Ag Ventures Alliance Awarded Federal Tax Credits

Don Hofstrand, value-added agriculture field specialist

Ag Ventures Alliance has over 1,100 members who have invested about $25 million in value-added agricultural business ventures associated with Ag Ventures Alliance.  Don Hofstrand, ISU Extension Value-Added Agriculture Specialist, is one of the founders and is Executive Director of Ag Ventures Alliance.

The New Market Tax Credit Program (NMTC), managed by the U.S. Treasury, is a national program that provides tax credits to investors who invest in and lenders who loan money to entities in low income communities.  The $15 billion program is designed to stimulate economic and community development and job creation in the nation's low income communities by attracting capital from the private sector. The credit provided to the investor is a 39 percent federal tax credit claimed over a seven year period. In each of the first three years, the investor receives a credit equal to five percent of their investment and six percent during the last three years. The program is to both encourage investment in low income communities and to buy-down interest rates for money lent to low income community entities.

The idea of seeking NMTC originated in an Ag Ventures Alliance committee that was focusing on developing new sources of capital for value-added businesses. Rural Development Associates (a consulting firm associated with Ag Ventures Alliance) and Ag Ventures Alliance created a subsidiary of Ag Ventures called Rural Development Partners (RDP), which applied for an allocation of NMTC's during the fall of 2003.

In April of 2004, Rural Development Partners received an award of $44.7 million under NMTC.  This allocation allows Rural Development Partners to provide federal tax credits to $44.7 million worth of value-added business projects.  Rural Development Partners is one of 62 applicants that received an award (only about 10 percent of applicants received an award).  Most of the awards were to entities in inner cities and suburban areas.  Rural Development Partners is the only entity awarded NMTC to focus on agricultural business development in rural areas. 

Rural Development Partners is in the process of deploying its tax credits to value-added agricultural businesses located in low income communities.  It has a national focus but most of the credits are expected to be deployed in the Midwest.  There are a number of rural, low income communities in Iowa.

Rural Development Partners just submitted another application for an additional award of $150 million from NMTC.  Through an extensive national value-added agricultural network developed over the last year, Rural Development Partners has identified over $1 billion of potential value-added projects to include in its application.   

Undated
121 - Adding Value and Enhancing Agricultural Products

Page last updated: July 9, 2006
Page maintained by Linda Schultz, lschultz@iastate.edu