New Markets Tax Credit (NMTC) COVID-19 Tax Relief in New Markets Tax Credit Transactions; The Internal Revenue Service (IRS) and the U.S. Department of the Treasury provide tax relief to investors, taxpayers and businesses for new markets tax credit transactions. As per the details, certain taxpayers affected by COVID-19 pandemic can get IRS tax relief in new markets tax credit transactions. In order to get further details, please go through Notice 2020-49 (PDF) that contains guidance for COVID-19 Tax Relief in New Markets Tax Credit Transactions.
New Markets Tax Credit Relief Transactions
The list of taxpayers who qualify to avail tax relief in New Markets Tax Credit Transactions due to COVID-19 pandemic is given below:
- Community Development Entities (CDEs).
- Qualified Active Low-Income Community Businesses (QALICBs) investing and conducting businesses in low-income communities.
Time-Sensitive NMTC Acts Qualify For Relief
The IRS Notice 2020-49 (PDF) provides both of the above eligible entities with tax relief for certain specified time-sensitive NMTC acts. In order to meet the eligibility criteria under section 45D of the Internal Revenue Code and its regulations, the acts must due to be performed between April 1, 2020, and December 31, 2020. Therefore, both CDE and QALICB may perform these acts by December 31, 2020.
Additional Time for Other Time-Sensitive Acts
Although, a CDE or QALICB may carry out the acts till December of this year, the additional time is granted for the execution of other time-sensitive acts. These acts include investments, reinvestments as well as spending money for construction of real property. Each of these acts is discussed separately below.
The cash investment is treated as ‘invested’ in a QLICI to the amount it is invested by Dec. 31, 2020. So, a CDE must be due to invest cash received from a qualified equity investment (QEI) in a qualified low-income community investment (QLICI) on or after April 1, 2020, and before Dec. 31, 2020.
New Markets Tax Credit – Re-Investments
The amounts are treated as ‘continuously invested’ in a QLICI to that extent these are so reinvested by Dec. 31, 2020. So, a CDE must be due to reinvest certain amounts of cash or payment in a QLICI on or after April 1, 2020, and before Dec. 31, 2020.
Expending Amounts for Construction of Real Property
Certain proceeds are treated as a ‘reasonable amount of working capital’ of the QALICB if so expended by December 31, 2020. The condition is that a QALICB must be due to expend the proceeds of a capital or equity investment or loan by a CDE for construction of real property on or after April 1, 2020, and before Dec. 31, 2020
Feel free to contact Black Ink Team to know whether you meet NMTC requirements to avail COVID-19 Tax Relief in New Markets Tax Credit Transactions. We are the top accounting and taxation services provider near you in United States.