New Markets Tax Credits
Kutak Rock has one of the most reputable and active tax credit practices in the country. Building on this experience, we have assembled a team of highly experienced attorneys and paralegals focused on the New Markets Tax Credits (“NMTC”) program. Since the inception of the program, community development entities (“CDEs”), investors, leveraged fund lenders and qualified active low-income community businesses (“QALICBs”) have trusted us to provide efficient and creative solutions to these complex deal structures. We are proud to be a leader in the evolution of the NMTC program and its impact on low-income communities throughout the country.
Our NMTC team helps clients navigate through the complexities of the NMTC structuring and closing process. Throughout every stage, we are focused on efficient document preparation and closings. Our group works closely with all major NMTC accounting firms and structuring agents generating the cash-flow projections that support key financial assumptions necessary for successful NMTC transactions.
Acting as the trusted advisor in every step of a transaction, we provide clients with the necessary flexibility for adapting to ever-changing economic markets, conducting extensive due diligence, and designing structures to prevent costly mistakes. In our role as legal counsel, we regularly prepare all major documentation for transactions, including:
- Special Purpose Entity Borrower organizational documents
- Applications for exemption from federal income taxation
- Leveraged fund operating agreements
- Community development entity operating agreements
- Leveraged fund loan and security agreements
- Qualified active low-income community businesses loan and security agreements
- Loan servicing and origination agreements
- Fee agreements
- Put and call agreements
- Guarantees and various related documents
We also provide industry standard federal income tax opinions with respect to all material tax issues related to NMTC financing as well as specialized, tailored tax opinions on specific issues as requested by our CDE, investor and QALICB clients.
With experienced tax credit, commercial and public finance, and real estate experts in offices coast to coast, we appropriately staff and efficiently close all types of complex NMTC transactions. Our experience is as broad as the program itself and our team has closed NMTC transactions across a wide variety of industries including:
- Community centers
- Medical clinics and hospitals
- Educational institutions
- Hospitality and entertainment facilities
- Renewable energy production
- Public facilities
- Grocery stores
- Retail chains
- Mixed use projects
- For-sale housing
- Performance venues
- Manufacturing facilities
Broad Range of Experience
Our team has extensive experience in combining NMTCs with state NMTCs, state and federal historic rehabilitation tax credits, renewable energy tax credits and tax credit pass-through leases, multiple-CDE and multiple-investor financings, staged qualified equity investment fundings, unwind agreements, targeted-population QALICB financings, separate portions of the business QALICB financings, pre-fundings and transactions with multiple equity conversion features.
Kutak Rock has played a crucial role in structuring some of the first NMTC transactions to combine NMTCs with certain tax-exempt bonds as the source of the leverage loan financing. These structures are document-intensive and highly tax-sensitive, but the resulting savings to the qualified active low-income business are often crucial to the financing and to the viability of the underlying project in the long term. With our depth of knowledge in the areas of tax-exempt bonds and tax credits, Kutak Rock is uniquely qualified in its ability to manage these complex transactions and to devise creative and appropriate NMTC structures that combine any number of available financing tools.
We regularly advise on using NMTCs in tandem with loans from the U.S. Department of Housing and Urban Development, U.S. Department of Agriculture loans, Brownfield Economic Development Initiative grant funds and Choice Neighborhoods initiative grant funds as well as other grants and loans from a variety of municipal, state and other governmental agencies.
In addition to our client representation, we participate in industry efforts to resolve tax and structuring issues in the NMTC area, including through submission of formal comments to the Community Development Financial Institutions Fund (“CDFI Fund”) and the Treasury Department and through industry efforts to promote uniformity among practitioners. Our team is heavily involved in NMTC industry groups, which provide recommendations to regulatory agencies.