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Breaking News: NMTC will be delayed until 2002, unless Treasury issues a Temporary Regulation. The Latest: New Markets Tax Credit (NMTC) Congress has created a New Markets Tax Credit. The credit will be allocated at a federal level to "community development entities." A community development entity may be either a partnership or a corporation and must provide capital to qualified active businesses in low-income communities as its primary purpose. In order to be entitled to an allocation of the credit, the community development entity must be certified by the Secretary of the Treasury. The Act provides that any specialized small business investment company or any community development financial institution shall satisfy the requirements for classification as a community development entity. A certified community development entity must invest substantially all of its cash in qualified low-income community investments. This requirement is met if at least 85% of the aggregate gross assets of the entity are invested in qualified low-income community investments. The amount of the credit available to an investor is 5% (of the equity contributed by the investor for the purchase of an interest in the community development entity) in the year of contribution and the subsequent two years, and 6% for the following four years. In 2001, $1 billion of New Market Tax Credit is available, with $1.5 billion in 2002 and 2003, $2 billion in 2004 and 2005, and $3.5 billion in 2006 and 2007, for a total of $15 billion in credits. The amount of credit is to be allocated by the Secretary of the Treasury, and the credits are subject to recapture if the entity ceases to be a qualified community development entity or the proceeds of the investment cease to be used for qualified low-income community investments. The Act requires the Treasury Department to issue regulations, including regulations regarding the application process, within 120 days of the enactment of the Act, or my late April 2001. Treasury has to date, failed to issue more than guidance.
Descriptions of How the Credit Will Work
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