OMB No. 1545-1804
New Markets Credit
(Rev. January 2007)
Department of the Treasury
Attach to your tax return.
Internal Revenue Service
Name(s) shown on return
Name and address of the qualified
Date of initial
Amount of qualified
community development entity (CDE)
number of CDE
New markets credit from partnerships and S corporations
Add lines 1 and 2. Partnerships and S corporations, report this amount on Schedule K;
all others, report this amount on the applicable line of Form 3800, (e.g., line 1l of the 2006 Form
Qualified Equity Investment
A qualified equity investment is an interest in a qualified CDE
Section references are to the Internal Revenue Code unless
in the form of stock (other than nonqualified preferred stock) in
a corporation or a capital interest in a partnership that meets
all of the following requirements.
You acquired the investment solely for cash at its original
The tax liability limit is no longer figured on this form.
issue (or from a taxpayer for whom the investment was a
Instead, it must be figured on Form 3800, General Business
qualified equity investment). The cash may be from borrowed
funds, including a nonrecourse loan.
Taxpayers that are not partnerships or S corporations, and
Substantially all (at least 85%) of the cash is used to make
whose only source of this credit is from those pass-through
qualified low-income community investments. The 85%
entities, are not required to complete or file this form. Instead,
requirement is reduced to 75% for the seventh year of the
they can report this credit directly on line 1l of Form 3800.
7-year credit period.
The IRS will revise the January 2007 version of the form only
The investment was designated as a qualified equity
when necessary. Continue to use this version for tax years
investment by the CDE on its books and records for purposes
beginning after 2005 until a new revision is issued.
of the new markets credit.
Generally, a qualified CDE can designate an equity
Purpose of Form
investment as a qualified equity investment only if it applied
Use Form 8874 to claim the new markets credit for qualified
for and received a new markets credit allocation and entered
equity investments made in qualified community development
into an allocation agreement with the CDFI Fund before the
entities (CDEs). This credit is part of the general business
equity investment was made.
Qualified CDEs must provide taxpayers holding a
qualified equity investment with a completed Form
8874-A when a qualified equity investment is
Exceptions. An equity investment in an entity that otherwise
A qualified CDE is a domestic corporation or partnership that
qualifies as a qualified equity investment is eligible to be
meets the following requirements.
designated as a qualified equity investment if made prior to an
Its primary mission is serving, or providing investment
allocation agreement only if either of the following applies.
capital for, low-income communities or persons.
The equity investment was made on or after April 20, 2001,
It maintains accountability to residents of low-income
and the designation of the equity investment as a qualified
communities through their representation on any governing
equity investment is made for a credit allocation received
board or advisory board of the entity.
under an allocation application submitted to the CDFI Fund no
It is certified as a qualified CDE by the Community
later than August 29, 2002. If the entity in which the equity
Development Financial Institutions (CDFI) Fund of the
investment is made does not receive an allocation under an
Department of the Treasury.
allocation application submitted no later than August 29, 2002,
Qualified CDEs also include specialized small business
the equity investment will not be eligible to be designated as a
investment companies and community development financial
qualified equity investment. For details, see Regulations
institutions. See section 45D(c)(2).
sections 1.45D-1(c)(3)(ii)(A) and 1.45D-1(c)(3)(iii).
For Paperwork Reduction Act Notice, see instructions.
Cat. No. 31663N