Overview
The typical new markets tax credit transaction involves multiple parties, including a tax credit investor, one or more lenders, one or more CDEs, and the qualified active low-income community business (“QALICB”), which is the owner of the project and typically receives a loan or equity investment from the CDE. QALICBs can be almost any active business, including anything from a real estate developer looking for a source of subsidy to fill a gap in its development budget to a local government seeking funding for a community center to a university trying to fund on-campus developments. No matter what type of project or its complexity, Maynard Nexsen has the expertise to handle it from start to finish efficiently and effectively.
A cross-disciplinary team of lawyers in Maynard Nexsen’s real estate, finance, tax, and bond practices provides extensive experience assisting clients in applying for certification as a CDE from the CDFI Fund, making loans to projects benefiting from federal and state NMTCs, and, in their capacity as the QALICB, borrowing from CDEs for a variety of different projects. Since 2008, our lawyers have closed financings totaling hundreds of millions of dollars in qualified equity investments, including projects for manufacturing facilities, office buildings, hotels, shopping centers, hospitals, alternative energy production facilities, and college/university buildings.
Both federal and state NMTC transactions involve deal structures that affect project lenders and require an understanding of NMTCs on the part of real estate and other lawyers involved in the transaction. Maynard Nexsen has worked on numerous aspects of NMTC transactions, and we are familiar with the requirements for structuring such transactions and can assist in bringing projects to successful financial closings. A hallmark of Maynard Nexsen’s NMTC experience has been our lawyers’ understanding of how to strategically combine federal NMTCs with other financing programs like state NMTCs, federal and state historic tax credits, and taxable and tax-exempt bond financing.
Congress established the federal new markets tax credit as part of an effort to spur investment in low-income communities. The federal program is administered by the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (“CDFI Fund”). It is designed to attract investment capital to operating businesses and real estate projects located in low-income communities by permitting investors (typically financial institutions that also receive Community Reinvestment Act credit) to receive a tax credit against their federal income tax liability in exchange for making qualified equity investments in certified community development entities (“CDEs”). The federal tax credit totals 39 percent of the original investment amount and is claimed over a seven-year period.
Representative Transactions
- Represented a medical office building developer on a $20 million financing that combined federal NMTCs, state NMTCs, and tax-exempt bonds
- Represented a hospital system on a $14.6 million financing that combined federal NMTCs and EB-5 loans
- Represented a manufacturer on a $53.7 million financing that combined federal NMTCs and tax-exempt bonds
- Represented a manufacturer on a $10 million financing that combined state NMTCs and tax-exempt bonds
- Represented a higher education institution on a $10 million financing that combined state NMTCs and tax-exempt bonds
- Represented a higher education institution on a $30 million financing that combined federal NMTCs, state NMTCs, and tax-exempt bonds
- Represented a religious organization on a $10 million financing that combined federal NMTCs and state NMTCs.
- Represented a manufacturer on a $3 million financing that utilized state NMTCs
- Represented an urban office building developer on an $8.4 million financing that combined federal NMTCs, state NMTCs, federal historic tax credits, and state historic tax credits
- Represented a higher education institution on a $10 million financing that combined federal NMTCs and taxable bonds
- Represented a commercial bank leverage lender on a $22 million financing that combined federal NMTCs, federal historic tax credits, and state historic tax credits in connection with an urban mixed-use building
- Represented a commercial bank leverage lender on a $7 million financing that combined federal NMTCs and state NMTCs in connection with an organic waste processing facility
- Represented a higher education institution on a $10 million financing that utilized federal NMTCs
- Represented a municipal corporation on a $40 million financing that combined federal NMTCs and tax-exempt bonds
- Represented a commercial real estate developer on a $23 million financing that combined federal NMTCs and taxable bonds