In December 2000, the U.S. Congress passed the Community Renewal Tax Relief Act, creating what has come to be known as the New Markets Tax Credit Program. This program is designed to encourage investments in qualified low-income communities that traditionally have had poor access to both debt and equity capital.
As a dollar-for-dollar reduction in federal income tax liability, the new markets tax credits are based on the amount of debt or equity investment that is made by the investor who will use the tax credit. The tax credits are taken during a seven-year period and total 39% of the debt or equity investment consisting of 5% percent in the first three years and 6% in the next four years. This simply means that for every million dollars invested, the investor will receive a bottom line tax credit of $50,000 per year for three years and $60,000 per year for the next four years totaling $390,000 in tax credits during the seven-year period.
In order to qualify for the new markets tax credits, an investment must be made to either a business or a non-residential, commercial property that is located in a low-income community through a community development entity (CDE).
As a designated CDE utilizing the new markets tax credits, CDF Development, LLC, an affiliate of The Cordish Company, offers investment capital in the form of medium and long-term primary mortgages, medium-term mezzanine financing, and traditional equity investments to owners of commercial retail properties located within qualified low-income communities.
Equity investors interested in capturing the benefits of these federal tax credits are welcome to contact CDF Development, as are developers with substantial retail projects in low-income communities.
For more information on the program, please click here for the New Market Tax Program official web site.