The Department of the Treasury today announced that the Treasury Department and Internal Revenue Service have issued final regulations regarding the New Markets Tax Credit (NMTC).
The NMTC provides a tax credit to investors who make qualified equity investments in privately-managed investment vehicles called Community Development Entities, or CDEs. The CDEs are required to invest substantially all of the proceeds of the qualified equity investments in low-income communities.
The final regulations amend temporary regulations that were promulgated in December of 2001 and March of 2004. The final regulations clarify the application of the substantially-all requirement; establish a six-month cure period for correcting noncompliance; provide guidance on when a distribution by a CDE to an investor will not be treated as a redemption requiring the investor to recapture credits previously taken; and clarify when a business, or a portion of a business, will be eligible for NMTC financing.