New Markets Tax Credits

Squire Sanders has a longstanding tax credit practice. As a natural outgrowth of that practice, we have been at the forefront of advising participants in the New Markets Tax Credits (NMTC) program since its inception, and our practice is one of the nation’s leaders in this area of the law.

The NMTC program permits developers and lenders choosing to make equity investments in certain community development projects to claim tax credits equivalent to 39 percent of their investments over seven years. We assist investors in analyzing and resolving the tax and structuring issues involved in obtaining NMTCs. Our vast experience means that we can efficiently assist clients without reinventing the wheel. We provide a full range of legal services in connection with NMTC-assisted transactions including:

• Formation and certification of community development entities (CDEs)
• Application for tax credits
• Structuring and documenting equity and leveraged equity investments in CDEs
• Negotiating and documenting loans and investments made by our CDE clients
• Counseling CDE clients on ongoing reporting and compliance

We are active in advising existing CDEs and investor clients to structure and document qualified equity investments (QEIs) in CDEs, the first step in the process of permitting investors to claim NMTCs. We have the experience necessary to assist these clients in closing QEIs that range in complexity from simple equity investments made by one investor to debt-leveraged equity investments made by multiple investors.

We also are active in advising existing CDEs in the key phase of making qualified low-income community investments (QLICIs) with the proceeds of equity investments made in CDEs. Clients call on us to assist in evaluating, structuring and documenting particular QLICIs, helping to ensure that each QLICI is financially viable as well as satisfying the requirements of the NMTC program. We draw upon both our experience evaluating and implementing QLICIs and our experience in the formation, qualification and allocation process to assist our clients to maximize the financial benefit of their allocations of NMTCs. In turn, this experience provides valuable perspective when we assist clients in preparing applications for new or additional NMTCs.

We are also prominent in developing and expanding the combined use of NMTCs and traditional public finance techniques including incorporating tax exempt financings such as Empowerment Zone Bonds with NMTC investments to increase a project’s viability. Our depth of knowledge in the tax exempt bond and tax credit areas permits us to review existing economic development projects and advise where NMTCs may be applied.