New markets tax credit.

• Author: Laffie, Lesli S.
• Position: Low-income community businesses

There is both good and bad news on the new markets tax credit (NMTC). The Sec. 45D credit, established by Section 121 of the Community Renewal Tax Relief Act of 2000, seeks to stimulate investment in low-income community businesses by offering a 39% credit of the amount invested through special intermediaries.

A taxpayer obtains NMTCs by making an equity investment in a Federally certified for-profit entity (a "qualified community development entity" (CDE)) that has received a Federal NMTC allocation permitting it to designate NMTCs to its equity investors. (For background, see Lederman, "Will the New Markets Tax Credit Stimulate Low-Income Communities? (Parts I and II)," TTA, June 2002, p. 390 and July 2002, p. 454.)

Bad news: According to the Community Development Financial Institutions (CDFI) Fund, which certifies CDE status and allocation of NMTCs to CDEs, 345 NMTC applications were filed...