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.
Representative Experience
- Representing a CDE in providing a loan to a nonprofit to finance the acquisition and renovation of a food distribution facility and office space for a food bank in Salt Lake City, Utah.
- Representing a CDE in providing a loan to a nonprofit to finance the expansion and renovation of a building located in Dorchester, Massachusetts to be used as a community health center and charter school.
- Representing a CDE in providing a loan to finance the renovation of an existing building and the construction of new improvements to be used as a charter school facility in New Haven, Connecticut.
- Representing a CDE in providing a loan to finance the renovation of a historical building in Boston, Massachusetts containing a youth hostel and retail space using both New Markets Tax Credits and federal Historic Tax Credits.
- Representing two CDEs in providing loans to finance the development and construction of a federally qualified community health center in downtown Detroit, Michigan using New Markets Tax Credits and Michigan state brownfield tax credits.
- Representing a CDE in providing a loan to finance the renovation of the St. Pete Times Forum in Tampa, Florida using Florida state New Markets Tax Credits.
- Representing a CDE in providing loans to various entities involved in the manufacturing and distribution of solar energy technology throughout the state of Florida using a combination of Florida state New Markets Tax Credits, federal New Markets Tax Credits and renewable energy grants.
- Representing a CDE in providing a loan to finance the renovation of an existing building in Greensboro, North Carolina to be used as a small business incubator to support non-retail, new or emerging businesses.
- Representing a CDE in providing a loan to finance the expansion and development of two buildings to provide for a nursing program and expanded health science program for a college located in Knox County, Kentucky using both Kentucky state New Markets Tax Credits and federal New Markets Tax Credits.