07 January 2020 Year-end tax legislation extends New Markets Tax Credit The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Act), which was part of the tax legislation that President Trump signed into law on December 20, 2019, extends the New Markets Tax Credit (NMTC) by one year and increases the allocation limit to $5 billion. Congress established the NMTC Program in 2000 to permit individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in community development entities (CDEs). The credit totals 39% of the investment and may be claimed by the investor over seven years. The CDE must use substantially all the investment to make qualified investments in low-income communities, typically in the form of loans with forgivable and other favorable aspects to a business that operates within a qualifying distressed census tract. The Act also allows aggregate amounts to be carried over until 2025 (instead of 2024). Under IRC Section 45D(f)(3), if the NMTC limitation for any calendar year exceeds the aggregate amount allocated for that year, the limitation for the succeeding calendar year is increased by the amount of that excess. This additional, larger-than-normal round of NMTC allocations is welcomed by the industry. It likely means a busy calendar year for 2020, with the 2019 allocation awards expected to be announced in the Spring/Summer, followed shortly thereafter with the application deadline for the 2020 round. A larger pool of funding should mean more successful CDEs and more projects benefiting from participation in the program. That said, we expect that it will still be highly competitive for CDEs that are looking for an allocation and projects that are looking for funding. We encourage CDEs that are considering applying or projects that are looking for funding to start the process as early as possible to have the best chance of success.
Document ID: 2020-0027 | ||||||||
