Cherrytree Group LLC Blog

All over Boston and New England, older buildings sit available and abandoned. New Markets Tax Credits allow developers and land lord the ability to re-open these buildings for business, all the while stimulating the economy, offering jobs, and breathing new life into our communities.

In Berlin, the former Fraser Papers mill is being replaced by a biomass plant that will not only result in hundreds of construction and permanent jobs, but will also buy $27 million worth of wood every year from local timber owners.

In Concord, the development of the two downtown buildings has pumped $35 million of economic life into the city's new arts district.

And in Plymouth, MidState Health Center and a medical office building next door provide primary care to 85 percent of the residents in that under-served area.

Those who built these projects say none of them would have happened without federal New Market Tax Credits, an obscure program that wasn't even in place a decade ago, and may be a quiet casualty in the politicized budget wars in Washington.

The program -- which allows a bank or finance company to take 39% off its taxes -- is the kind of complicated corporate tax break that has gotten a bad name lately, because it enriches banks, developers, attorneys and consultants.

But in New Hampshire alone, the New Market program has contributed to a dozen projects, resulting in more than $200 million of economic activity -- from hotels in Concord and Portsmouth and the redevelopment of old mill buildings in Claremont and Newmarket, to a strip mall in Derry and the acquisition of conservation land in Errol.

When all is said and done, the developer may end up reducing the cost between 20% and 25%. That subsidy gives an "economic tailwind to a project" that gets it "over the hump."

Not a single one of these projects would have happened if not for the New Market Tax Credit feature.

For information on applying for, selling or using New Market Tax Credits in Boston and New England, contact The Cherrytree Group.

NHBR

...by Warren Kirshenbaum

The Community Renewal Tax Relief Act was passed in 2000. Part of that act is the New Markets Tax Credit, the purpose of which is to spur approximately $15 billion in investments into privately managed investment institutions (CDE) who in turn will make loans and capital investments to businesses in low-income communities.

The New Markets Tax Credit is one of several key business tax breaks that are set to expire at year end unless Congress acts. Businesses should be aware of the expiring tax provision. Businesses interested in investigating or applying for the New Markets Tax Credit should consult with a commercial real estate tax lawyer to determine whether they should take advantage of this tax break  and/or if they need to plan for the expiration of other tax credits which they have previously taken advantage of.

What is New Markets Tax Credit ("NMTC")? A taxpayer who holds a qualified equity investment in a qualified community development entity ("CDE") may be entitled to a NMTC of 39% of the qualified equity investment during a seven-year credit period. Under current law, the last NMTC dollar limitation is for 2011.

The U.S. Treasury Department has awarded Pittsburgh's Urban Redevelopment Authority $35 million in tax credits to stimulate investment in low-income communities.

The URA was one of 99 applicants to receive the New Market Tax Credits; more than 250 government entities, nonprofits and other groups applied.

The tax credits will go to investors in "Community Development Entities," groups formed to undertake projects in low-income neighborhoods. The cedits are designed to draw private investment into those communities.

"This is great news for Pittsburgh," Mayor Luke Ravenstahl said in a statement. "This award will leverage millions of dollars of investment into businesses and real estate projects to create jobs and promote growth in our neighborhoods."

U.S. Sen. Bob Casey, D-Pa., and Rep. Mike Doyle, D-Forest Hills, supported the URA's application.

By Joe Smydo, Pittsburgh Post-Gazette