New Markets Tax Credits
The Empowerment Reinvestment Fund LLC (ERF) is the subsidiary of Seedco Financial that is a certified Community Development Entity (CDE) that receives New Markets Tax Credit (NMTC) allocations. ERF has previously been awarded $145 million of NMTCs from the CDFI Fund in five allocations: $40 million in June 2006, $25 million in May 2004, $10 million in March 2003, $35 million in October 2008, and $35 million in February 2011. This highly competitive award is a part of the now $26 billion NMTC Program, enacted in 2000 to encourage economic development investment in low-income communities nationwide.
Geographic market
ERF finances projects nationwide, but focuses its efforts in markets where Seedco Financial maintains offices or has historical relationships.
Eligible Businesses
Federal guidelines require that investments meet two criteria: first, they must be located in low-income communities, defined as having a median income below 80% of the median income in the surrounding area. Second, projects must show that they provide substantial services to their communities or that they are located within that community.
ERF will target non- and for-profit borrowers that engage in transactions in four key areas, which include: (1) large-scale job development projects; (2) projects that support small business development; (3) projects that enhance the capacity of minority-serving institutions and community facilities; as well as (4) anchor real estate projects that act as catalysts for community development in low-income neighborhoods.
In all cases, ERF seeks to leverage other Seedco Financial and Seedco resources into these projects.
Protection for ERF Investors
ERF follows the same extensive due diligence procedures developed for Seedco Financial’s other loan funds. The financial components of each transaction and the financial history of each participant are carefully reviewed to ensure that the interests of the investors are protected.
Benefits to Investors
Low-interest, high-return: In return for a qualifying investment, investors will receive a 39% tax credit over seven years for each dollar invested plus negotiated economic return.
- Investors may claim a tax credit of 5% of the total value of the investment during each of the first three years and of 6% on the total value of investment for each of the final four years of the credit period, for a total of 39%.
- Investors will receive an additional return on their investment, usually in the form of interest on indebtedness, as well as the return of principal at the end of the seven-year investment period.
- Alternatively, investors may choose to purchase only the tax credits or to finance the entire project.
Benefits to the Community
All loan documents contain community covenants that require all parties in the project to work together to leverage other resources and to develop programs to enhance its community impact.
Contact us at NMTC@Seedco.org or 877.296.8878 for additional information about our New Markets Tax Credit.
