Public entities have new opportunities for financing public projects beginning July 1, 2012. Amendments to Section 57-105-1 of the Mississippi Code of 1972 will allow certain public entities to participate in New Markets Tax Credit financing under Section 45D of the Internal Revenue Code. To attract private investment the NMTC program permits investors to receive a credit against federal income taxes for making qualified equity investments in community development entities. Borrowers who participate in the NMTC program generate tax credits based on project investments within qualified census tracts. Such credits are then sold to institutional investors in order to generate subsidy for project costs. Borrowers under the NMTC program are required to be partnerships or corporations for tax purposes. Therefore prior to the new amendments taking effect, public entities have been prohibited from directly participating in the program as qualified active low-income businesses. Amendments to existing legislation now allow for public entities to create and establish Public Benefit Corporations for the purpose of entering into financing arrangements necessary to generate NMTC subsidy for property and facilities. Public entities include utility districts, regional solid waste authorities, regional utility authorities, community hospitals, regional airport authorities, community and junior colleges, educational building corporations established by IHL, school districts, planning and development districts, county economic development districts, urban renewal agencies, and any other regional or local economic development authority, agency, or governmental entity. Public Benefit Corporations may assist these public entities by entering into financing arrangements conveying public property or facilities provided such converelate to NMTC transactions, furthering the purpose of the public entity’s project. Such financing arrangements could include sale-lease backs, leases and lease backs between and public entity and the Public Benefit Corporation with respect to financing construction of public property or facilities. In addition, the new legislation provides public entities the authority to leverage funds necessary by entering into financing arrangements for the purposes of generating NMTC subsidy. This new source of financing will allow public entities the opportunity to fill financial gaps associated with public projects without creating additional local economic burden. Public entities considering alternative means of financing public projects need to now become familiar with the benefits of NMTC financing.
If you have questions regarding this Public Finance & Incentives Alert, please call your primary contact at Butler Snow.