended the earliest of (A) Dec. 31, 2009, (B) the termination date designated by state and local governments as provided for in their nomination, or (C) the date the appropriate secretary revokes the designation. Notice 2013-38 was published in the Internal Revenue Bulletin 2013-25 on June 17.

Journal Category:

New Markets Tax Credit

Authors:

Novogradac

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