New Markets Tax Credits: 2011 Allocation and Competition Announced

This past Friday, June 3, 2011, the U.S. Department of the Treasury, Community Development Financial Institutions Fund released its 2011 Notice of Allocation for the New Markets Tax Credit (“NMTC”) program.  There will be $3.5 billion in new markets tax credits available in 2011, and the Notice of Allocation serves to officially open competition for those credits. 

The NMTC program is designed to attract private investment to underserved, low-income communities.  In broad strokes, the NMTC program provides a tax credit to corporate or individual taxpayers who make qualified equity investments in designated “Community Development Entities” (known as “CDEs”).  The CDEs invest the capital raised into projects and businesses in the targeted communities.  In exchange for the investment, the investor gets a tax credit of 39% of the investment in the CDE.  The credit is allocated over a seven-year period.

The 2011 allocation of new markets tax credit is part of a recent extension of the NMTC program, and there are numerous CDEs in Arkansas poised to take advantage of the investment generated by the tax credits.  The NMTC program is also a significant tool for the Arkansas Sustainasphere, as the low-income and underserved communities that are the target of the program are the very places ripe for sustainable investment and development. The 2011 Arkansas General Assembly generally failed to pass much in the way of sustainalaws – such as the Property Assessed Clean Energy (PACE) Act and the Arkansas Clean Energy Act.  Those sustainalaws that did pass, primarily the Arkansas Central Business Improvement District Rehabilitation and Development Investment Tax Credit Act, have a limited reach and are probably under funded.  Given these deficiencies, look for savvy investors and developers to take advantage of the 39% tax credit for their community redevelopment projects, particularly in places like Little Rock, Helena, and Fort Smith.

The deadlines for the NMTC program are rapidly approaching.  CDE certification applications are due June 22, 2011, and NMTC program applications are due July 27, 2011. 

More information about the NMTC program can be found at www.cdfifund.gov/what_we_do/programs_id.asp?programID=5.