Below Market Capital Loans for Business
The 2013 Nevada Legislature created the Nevada New Markets Tax Credit program to help businesses located in low-income areas get access to below market loans. Seven federally certified community development entities (CDE's) were awarded tax credits through a competitive process, which they in turn sold to raise investment capital to lend through the program. CDEs work with banks to provide below market loan packages to qualified businesses and are required to invest most of the program's $200 million raised by the end of the year.
They are actively seeking qualified business investment opportunities of $3 million to $5 million in federally defined low-income areas throughout Nevada. We are here to help facilitate introductions of your project to these CDEs. A list of all CDEs that are participating in this program can be found by clicking the "CDE Contact Information" link under program resources.
Access to capital remains a significant challenge for Nevada small businesses, especially those in under served areas, both rural and urban. To attract additional investment in the most severely distressed areas of the state, Senate Bill 357 was passed during the 2013 Legislature. New Market Tax Credit programs are an effective tool used by the federal government and 11 states to attract private capital investment in areas in need of job growth and economic development.
Community Development Entities (CDEs) which have been allocated federal New Market Tax Credits for Nevada. The state New Market Tax Credits are provided to investors which invest the funds established by a CDE for projects in Nevada.
Eligibility Criteria for Investment
A CDE may make an investment (loan or equity) into a Qualified Active Low-Income Community Business (QALICB), which is any corporation, including a nonprofit corporation, or partnership which meets the following criteria for any taxable year:
- At least 50% of total gross income of the QALICB is derived within any low-income community.
- A substantial portion of the use of the tangible property of the QALICB by its employees are performed in any low-income community.
- A substantial portion of the use of the tangible property of the QALICB (whether owned or leased) is within any low-income community
- Less than 5% of the average of the aggregate unadjusted basis of the property of the QALICB is attributable to collectibles, other than collectibles that are held primarily for sale to customers in the ordinary course of such business and;
- Less than 5% of the average of the aggregate unadjusted basis of the property of the QALICB is attributed to nonqualified financial property. Any business that projects to derive 15% or more of its annual revenue from the rental or sale of real estate shall not be considered a QALICB.
Eligible Areas for Investment
Low-income communities are census tracts that have a poverty rate of more than 30% below federal poverty guidelines or the median household income of less than 60% of the area median income for the state of Nevada or a rate of unemployment that was equal to or greater than 150% of the national average.
The tax credit amount shall be equal to the applicable percentage of the adjusted purchase price paid to the issuer of such qualified investment. The tax credits are realized over the course of seven years:
- 0% for years 1 & 2
- 12% for years 3,4,5
- 11% for years 6 & 7
The amount of tax credit allocated shall not exceed $50 million with a minimum of $5 million per CDE. State tax credits are allocated on a first come basis.
How to Apply (Program is fully subscribed, applications are no longer being accepted.)
The CDEs that have been certified by the Federal NMTC program and Nevada is in their certified area are eligible to apply for the state NMTC program. The state application will be a two part process:
- The CDE submits an application to the Department of Business and Industry.
- Once eligibility is determined, B&I will send a written notice of certification to the applicant CDE, which will include an allocated amount of NMTC contingent upon qualified investments being made within 30 days of the date of the preliminary approval letter.
- If an approved CDE is not successful in gaining proof of the investment, the CDE will be required to reapply and will be required to obtain a commitment that secures the investment in the amount of the application to accompany the new submittal.
Within five business days after each anniversary of the credit allowance date, the CDE shall submit a report to B&I as outlined in the New Market Tax Credit regulations.
Regulations are currently being drafted for the implementation of SB 357 which established the Nevada New Market Tax Credit Program. Information contained on this page is subject to change pending the finalization of those regulations.