New Markets Tax Credits
- Holland & Knight tax lawyers have been active counselors on New Markets Tax Credit (NMTC) transactions since the program's inception and represent all parties in NMTC transactions: community development entities, syndicators, investors, lenders and qualified active low-income community businesses (QALICBs).
- Our attorneys are experienced in representing clients in a wide range of NMTC projects, including charter schools, mixed-use developments, hospitals and health centers, grocery stores, community facilities, arts centers and museums, manufacturing facilities, public transit and many other sectors.
- Our support of clients in NMTC transactions isn't limited to tax and finance advice. Our attorneys have the knowledge, experience and resources to advise on every legal aspect necessary to close transactions efficiently, including real estate and environmental issues, various corporate matters and helping to ensure that projects are structured to be successful after they are funded.
- NMTCs frequently are used in tandem with state credits and other federal credits, such as those for low-income housing or historic preservation. Our NMTC lawyers are experienced in combining multiple sources of tax credit equity and private equity to maximize investment in distressed communities with the NMTC.
Overview
Our New Markets Tax Credit (NMTC) attorneys have represented clients in hundreds of projects since this program was authorized by the Community Renewal Tax Relief Act of 2000 as part of a package of incentives to encourage investment and job growth in economically distressed neighborhoods. As of the end of 2021, the NMTC program had resulted in leveraged investment of more than $66 billion in communities with high rates of poverty and had created more than 938,000 jobs. The program has supported the construction of nearly 239 million square feet of manufacturing, office and retail space.
We closely follow developments in Congress as lawmakers consider the extension of the NMTC program (scheduled to expire at the end of 2025) as well as related tax credits and possible changes that could be part of an overall reform of federal taxes. Complicating the picture for clients is compliance with a complex and evolving regulatory scheme involving tax regulations issued by the IRS and policy rules issued by the Community Development Financial Institutions (CDFI) Fund, both branches of the U.S. Department of the Treasury. Vigilance is required to keep up with a shifting landscape in the compliance area.
Through active participation in industry groups, our attorneys stay abreast of tax and policy developments regarding the NMTC and related tax laws to give clients timely advice. We are advocates for the NMTC program and support its goal of encouraging private investment in underserved urban and rural communities.
Combining NMTC with Other Credits, Sources
Our New Markets Tax Credit Team takes a holistic approach and understands that tax credits frequently are used as a package. We often advise clients on transactions that combine NMTCs with credits for historic preservation, renewable energy, low-income housing (LIHTC), state credits for investment in economically distressed areas and various forms of government financing. Structuring transactions involving residential uses is particularly complex because the NMTC cannot be used for residential rental property or combined directly with the LIHTC.
NMTC projects often combine a variety of funding from grants, direct loans from local banks, bridge loans and other sources. We have experience in all types of combined lending structures. Our New Markets Tax Credit Team also has assisted clients in combining NMTCs with existing Health Resources and Services Administration (HRSA) grants for community health centers, Opportunity Zone funds, and have used other creative strategies, such as pairing these credits with the EB-5 immigrant investor program that grants visas for foreign nationals whose investments create jobs. Further, our attorneys have assisted clients in combining NMTCs with other federal grants and a variety of state, city and county grants.
Leveraging NMTC for Diverse Projects
Our clients run the gamut of NMTC participants. We represent major banks, institutional investors, investment funds, syndicators, community development entities (CDEs) and qualified active low-income community businesses (QALICBs).
Our Tax Credit & Community Development Finance Practice has more than 40 attorneys in offices across the U.S. We offer clients comprehensive advice on how the NMTC fits with their overall strategies in a variety of industries and contexts.
NMTC projects that we have assisted on have included food banks, hospitals and health centers, museums, art centers, grocery stores, community centers, transit systems, hotels, college and university facilities, telecommunication systems, solar facilities, brownfields cleanup, and manufacturing and production facilities. We also have assisted investors in using NMTCs to establish or expand charter schools throughout the country, as well as to rehabilitate historically significant buildings and facilities. We have used a variety of creative structures to combine NMTC mixed-use facility or commercial projects with related low-income housing projects and historic tax credit projects, including side-by-side projects or integrated projects using a condominium structure.
Holland & Knight's extensive NMTC experience in such a wide range of sectors has made our attorneys sought-after speakers at educational and industry programs. We offer the knowledge and resources needed to result in favorable deals, helping to ensure projects are structured for success after they are funded. Our New Markets Tax Credit Team prides itself on being efficient, practical and approachable. We are passionate about community development, the NMTC program and our clients' projects.