New Markets Tax Credits
Federal New Markets Tax Credit Program
Lane Powell is one of the few Northwest firms with national New Markets Tax Credits (NMTC) experience. The federal NMTC program, enacted in 2000, provides a tax subsidy for qualifying investments in low-income communities. We have provided legal services to all types of participants in NMTC financing transactions: project borrowers (including for-profit, governmental, and private nonprofit organizations) that meet the requirements of a so-called qualified active low-income community business (QALICB); tax credit investors; and community development entities (CDEs) that have received allocations of NMTC authority from the U.S. Treasury Department.
The NMTC program permits an investor to receive credits against federal income taxes by making a qualified equity investment (QEI) in a CDE that invests the QEI proceeds in projects in qualifying low-income communities. The credit provided to the investor totals 39 percent of the amount of the QEI and is claimed over a seven-year period. In each of the first three years, the investor receives a credit equal to five percent of the QEI. In each of the final four years of the credit period, the amount of the credit is six percent of the QEI. A QEI cannot be redeemed during the seven-year credit period without recapture of all credits claimed.
Following is a selection of Lane Powell’s federal New Markets Tax Credit transactions:
- Represented Wells Fargo, as tax credit investor, in six federal NMTC transactions.
- Represented Washington Federal, as tax credit investor, in the construction of a medical arts pavilion by Island Hospital in Anacortes, Wash.
- Represented Community Funding Group of Seattle, Wash., as Community Development Entity in four federal NMTC transactions.
- Represented Albina Equity Fund I, LLC, a subsidiary of Albina Community Bancorp, as Community Development Entity in the refinancing of a community wind farm in Baker County, Ore.
- Represented Mercy Corps, as project sponsor, in the restoration of a historic downtown Portland building to serve as Mercy Corp’s headquarters. The financing combined federal New Markets Tax Credits with Historic Rehabilitation Tax Credits to redevelop and construct a LEED Platinum facility.
- Represented Chemeketa Community College, as project sponsor, in the expansion of the Chemeketa Center for Business and Industry, including the incorporation of state-of-the-art distance education technology.
- Represented Neighborcare Health, as project sponsor, in the construction of a low-income health and dental clinic in the Rainier Beach neighborhood of Seattle, Wash.
- Provided an NMTC Oregon law opinion and real estate advice to ZeaChem Applied Technology LLC, the QALICB, in connection with the construction and leasing of its biorefinery demonstration facility in Boardman, Ore.
- Represented Waimanalo Hawaiian Homes Association, as project sponsor, in the construction of a Community Technology, Education, and Employment Center located in Waimanalo, Hawaii, the first use of NMTCs on Hawaiian Home Lands.
- Represented YES Prep Public Schools Inc., as project sponsor, in the expansion and improvement of two of its charter school campuses located in Houston, Texas.
Oregon State New Markets Tax Credit Program
Oregon, along with a number of other states, has adopted a state tax credit program to promote local investment and job creation. The Oregon program, known as the “Oregon Low Income Community Jobs Initiative,” provides a tax credit for QEIs that fund loans or equity investments of up to $84 million in projects located in federally-qualifying census tracts within the state of Oregon. The credit provided to the investor totals 39 percent of the amount of the Oregon QEI and is claimed over a seven-year period. No credit is received by the investor in the first two years after investment; in the third year, the investor receives a credit equal to seven percent of the Oregon QEI; and in each of the final four years of the credit period, the amount of the credit is eight percent of the Oregon QEI.
Lane Powell attorneys assisted in the development of the final terms of the Oregon NMTC award certification agreement. We have represented an Oregon credit allocation holder and several Oregon project sponsors in transactions using the Oregon tax credit (both on a stand-alone basis and combined with federal NMTCs).