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New Markets Tax Credits
OVERVIEW

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.

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.

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 Cooper has worked on numerous aspects of NMTC transactions and is familiar with requirements for structuring NMTC transactions and can assist in bringing projects to successful financial closings. A hallmark of Maynard Cooper’s NMTC experience has been the firm’s lawyers’ understanding of how to combine federal NMTCs with other financing programs like state NMTCs, federal and state historic tax credits, and taxable and tax-exempt bond financing.

Maynard Cooper has assisted 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 more than $300 million in qualified equity investments, including projects for office buildings, hotels, shopping centers, hospitals, alternative energy production facilities, college/university buildings, and manufacturing facilities.

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
May 21, 2019
RANDALL MINOR PARTICIPATES IN BBJ’S OPPORTUNITY ZONES TABLE OF EXPERTS

Randall Minor, a shareholder in the Firm’s Real Estate and Economic Development practice groups, represented Maynard Cooper in the Birmingham Business Journal’s Table of Experts: Insights into Opportunity Zones. This edition of Table of Experts was released in the May…

May 17, 2019
2019 LEGISLATIVE UPDATE: WEEK NINE

With 21 of the constitutionally permitted 30 days used after a three-day week this week, the 2019 Regular Legislative Session has begun to pick up the pace for a sprint to the finish. The House plans to take up only…