rr-10-17.pdf

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Part I

Section 45D.--New Markets Tax Credit

26 CFR 1.45D-1: New markets tax credit

Rev. Rul. 2010-17

ISSUE
For purposes of determining the new markets tax credit allowable under § 45D of the
Internal Revenue Code, does the amount of the qualified equity investment made by a
limited liability company (LLC) classified as a partnership include cash from a recourse
loan to the LLC that the LLC invests as equity in a qualified community development
entity?
ANALYSIS
Section 45D(a) provides a new markets tax credit to taxpayers who hold a qualified
equity investment in a qualified community development entity. Section 45D(b)
provides that a qualified equity investment means any equity investment in a qualified
community development entity if, among other requirements, the taxpayer acquired the

investment solely in exchange for cash. Rev. Rul. 2003-20, 2003-1 C.B. 465, held that,
on the facts presented in that revenue ruling, the amount of the qualified equity
investment under § 45D(b) made by an LLC classified as a partnership included cash
from a non-recourse loan to the LLC that the LLC invested as equity in a qualified
community development entity. The rationale of Rev. Rul. 2003-20 applies equally
where the loan is recourse.
HOLDING
For purposes of determining the new markets tax credit allowable under § 45D, the
amount of the qualified equity investment made by an LLC classified as a partnership
includes cash from a recourse loan to the LLC that the LLC invests as equity in a
qualified community development entity.
EFFECT ON OTHER REVENUE RULINGS
Rev. Rul. 2003-20 is amplified.
DRAFTING INFORMATION
The principal author of this revenue ruling is Benjamin H. Weaver of the Office of
Associate Chief Counsel (Passthroughs & Special Industries). For further information
regarding this revenue ruling, contact Benjamin H. Weaver at (202) 622-3050. For
information regarding issues under § 45D, contact Julie Hanlon Bolton of the Office of
Associate Chief Counsel (Passthroughs & Special Industries) at (202) 622-3040. These
are not toll-free calls.