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New Markets Tax Credit

Private equity groups investing in distressed communities

can leverage tax credits to create jobs.

If your private equity group is acquiring, expanding, or investing in businesses that will create jobs in an urban or a rural area that qualifies as distressed according to federal guidelines, you should investigate the availability of New Markets Tax Credits (NMTCs).

For qualifying businesses, NMTCs can provide a permanent net subsidy of 15 to 20 percent of the amount financed. The best candidates are businesses that are seeking financing of $5 million or more and will:
  • Create a significant number of permanent jobs, particularly those that will be available to low-income individuals
  • Provide services not now available to the residents of a distressed area and/or
  • Make goods for the residents of a distressed community that aren’t currently available in the community
 
To incentivize taxpayers to invest in qualified NMTC businesses, the federal government offers a tax credit equal to 39 percent of the investment, earned over seven years.


How to access NMTC capital 

The first step for a private equity group interested in leveraging the NMTC program is to determine if its target or portfolio company qualifies for an NMTC allocation based on location and its ability to create jobs and/or provide products or services to an underserved market. The second step is to identify a Community Development Entity (CDE) with an allocation of NMTCs that is willing to enhance the business’ financing with NMTCs.
 
You can identify CDEs that have received NMTC allocations from the federal government at: www.cdfifund.gov. However, a team of Plante Moran specialists can add insights to improve the efficiency and effectiveness of your search and confirm that NMTCs align with your goals.


Recognized leaders in community development 

Plante Moran has a team of specialists who are nationally recognized as leaders in New Markets Tax Credits. They have helped close more than 130 new markets and historic tax credit transactions, generating more than $1 billion in tax credits to finance more than $2.5 billion in development.
 

Supporting the tenets of private equity investing

The firm also has a practice group that serves more than 100 private equity groups and more than 200 portfolio companies. This multidisciplinary group can be depended upon to keep the project in line with the tenets of private equity investing.
 

Navigating the world of NMTC financing

Whether your private equity group is interested in obtaining NMTC-enhanced financing for a target or portfolio company or you would like to explore the idea of establishing your own captive CDE to apply for an allocation of NMTCs from the U.S. Treasury, a Plante Moran team of private equity and community development experts can guide you through the process.

"Our Plante & Moran tax specialists are thoughtful and complete in their tax planning ideas. We appreciate that they successfully implement their ideas with equal energy and expertise."

Tax Manager
Large Turnaround Firm