New Market Tax Credit

For 2007, an additional $400 million of New Markets Tax Credit allocation authority is available to help rebuild low-income communities within the GO Zone. Nearly half of the census tracts in the GO Zone qualify as low-income communities.

New Market Tax Credits (NMTCs) are awarded through the U.S. Treasury’s Community Development Financial Institutions Fund (CDFI Fund) to organizations that qualify as Community Development Entities (CDEs). A CDE can be either a for-profit or not-for-profit entity that demonstrates a primary mission of serving – or providing investment capital for – low-income communities. To receive an NMTC award, a CDE must submit a formal application to the CDFI Fund. The deadline for 2007 applications is Feb. 28, 2007. NMTC awards will be announced in Fall 2007.

Individual taxpayers, corporations, banks, insurance companies and others may make qualified equity investments in designated Community Development Entities that have been awarded NMTCs through cash contributions. The NMTC Program permits taxpayers to receive a credit against Federal income taxes. According to information provided by the CDFI Fund at www.cdfifund.gov:

The tax credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not redeem their investments in CDEs prior to the conclusion of the seven-year period.