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                                                New Markets Credit                                                      OMB No. 1545-1804

Form (Rev. November 2021)8874                         ▶ Attach to your tax return.                                      Attachment   
Department of the Treasury              ▶ Go to www.irs.gov/Form8874 for the latest information.                        Sequence No. 127
Internal Revenue Service
Name(s) shown on return                                                                                          Identifying number 

                              (a)                          (b)              (c)                  (d)             (e)                (f) 
     Name and address of the qualified          Employer identification   Date of initial    Amount of qualified Credit Credit ((d) × (e)) 
     community development entity (CDE)               number of CDE       investment         equity investment   rate
1 
                                                                                                                 % 

                                                                                                                 % 

                                                                                                                 % 

                                                                                                                 % 

                                                                                                                 % 

                                                                                                                 % 

2    New markets credit from partnerships and S corporations .      .   . . .   .    .     . . . . . . .         2 
3    Add lines 1 and 2. Partnerships and S corporations, report this amount on Schedule K. All others, 
     report this amount on Form 3800, Part III, line 1i  . .   . .  .   . . .   .    .     . . . . . . .         3 
For Paperwork Reduction Act Notice, see instructions.                     Cat. No. 31663N                        Form  8874 (Rev. 11-2021)

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Form 8874 (Rev. 11-2021) Page 2
General Instructions Exceptions. An equity investment in an entity that otherwise
qualifies as a qualified equity investment or a non-real estate
Section references are to the Internal Revenue Code unless qualified equity investment is eligible to be designated as a
otherwise noted. qualified equity investment if made prior to an allocation
agreement, but only if the following applies.
Future Developments
• The equity investment was made on or after the date the CDFI
For the latest information about developments related to Form Fund publishes a Notice of Allocation Availability (NOAA) in the
8874 and its instructions, such as legislation enacted after they Federal Register, and the designation of the equity investment
were published, go to www.irs.gov/Form8874. as a qualified equity investment is made for a credit allocation
received under an allocation application submitted to the CDFI
What’s New Fund under that NOAA. If the entity in which the equity
The new markets credit allocation has been extended for investment is made does not receive an allocation under that
calendar years through 2025. NOAA, the equity investment will not be eligible to be
designated as a qualified equity investment. For details, see
Purpose of Form Regulations sections 1.45D-1(c)(3)(ii)(B) and 1.45D-1(c)(3)(iii).
Use Form 8874 to claim the new markets credit for qualified The maximum amount of equity investments so designated by
equity investments made in qualified community development the qualified CDE cannot exceed the amount of the allocation it
entities (CDEs). This credit is part of the general business credit. received from the CDFI Fund. The names and addresses of
Taxpayers that are not partnerships or S corporations, and qualified CDEs that have received an allocation for each
whose only source of this credit is from those pass-through allocation round and the amount of that allocation are listed on
entities, are not required to complete or file this form. Instead, the CDFI Fund website at www.cdfifund.gov.
they can report this credit directly on Form 3800, Part III, line 1i. Non-Real Estate Qualified Equity Investment
Definitions If a qualified equity investment is designated as a non-real
estate qualified equity investment, then the qualified equity
Qualified CDE investment may only satisfy the substantially-all requirement if
A qualified CDE is a domestic corporation or partnership that the CDE makes qualified low-income community investments
meets the following requirements. that are directly traceable (including investments made through
one or more CDEs) to non-real estate qualified active low-
• Its primary mission is serving, or providing investment capital income community businesses. The proceeds of a non-real
for, low-income communities or persons. estate qualified equity investment cannot be used for
• It maintains accountability to residents of low-income transactions involving a qualified active low-income community
communities through their representation on any governing business that is not a non-real estate qualified active low-
board or advisory board of the entity. income community business. See Regulations section
• It is certified as a qualified CDE by the Community 1.45D-1(d) for details about qualified low-income community
Development Financial Institutions (CDFI) Fund of the investments.
Department of the Treasury.
How To Figure the Credit
Qualified CDEs also include specialized small business
investment companies and community development financial A credit is generally allowed to the holder of the qualified equity
institutions. See section 45D(c)(2). investment on each of 7 credit allowance dates. The credit
allowance dates are the date you make the initial investment
Qualified Equity Investment and each of the next 6 anniversary dates. The credit is equal to
A qualified equity investment is an interest in a qualified CDE in the qualified equity investment multiplied by 5% (6% for the
the form of stock (other than nonqualified preferred stock) in a fourth through seventh years). However, the credit is not
corporation or a capital interest in a partnership that meets all of allowed for a credit allowance date if the investment is not a
the following requirements. qualified equity investment on that date.
• You acquired the investment solely for cash at its original Recapture of the Credit
issue (or from a taxpayer for whom the investment was a
qualified equity investment). The cash may be from borrowed You may have to increase your tax by a credit recapture
funds, including a nonrecourse loan. For details, see Rev. Rul. amount if at any time within 7 years from the date of the original
2003-20 and Rev. Rul. 2010-17. issuance of the qualified equity investment:
• Substantially all (at least 85%) of the cash is used to make • The entity ceases to be a qualified CDE,
qualified low-income community investments. The 85% • Substantially all of the proceeds of the investment cease to
requirement is reduced to 75% for the seventh year of the be used to make qualified low-income community investments,
7-year credit period. or
• The investment was designated as a qualified equity • The investment is redeemed or otherwise cashed out by the
investment or a non-real estate qualified equity investment by entity.
the CDE on its books and records for purposes of the new Exception. If a CDE fails to use substantially all of the proceeds
markets credit. of a qualified equity investment to make qualified low-income
Generally, a qualified CDE can designate an equity investment community investments, the CDE may avoid recapture of the
as a qualified equity investment or a non-real estate qualified credit if it corrects the failure within 6 months after the date it
equity investment only if it applied for and received a new becomes aware (or reasonably should have become aware) of
markets credit allocation and entered into an allocation the failure. Only one correction is permitted for each qualified
agreement with the CDFI Fund before the equity investment equity investment during the 7-year credit period.
was made. See section 45D(g) and Regulations section 1.45D-1(e) for
Qualified CDEs must provide taxpayers holding a details, including how to figure the credit recapture amount.
qualified equity investment with a completed Form Generally, include the credit recapture amount on the line for
TIP 8874-A when a qualified equity investment is recapture taxes on your income tax return for the year in which
acquired. the recapture event occurs. For example, the credit recapture

