Practice Areas & Industries: Lane Powell PC

Practice/Industry Group Overview

Lane Powell provides services to municipalities, investors, developers, lenders, underwriters and service providers who are participating in the New Markets Tax Credit program.

Lane Powell's New Markets Tax Credits Practice Group has assisted clients in development projects and programs using federal income tax incentives since the inception of the Low Income Housing Tax Credit program. This expertise helps us assist our clients in creating and implementing New Markets Tax Credit opportunities.

The New Markets Tax Credit ("NMTC") Program permits taxpayers to receive a credit against Federal income taxes for making qualified equity investments in designated Community Development Entities ("CDEs"). Substantially all of the qualified equity investment must in turn be used by the CDE to provide investments in low-income communities. The credit provided to the investor totals 39 percent of the amount 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 the investment. 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. The proceeds are used by CDEs to make loans and investments in qualifying community development projects and related activities. The leveraged method of utilizing NMTCs can result in robust subsidies for substantial projects.

NMTCs are allocated annually in a competitive application process. Throughout the life of the originally authorized NMTC Program, the Fund is authorized to award CDEs the authority to issue up to $15 billion in equity for which NMTCs can be claimed. The Fund allocated the first two years' tax credit availability in 2003, and combined two years' availability in the application round that closed on September 30, 2003, for award in March, 2004. The program is being considered for reauthorization by Congress during 2006.

Lane Powell's team has the experience and expertise to assist clients in structuring CDE entities, drafting and submitting applications, structuring and negotiating investments, and in deploying capital and managing compliance risks.