On October 31st, 2013 seventy Members of Congress sent a letter to the House Ways and Means Committee requesting permanent extension and expansion of the IRC § 45D New Markets Tax Credit (“NMTC”). The NMTC acts as an incentive for investing in low-income communities (determined by reference to census tracts) by providing individual and corporate investors a credit against their federal income tax in exchange for investing in low-income communities. Specifically, the credit equals 39% of the Qualified Equity Investment (“QEI”) amount a taxpayer invests with a certified Community Development Entity (“CDE”). A CDE is a domestic entity certified by the Community Development Financial Institutions Fund (“CDFI”), and provides investment capital to low-income communities. The CDE invests funds from investors and leveraged lenders (typically large lending institutions) in Qualified Low-Income Community Businesses (“QLICB”). The credit is claimed over a period of 7 years subsequent to the investment, with 5% of the investment claimed in each of the first three years and 6% of the investment claimed in each of the remaining four years; these amounts are subject to recapture. Absent congressional action, the NMTC will expire on December 31st, 2013.
Congressional Members Urge Permanent Extension of New Markets Tax Credit
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