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PIDC New Markets Tax Credit Program
BACKGROUND
The New Market Tax Credit (NMTC) program is a federal
tax credit program designed to generate private-sector capital investment
in low-income areas. The program permits individual and corporate taxpayers
to receive credit against their federal income taxes for making qualified
equity investments in projects that finance community development,
stimulate economic growth and create jobs.
USES
Appropriate uses of funds include:
- Property
acquisition if associated with substantial renovation or new construction;
- New
building construction or substantial renovation;
- Machinery
and equipment, if associated with growth, new construction or substantial
renovation; and
- Working capital, if associated with business
growth, new construction or substantial renovation.
FINANCING
Typical project financing is a combination of market-rate
debt and NMTC equity which results in a lower overall cost of capital.
The financing term is seven years after which it is anticipated that
all or a portion of the equity will be granted to the project and the
project’s remaining debt will be refinanced, if necessary.
PROCESS AND TIMING
An applicant must submit an eligibility application
including detailed information on how its project will benefit the
low-income community. Eligible applicants will then submit detailed
project information for PIDC’s final review. The transaction
cycle typically takes 90-120 days.
FEES
- Application: Equal to $500.
- Origination:
Equal to 2% of the allocation.
- Program compliance fee up to
0.5% per year over seven years.
- Direct expenses, including
legal and accounting fees. • Exit fees may apply.
For more information, contact Susan Lowry, 215-496-8161,
slowry@pidc-pa.org .
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