Historic and New Markets Tax Credits

Historic and New Markets Tax Credits

Tax credits are made available to Investors in exchange for an equity investment in a qualifying project. Credits are provided by the Federal and some State Governments.

Investors benefit from a reduced tax liability and Owners/Developers benefit from new equity funding for their project. There are two types of Tax Credit programs: Historic and New Markets each with different requirements

The Tax Credit program is regulated by the IRS and Department of Interior. These regulations require specific organizational structures, specialized accounting, reporting and record keeping requirements and come with a penalty if regulations are not followed.

The Historic Tax Credit (HTC) Program was created by Federal and State Governments and regulated by the IRS and the Department of the Interior to foster economic development and job creation. These programs have enabled the restoration and rehab of valuable historic and non-historic properties bring new jobs, services and economic activity.

New Market Tax Credits are provided by the Federal Government and allocated yearly to various Community Development Entities (CDE’s). CDE’s evaluate many projects based on their contribution to severely distressed communities and distribute their allocations to a few chosen projects.

A credit is a specified amount that an investor may deduct from their Taxes.

Investors are those Businesses that can realize financial benefit from the tax credits.

A project must meet specific requirements in order to qualify for these programs.  

The amount of credits a project may claim are based on the qualifying project expenditures or QRE’s.

Tax credit financings require forming multiple new Entities and involve Tax, Legal and Accounting Consultants, sources for bridge financing, Investors, CDE’s and specialized accounting and reporting requirements.

Historic and NMTC’s each have different qualifying requirements

In addition to the need to qualify: these programs also require:

  • An experienced and knowledgeable Management team;
  • Experienced Contractor;
  • Sustainable business and operating plan;
  • Evidence of significant economic contribution to the community.

Questions?

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ds’at’plymouthsoundings’dot’com
865-254-4343