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BACKGROUND
The New Markets 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.
ELIGIBILITY
An applicant must demonstrate that its proposed project
will provide long-term benefits to the low-income community.
The applicant and/or project must also:
- Derive 50% or more of its gross
income from activities conducted in an eligible census
tract;
- Demonstrate that 40% or more of the services
it performs or tangible property it uses takes place in
an eligible census tract; and
- Attribute less than 5% of its assets to collectibles
or nonqualified financial property.
USES
Appropriate uses of funds include:
- Property acquisition if associated with substantial
renovation or new construction;
- New building construction or substantial renovation;
- Machinery & 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.
PROCEDURE
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 application process is competitive and PIDC will approve
those applications that best meet the goals of its NMTC program.
FEES
Amounts will include:
- Application fee equal to $500
- Origination fee equal to 2.0% of the allocation;
- Program compliance fee up to 0.5% per year over seven
years; and
- Direct expenses, including legal and accounting fees.
- Exit fees may apply.
For more information, contact SAM RHOADS, 215.496.8132 |