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Form 8874 (Rev. 11-2021) Page 3
amount on a 2021 Form 1040 is reported on Schedule 2 (Form If you need more space, attach a statement showing all the
1040), line 17a, and the amount on a 2021 Form 1120 is information requested for each qualified equity investment. On
reported on Schedule J, line 9g (Other taxes). the last row on line 1, write “See attached” in column (a) and
You are not subject to recapture of the credit solely because enter the total of the credit amounts from the attached
you sell or otherwise dispose of your investment. However, you statement in column (f).
cannot claim the credit for any credit allowance date after the
disposition. Paperwork Reduction Act Notice. We ask for the information
on this form to carry out the Internal Revenue laws of the
Qualified CDEs must provide taxpayers holding a United States. You are required to give us the information. We
qualified equity investment with a completed Form need it to ensure that you are complying with these laws and to
TIP 8874-B when a recapture event occurs. allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on
Basis Reduction a form that is subject to the Paperwork Reduction Act unless
You must reduce your basis in your qualified equity investment the form displays a valid OMB control number. Books or
by the amount of the new markets credits allowed (even if part records relating to a form or its instructions must be retained as
or all of the credit is not allowed for the current year and is long as their contents may become material in the
carried forward). However, do not reduce your basis for administration of any Internal Revenue law. Generally, returns
purposes of figuring the exclusion of gain for: and return information are confidential, as required by section
6103.
• Qualified small business stock under section 1202,
The time needed to complete and file this form will vary
• Certain DC zone assets under section 1400B (as in effect depending on individual circumstances. The estimated burden
before its repeal on March 23, 2018), or for individual and business taxpayers filing this form is approved
• Certain qualified community assets under section 1400F (as in under OMB control number 1545-0074 and 1545-0123 and is
effect before its repeal on March 23, 2018). included in the estimates shown in the instructions for their
individual and business income tax return. The estimated
Additional Information burden for all other taxpayers who file this form is shown below.
For more details, see section 45D, Regulations section 1.45D-1, Recordkeeping . . . . . . . . . . . 6 hr., 13 min.
or www.cdfifund.gov. Learning about the
law or the form . . . . . . . . . . . 1 hr., 12 min.
Specific Instructions Preparing and sending
Line 1 the form to the IRS . . . . . . . . . . 1 hr., 20 min.
Enter the information requested for each qualified equity If you have comments concerning the accuracy of these time
investment held directly by you on a credit allowance date in estimates or suggestions for making this form simpler, we would
the current tax year. In column (e), enter the credit rate. Enter be happy to hear from you. See the instructions for the tax
“5” for the first, second, or third year of the 7-year credit period. return with which this form is filed.
For any later year, enter “6.”

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