New Markets Tax Credit Program Overview

The New Markets Tax Credit (NMTC) Program is a federal initiative that aims to stimulate economic growth in low-income communities by providing tax credits to investors who support businesses in these areas.

The program was created in 2000 as part of the Community Renewal Tax Relief Act.

The NMTC Program is administered by the Community Development Financial Institutions Fund (CDFI Fund), which is a division of the U.S. Department of the Treasury.

Tax credits are allocated to Community Development Entities (CDEs), which are organizations that invest in businesses and projects in low-income communities.

The New Markets Tax Credit (NMTC) is a program designed to stimulate investments in low-income, urban, and rural areas. This initiative aims to promote development, create quality jobs, and increase services in these traditionally underserved communities.

The NMTC was established under the Community Renewal Tax Relief Act of 2000, making it a relatively recent addition to the tax credit landscape.

Here are some examples of common NMTC projects:

These projects can have a significant impact on the local economy and quality of life for residents in these areas.

The New Markets Tax Credit (NMTC) is a powerful tool for businesses and organizations looking to make a positive impact in low-income communities. It produces a 39% federal tax credit to investors who provide low-interest loans or equity in exchange.

This tax credit can be a game-changer for projects that need financing to cover construction costs, equipment purchases, or other working capital needs. The benefit is often structured to be forgiven at the end of a seven-year compliance period.

By investing in NMTC, you can also reduce your federal tax liabilities. This can be a huge relief for businesses and organizations that are already operating on thin margins.

NMTC investments can also support environmental, social, and governance (ESG) initiatives by promoting environmentally sustainable outcomes and social support for low-income individuals. This is a great way to give back to your community while also improving your bottom line.

Here are some of the key benefits of NMTC:

The New Markets Tax Credit (NMTC) Program was established by Congress in 2000 to attract private investment into low-income communities.

The program permits individual and corporate taxpayers to receive a non-refundable tax credit against federal income taxes for making equity investments in Community Development Entities (CDEs).

CDEs are domestic corporations or partnerships that provide loans, investments, or financial counseling in low-income urban and rural communities.

Since its inception, the CDFI Fund has completed 17 allocation rounds and has made 1,354 awards totaling $66 billion in tax allocation authority.

The tax credit provided to the investor totals 39% of the cost of the investment and is claimed over a seven-year period.

This program is a financing tool for qualified projects and a tax incentive for investors, aiming to break the cycle of disinvestment in low-income communities.

The program attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in CDEs.

Low-income communities often experience a lack of investment, as evidenced by vacant commercial properties, outdated manufacturing facilities, and inadequate access to education and healthcare services.

The NMTC Program aims to reinvigorate struggling local economies by attracting the private investment necessary to create jobs and spur economic growth.

In 2020, the CDFI Fund announced $5 billion in New Markets Tax Credits that will spur investment and economic growth in low-income urban and rural communities nationwide.

This announcement brings the total amount awarded through the NMTC Program to $66 billion, with a historical return on investment of $8 of private investment for every $1 invested by the federal government.

The New Markets Tax Credit (NMTC) process can be complex, but understanding its basics can help you navigate it with confidence. Our professionals can guide you through the process, helping you make informed decisions about your business needs and operations.

Development budgets for NMTC projects typically range from $5 million to $30 million, with no current limit restrictions. This means you have a wide range of options to consider.

While there's no hard minimum, a soft minimum of $5 million is often recommended due to transaction costs. This can help you plan and budget more effectively for your project.

The New Markets Tax Credit (NMTC) program has a complex structure, but understanding how it works can help you navigate it confidently.

Development budgets for NMTC projects usually range from $5 million to $30 million, with no current limit restrictions.

A soft minimum of $5 million is often recommended due to transaction costs, but smaller projects may still be an option.

The transaction lifecycle of NMTCs can be a lengthy process, with project life cycles often lasting longer than the seven-year compliance period.

Securing NMTC allocation for projects can be a difficult and time-consuming task, which is why it's essential to have guidance throughout the process.

The New Markets Tax Credit (NMTC) program is flexible and can fund a wide range of projects.

NMTCs can be used to finance equipment, operations, or real estate, including retail, manufacturing, agriculture, community facilities, rental or for-sale housing, or combinations of these.

Manufacturing and food processing, retail, health care, schools and child care, and office and professional services are the most prevalent project types, according to the Urban Institute.

The Urban Institute categorized NMTC project types, showing that no one type dominates.

NMTCs have been used to finance projects such as a new Center for Food, Youth, and Community in Santa Rosa, CA, which will support community development.

A $22,000,000 New Markets Tax Credit financing was announced for this project, with a closing date of August 22, 2024.

The CSCDC has also announced NMTC financing for several education facilities, including an innovative education facility in Redding, CA, and expansion of community college facilities in Indio, CA.

These projects demonstrate the NMTC program's flexibility and ability to support a wide range of community development initiatives.

A $7,500,000 New Markets Tax Credit financing was announced for AMPLA Health, a nonprofit FQHC, to support expansion of its medical facility in Marysville, California.

A $16,500,000 New Markets Tax Credit financing was announced for LifeLong Medical Care to finance a new permanent primary healthcare center that will serve 19,000 additional patients per year.