Saturday, February 17, 2007

Will I.R..S. Approve Funds for Fort Wayne Baseball Downtown

More funding tools are needed to support developers or a developer to invest in downtown project, Harrison Square hotel and baseball stadium. Derrick Gingery writes in Greater Fort Wayne Business Weekly, that another funding resource could be a tax credit from the I.R.S.
The federal tax credits would join a growing list of inducements the city has at its disposal to entice developers to build in town. The CRED tax credit program is well-known. The city also uses tax abatements and industrial revenue bonds to attract businesses.


From the Community Development Finance Institutions Funds Website, The New Markets Tax Credit (NMTC) Program permits taxpayers to receive a credit against Federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). Substantially all of the qualified equity investment must in turn be used by the CDE to provide investments in low-income communities.

The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not redeem their investments in CDEs prior to the conclusion of the seven-year period.

The NMTC Program allocates tax credit authority to Community Development Entities (CDEs), which in turn make investments in a variety of businesses and activities in low-income communities. A Community Development Entity for profit business has formed in downtown Fort Wayne to administrate the funds, under the new markets tax credit program. The name of the business is Fort Wayne New Market Revitalization Fund, LLC and the registered agent is Timothy Manges, attorney for the City of Fort Wayne, located at 1 East Main Street, in the City County Building, Fort Wayne, IN 46802. The limited liability company was formed on January 10, 2007.

Fort Wayne’s application is expected to be sent at the end of the month. A response is not likely until this summer. Fort Wayne New Markets Revitalization Fund LLC was created to administer the program, if the city is approved.
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Fort Wayne New Markets Revitalization Fund, LLC is probably crossing its fingers, since some Indiana company have received some funding,
The Indiana Redevelopment Corp. received $25 million and the Community Bankers Association of Indiana Inc. received $50 million in 2003 to provide low-interest loans and other programs to promote economic development
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From the reading, it appears that the Fort Wayne New Markets Revitalization Funds, LLC is seeking to become some kind of bank, to provide low-interest loans and economically support programs such as DID or whatever other programs that they can create in downtown.

The entity must be a Community Development Entity. A Community Development Entity is a domestic corporation or partnership that is an intermediary vehicle for the provision of loans, investments, or financial counseling in Low-Income Communities (LICs). Benefits of being certified as a CDE include being able to apply to the CDFI Fund to receive a New Markets Tax Credit (NMTC) allocation to offer its investors in exchange for equity investments in the CDE and/or its subsidiaries; or to receive loans or investments from other CDEs that have received NMTC allocations.


According to the Tax Code, to qualify as a CDE, the organization must be certified by being: "(A) the primary mission of the entity is serving, or providing investment capital for, low-income communities or low-income persons, ‘‘(B) the entity maintains accountability to residents of low-income communities through their representation on any governing board of the entity or on any advisory board to the entity,
and ‘‘(C) the entity is certified by the Secretary for purposes of this section as being a qualified community development entity."
More from the code,
‘‘(A) with a record of having successfully provided capital or technical assistance to disadvantaged businesses or communities, or ‘‘(B) which intends to satisfy the requirement under subsection (b)(1)(B) by making qualified low-income community investments in 1 or more businesses in which persons unrelated to such entity (within the meaning of section 267(b) or 707(b)(1)) hold the majority equity interest."


The term ‘qualified low-income community investment’ means—‘‘(A) any capital or equity investment in, or loan to, any qualified active low-income community business, ‘‘(B) the purchase from another qualified community development entity of any loan made by such entity which is a qualified low-income community investment, ‘‘(C) financial counseling and other services specified in regulations prescribed by the Secretary to businesses located in, and residents of, low-income communities, and ‘‘(D) any equity investment in, or loan to, any qualified community development entity.

I wonder why FourthWave did not apply for such funding?

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