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Step 5: Structuring Around State and Local Tax Issues

Structuring Around State and Local Tax Issues

Once a New Markets Tax Credit Program allocation agreement in place, the focus turns to finding and structuring the loans and investments that are at the heart of the CDE’s mission. Researching the CDE’s state tax filing requirements and developing the appropriate tax strategy is an important part of the structuring of every transaction.

Most CDEs are set up as limited liability companies (LLCs), which are treated as partnerships for tax purposes. Partnerships do not pay federal income tax because the federal tax code regards them as pass-through entities. Instead, the partners pay individual federal tax on their share of the partnership’s income. For CDE’s, income is most commonly generated through the interest paid by loans made to Qualified Active Low Income Community Businesses (QALICBs)…Download the PDF to learn more

Step 1: Applying for CDE Application

Step 2: The NMTC Application

Step 3: The Allocation Agreement

Step 4: The Annual Audit

Step 6: NMTC Program Compliance