The New Markets Tax Credit (NMTC) Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income taxes in exchange for equity investments in specialized financial institutions called Community Development Entities (CDEs). Funds invested into CDEs allow them to finance operating businesses and real estate development in low-income communities across the country. The tax credit totals 39 percent of the original investment amount and is claimed over a period of seven years (five percent for each of the first three years, and six percent for each of the remaining four years). The CDE has 12 months to invest “substantially all” of the proceeds from the equity investments, known as Qualified Equity Investments (QEIs) into Qualified Low Income Community Investments (QLICIs) — that is, loans to or equity investments in qualified businesses and/or CDEs, the purchase of qualifying loans originated by other CDEs, or financial counseling to businesses located in low-income communities.
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