Treasury Department Issues Notice on New Markets Tax Credit

This afternoon the Treasury Department issued an administrative notice (Notice 2002-64) offering clarification as to how the New markets Tax Credit can be used for investments that are directly or indirectly subsidized by other federal tax benefits.

The notice states that the Treasury Department and the Internal Revenue Service (IRS) will continue to study how the New Markets Tax Credit can be used with the Low Income Housing Tax Credit (IRC 42). In addition Treasury and IRS may issue additional clarifications on federal tax benefits not addressed in today's notice.

The notice clarified that there are no limitations on using the New Markets Tax Credit with the following direct federal tax benefits:

  • the rehabilitation credit (IRC 47)
  • all depreciation deductions (IRC167 and 168)
  • all tax benefits related to Empowerment Zones and Enterprise Communities (IRC 1391-1397D)
  • all tax benefits related to the D.C. Enterprise Zone (IRC 1400 -1400B)
  • all tax benefits related to Renewal Communities (IRC 1400)
  • all tax benefits related the New York Liberty Zone (IRC 1400L)

Treasury is expected to issue additional notices on the New Markets Tax Credit in the coming months including a notice that addresses the issue of leverage.