June 16, 2020 IRS extends new market tax credits deadlines until end of 2020 The IRS in Notice 2020-49 postponed until December 31, 2020, the due dates for making investments and reinvestments, and expending amounts for construction of real property, under the new markets tax credit (IRC Section 45D). Congress established the New Markets Tax Credit (NMTC) Program in 2000 to permit individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments (QEIs) in community development entities (CDEs). The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended the new markets tax credit by one year to December 31, 2020. The credit totals 39% of the investment and may be claimed by the investor over seven years. Generally, a CDE must invest at least 85% of its QEIs in qualified low-income community investments (QLICIs). A CDE has 12 months to invest QEIs in a QLICI. A CDE also has 12 months to reinvest amounts received in payment of, or for, capital, equity or principal with respect to a QLICI in order for those amounts to be treated as continuously invested in a QLICI. Working capital is defined as any investment proceeds or loan that will be used for construction of real property within 12 months after the date the investment or loan is made. Notice 2020-49 has postponed deadlines so amounts that would have expired on or after April 1, 2020 and before December 31, 2020, still qualify for the credit until December 31, 2020 Implications The change in deadlines directly respond to the COVID-19 emergency and falls squarely within the instructions provided by Treasury's Emergency Declaration "to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a)." As a result of COVID-19-related shutdowns and other "shelter in place" orders from various state and local governments, many projects, including NMTC investments, have faced unforeseen delays, cost pressures and financing hurdles. These challenges have, in some cases, delayed expenditures that would otherwise have satisfied investment requirements associated with the NMTC program. Notice 2020-49 provides a grace period for projects to meet the 12-month investment requirements. ———————————————
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