New Markets Tax Credits

February 6, 2012

The Federal government enacted a program about 10 years ago designed to stimulate private investment in low to moderate income areas of the country called the “New Markets Tax Credits” program. In a nutshell, tax credits are offered to qualifying projects in distressed and severely distressed areas (“severely distressed” is when the income is less than 60% of the AMI, poverty above 30% and unemployment over 1.5 times the national rate). Sadly, most of Tucson qualifies as “severely distressed” as of 2011.

But this means that qualifying projects can receive tax credits under the NMTC program of 39% of qualifying expenses including acquisition costs. Generally NMTCs are appropriate for projects that are predominantly commercial in scope (as defined by the tax code;  no exclusively residential housing projects fit under this program but projects with over 20% of the income derived from commercial sources are OK) and for which expenses exceed $5,000,000. “Sin” businesses such as bars are excluded from this tax credit.

The Downtown Tucson Partnership invited Jamie Badgely from CBO Financial to visit with us last week. CBO Financial receives tax credit allocations under this program and they also work to structure deals using the tax credits. We have also met with Jim Howard of Dudley Ventures in Phoenix, a firm with a similar mission.

If you would like to learn more about NMTC and find out if your project qualifies, please contact us. or 837-6508.

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