Pub. 7 2010-2013 Issue 3

www.nebankers.org 20 Extraordinary Service for Extraordinary Members. Over the last 11 years, the Federal New Markets Tax Credit Program has helped finance thousands of worthwhile projects in so-called “low-income communities.” For the first time, Nebraska now offers a similar program at the state level. T HE NEBRASKA NEW MARKETS JOB Growth Investment Act was enacted on April 11, 2012, and provides for a 39 percent state tax credit against personal income tax, corporate excise tax, insurance premium tax, and corporate in- come tax. To qualify for the credit, a taxpayer must make a “qualified equity investment” in a “community development entity” that makes a “qualified low-income community investment” in a “qualified active low-income community business.” The act offers a number of unique opportunities for Nebraska banks to make an attractive investment return while investing in the development of Nebraska communities. The state act is largely based on the Federal New Markets Tax Credit (NMTC) Program, whichwas enacted in 2001 and has facilitated more than $29 billion of investments throughout the country. Over the past several years, a number of states have adopted state new market tax credit programs as a means to draw additional Federal NMTC in- vestments to their states. For example, of the approximately $29 billion in Fed- eral NMTC transactions, Nebraska has only received approximately $50 mil- lion of such investments. The state act is The Nebraska New Markets Job Growth Investment Act David Lutz , Husch Blackwell LLP COUNSELOR’S CORNER designed to drawadditional investment toNebraska by allowing potential inves- tors to obtain both a federal and state tax credit for a qualifying transaction. The state tax credit is in an amount equal to 39 percent of the “qualified eq- uity investment” made by the taxpayer and is taken over a seven-year period: 0 percent for years one and two; 7 percent for year three; and 8 percent for years four through seven. The total amount of credits cannot exceed $15 million per fiscal year. Overview of Key Concepts Although a detailed review of a typi- cal new markets tax credit transaction is beyond the scope of this article, every transaction must be structured to in- clude four necessary components: (1) a “qualified equity investment”; (2) a “community development entity”; (3) a “qualified active low-income com- munity business”; and (4) a “qualified low-income community investment.” Below is a brief description of each component. The investor must make a qualified equity investment (QEI) in a “com- munity development entity” (defined below). For an investment to consti- tute a QEI, such investment must be acquired at its original issuance by the investor solely in exchange for cash. In addition, at least 85 percent of the cash purchase price of the investment must be used by the community de- velopment entity to make “qualified low-income community investments” in Nebraska. A “community development entity” (CDE) is a corporation or partnership that: (1) has the primary mission of serving, or providing investment capital for, low-income communities or low-income persons; (2) maintains accountability to residents of low- income communities; and (3) is certi- fied by the Community Development Financial Institutions Fund (CDFI Fund) as being a qualified community development entity.