Seven community development entities, or investment funds, won a combined $200 million in state tax credits meant to support economic development and job growth in Nevada. The catch is they must invest 85 percent of the credits within one year.
The state’s Nevada New Markets Tax Credit program helps finance investments by providing state tax credits to investors for a seven-year, below market rate loan for businesses in low-income communities and rural areas statewide.
“It’s an uphill battle,” said Ash Mirchandani, deputy director of the state’s Department of Business and Industry. “These entities will have to be strategic and aggressive to find the right investments. We are very confident that this can be done within a year.”
The program was created with the passage of Senate Bill 357, also known as the Nevada New Markets Jobs Act, during the 2013 Legislature. The state tax credits are used to assist financing projects with a cost between $3 million and $5 million.
Mirchandani said the purpose of Nevada’s program was to encourage job growth through capital investment in low-income and rural communities. He said the tax credits act as an incentive to investment in new and growing companies.
The community development entities will use the tax credits to attract banks and insurance companies to projects. The lenders earn a vested tax credit equal to 58 percent of the purchase price of the investment over 7 years.
Of the seven CDEs selected by the state, six will receive $32 million. They are: Advantage Capital Partners, Enhanced Capital Partners Inc., KHC New Markets Fund LLC, Stonehenge Community Development LLC, Urban Development Fund LLC, and USBCDE LLC.
Clearinghouse CDFI will receive $8 million in state tax credits.
“We’ve been approved by the state, but we are still in the process of (raising) private sector capital,” said Rob Monsees, vice president with Advantage Capital Partners in St. Louis. “We haven’t closed the fund yet.”
Advantage Capital operates in 21 states, but this is its first fund in Nevada. Some of the firm’s investments include debt or equity stakes in companies such as Virent Energy Systems Inc. and TAS Environmental Services L.P.
Monsees said the investment firm plans to reach out to lenders across the state, and plans to have employees in Nevada. He said it was too early to know if the firm will base its staff in Las Vegas or Reno.
“We are excited about the opportunities in Nevada,” Monsees said. “We look forward to finding the right companies to provide growth capital.”
The program is being administered by the Department of Business and Industry. The tax credits are taken against the state insurance premium tax and are used to raise private capital.
Some of the projects possibly receiving loans are hospitals, office buildings, infrastructure improvement and manufacturing projects.
The Nevada New Markets Tax Credit program is based on the Federal New Markets Tax Credit program, which has had moderate success in Nevada.
From 2003 to 2011, less than $2 million in federal tax credits were used in Nevada.
Federal data shows that for every dollar of forgone tax revenues under the New Market Tax Credit, $12 of private investment is leveraged in distressed communities. Since the federal program’s inception, a total of $36.5 billion in tax credit authority has been allotted to CDEs nationwide, according to the Community Development Financial Institutions Fund, which is overseen by the U.S. Department of the Treasury.
Contact reporter Chris Sieroty at 702-477-3893 or email@example.com. Follow @sierotyfeatures on Twitter.