Internal Revenue Bulletin:  2010-26 

June 28, 2010 

Rev. Rul. 2010-17


New markets tax credit. This ruling provides that for purposes of determining the new markets tax credit allowable under section 45D of the Code, 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. Rev. Rul. 2003-20 amplified.

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.


More Internal Revenue Bulletins