TAX CREDITS

Real Estate Development Tax Credits and Programs

There are far more tax credits than we can discuss here. But this page discusses the main tax credits of interest to developers. We have provided some basic information on New Markets Tax Credits, Historic Tax Credits, USDA Rural Development Programs and Federal Low Income Development Tax Credits. We have also provided a basic list of the Environmental and Energy Tax credits available to real estate developments and other types of businesses. We encourage
anyone developing a new real estate development project to explore these potential credits, loans and grant programs as sources of non-traditional funding. For more information please schedule an appointment with us to discuss the details of your project. We can research what credits and programs you may be eligible for and help you through the application process. These resources can help minimize the amount of funding projects will need from traditional bank loans, lines of credit, outside investors and venture capitalists.

 

New Markets Tax Credits

Only a specialized financial institution called a CDE or Community Development Entity can qualify for these NMTCs. An entity can become a certified CDE by applying to the CDFI ( Community Development Financial Institutions Fund). To qualify as a CDE the CDFI requires that:

  • A CDE has to be a domestic corporation or partnership;
  • A CDE must be able to demonstrate a primary a mission of serving, or providing investment capital for, low – income individuals or low-income communities; and
  • A CDE must remain accountable to residents of the respective low-income communities.

For more detailed information on the CDE certification process and CDE certification Application materials, please visit the CDE Certification page.

Corporate investors and individuals can be eligible to receive a New Market Tax Credit against their Federal income tax return in exchange for making equity investments CDEs. A NMTC can be for up to 39 percent of the original investment amount. This credit is then claimed over a period of seven years. The first three years the credit claimed is equal to five percent and then six percent four years. Before the 7 year period ends the actual investment in the CDE cannot be redeemed.

 

Historic Tax Credits

To qualify for this 20% tax credit a building must be a certified historic structure in the National Register of Historic Places. The building may be listed individually or as a contributing building to a historic district. Once that basic requirement is met the rehabilitation project seeking the credit must be approved by the National Park Service to insure that the rehabilitation is consistent with the historic character of the building. This means that the character-defining spaces and aspects of the building should be restored or kept intact. This can include items like windows, masonry, tile work, ceilings, floors, woodwork, moldings, staircases, etc. Plans are typically reviewed by the National Park Service and evaluated against the Secretary of Interior’s Standards of Rehabilitation. After, the work is complete then the project must seek final approval of completed work to get the tax credit.

 

More Information at:

National Park Service’s Guide to Historic Tax Credits >>

 

The Secretary of the Interior’s Standards for Rehabilitation >>

 

U.S. Dept. of Treasury – Community Development Financial Institutions Fund >>

 

USDA – Renewable Energy and Energy Efficiency Programs:
“USDA Rural Development is helping to lead the way in the agriculture sector finding energy solutions in our fields and helping rural residents and communities access renewable energy systems and use energy more efficiently. USDA Rural Development provides funding opportunities in the form of payments, grants, loans, and loan guarantees, for the development and commercialization of renewable energy sources including wind, solar, geothermal, hydrogen, ocean waves, hydroelectric, biomass, and biofuel (ethanol, biodiesel, etc.) to change the way people power their homes, businesses, and industries. By making renewable energy sources commercially viable, USDA Rural Development is also creating sustainable opportunities for wealth, new jobs, and increased economic activity in rural America.”

 

Details on Specific Programs and Eligibility Requirements can be found at:
www.energymatrix.usda.gov

 

USDA -Community Development Programs:
In order to qualify for a Empowerment Zone Tax credit first you must be located in an eligible empowerment zone. You can check to see if your address is qualified at: http://egis.hud.gov/ezrclocator/

The program is designed to provide economic opportunity to economically distressed communities. The program was envisioned to provide sustainable long-term strategic community development through partnerships with the local communities.

 

Rural Business Opportunity Grants (RBOG)

This program can provide grants for technical assistance in carryout feasibility studies, economic strategies and community development strategies. These funds are primarily for long term economic planning in rural communities to help businesses and entrepreneurs bring new businesses to these rural areas.

 

Federal Low Income Tax Credits for New Developments (LIHTC)

These Credits are designed to promote the development of multi-family housing in low income neighborhoods. “Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their Federal tax liability each year over a period of 10 years.” To find out more about how these tax credits work visit:
www.hud.gov
AND
For more information on eligibility please visit:
www.hud.gov