Incentives Watch: New Markets Opened as Congress and Arkansas Make Tax Credit Announcements

New markets tax credits are designed to encourage investment in low-income communities across the country. In fact, the U.S. Treasury’s Community Development Financial Institutions Fund recently announced $3.5 billion in federal tax credit awards.

Congress established the federal new markets tax credit in 2000. Individual and corporate taxpayers making investments in certain low-income areas may claim the credit, which is equal to 39 percent of their investment, according to the Community Development Financial Institutions Fund.

In addition, many states offer their own new markets tax credit that is modeled after the federal tax credit. One such state is Arkansas, as noted in a Bloomberg BNA Weekly State Tax Reportarticle.

The Arkansas new markets tax credit is available against insurance premium taxes for qualified equity investments in qualified community development entities that, in turn, invest in low-income community businesses.

The credit is available over a seven-year period, but no credits are allowed for the first two years of investment, according to the article. For an equity investment or long-term debt security to be designated as a qualified equity investment and eligible for the credit, the qualified community development entity must apply to the commission for certification.

Applications for the state tax credit in Arkansas will be accepted starting July 15, 2013.

In addition to Arkansas, Alabama, Florida, Illinois, Kentucky, Louisiana, Maine, Mississippi, and Nebraska offer state new market tax credits. For more information about these credits, check out Bloomberg BNA’s Credits and Incentives Portfolios.

In other developments . . .

Mississippi amended its motion picture production rebate program by increasing the amount available to companies and by adding video games to the program, according to a Bloomberg BNA Weekly State Tax Report article.

By: Kathleen Caggiano

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