Practice Areas: Public Finance

New Markets Tax Credits

New Markets Tax Credits (NMTCs) are an attractive vehicle for revitalizing communities hit hard by the economic downturn. NMTCs facilitate partnerships among developers, lenders and equity sponsors, making investing in low-income communities economically feasible.

Regulations governing the NMTC program, which is administered by the U.S. Treasury’s Community Development Financial Institutions Fund (CDFI) and the Internal Revenue Service (IRS), can lay traps for the unwary. McGuireWoods’ new markets tax credit practice is experienced in guiding clients through the NMTC process.

Drawing on focused experience from our federal tax, corporate, real estate and public finance practices, we represent community development entities (CDEs), investors, lenders, developers and qualified active low-income businesses in the NMTC space. We have helped CDEs obtain allocations of NMTCs, assisted developers on obtaining private letter rulings from the IRS, assisted in the creation and financing of CDEs, and provided advice on a variety of projects qualified for NMTCs. More specifically, we provide tax advice relating to all aspects of NMTC projects, including those related to bond financing, partnership structuring, and qualification requirements.

Representative NMTC Work

• Representing a developer in a ruling request that resulted in the first favorable ruling by the IRS that three buildings may be treated as a single building for purposes of determining whether the building (and its structural components) qualifies for the NMTC. The developer needed to have the three buildings treated as a single building to qualify the project for the NMTC.
• Representing a municipality as bond counsel in connection with loan to a nonprofit. By counseling our client to use taxable bond proceeds to create a leveraged loan structure, it was able to assist in the redevelopment of a blighted area.
• Representing a municipality as a lender into a leveraged loan structure, used to finance mixed-use affordable housing deals, thus improving the quality of life of its citizens.
• Counseling a charitable entity on the use of NMTCs and tax-exempt bonds for the development of several new facilities. As a result, the entity was able to determine the optimal financial structure.
• Representing a bond issuer on the use of NMTCs for a commercial and retail urban core development owned by an affiliate of the issuer, allowing the bond issuer to combine NMTC and tax-exempt bonds to finance the project.
• Representing a lender on its qualified school construction bond loan to a charter school expansion project using NMTCs, and helping the lender understand the effect of the NMTC structure on the borrower’s credit.
• Advising a power provider on its use of NMTCs and other federal subsidies for construction of a new power plant, and explaining the differences between the federal tax subsidies and their impact on the structuring of financing for the project.
• Representing a bond underwriter in the sale of recovery zone facility bonds in a mixed-use redevelopment project using NMTCs, and allowing the bond investors to understand the effect of the NMTCs on their bond investment.
• Advising a solid waste company on the use of NMTCs for expansions at several landfills.