New Markets Tax Credits

Definition

The new markets tax credit lets an investor claim a federal credit for a qualified equity investment in a qualified community development entity (CDE): 5 percent of the investment on each of the first three credit allowance dates and 6 percent on each of the next four, provided substantially all the cash goes to qualified low-income community investments.^[1] Public Law 119-21 removed the end date on the credit's annual allocation, which now applies for each calendar year after 2019.^[2]

Federal law

1. Community Renewal Tax Relief Act of 2000 (H.R. 5662, enacted by Consolidated Appropriations Act, 2001, § 1(a)(7)), Pub. L. 106-554, § 1(a)(7) [H.R. 5662, § 121], 114 Stat. 2763A-605. Created the new markets tax credit (26 U.S.C. § 45D). Official text: govinfo.gov, U.S. Government Publishing Office.
2. One Big Beautiful Bill Act (popular name), Pub. L. 119-21, § 70423, 139 Stat. 235. Made the annual new markets tax credit allocation permanent. Official text: govinfo.gov, U.S. Government Publishing Office.

Also defined as

• Capital Deployment Risk
• Capital Absorption Opportunity