• Objective: To attract private capital into low-income communities to spur economic development and create jobs.
• Eligible Applicants: Community Development Entities (CDEs) that have a primary mission of serving low-income communities.
• Funding Uses: Investments in businesses and real estate projects in low-income communities.

The NMTC Program operates through CDEs, which are financial intermediaries that channel investment capital from investors to qualified businesses in low-income communities. Here’s a step-by-step overview of how the program is administered:

1) CDFI Fund Allocation: The CDFI Fund allocates NMTCs to CDEs through a competitive application process. CDEs must demonstrate their capacity to invest in low-income communities and their ability to attract private capital.

2) Investor Engagement: CDEs offer tax credits to investors in exchange for equity investments. Investors receive a tax credit worth 39% of their original investment, claimed over a seven-year period (5% annually for the first three years and 6% annually for the remaining four years).

3) Investment in Projects: CDEs use the capital raised from investors to make loans and investments in businesses and real estate projects located in low-income communities. These investments typically offer better rates and terms than conventional financing.

4) Community Impact: The investments made by CDEs are intended to generate substantial community impacts, such as job creation, increased economic activity, and improved access to essential services.

Eligible Activities:

• Business Investments: Loans and equity investments in businesses operating in low-income communities.
• Real Estate Projects: Development and rehabilitation of commercial, industrial, and mixed-use real estate projects.
• Community Facilities: Investments in facilities that provide essential services to low-income communities, such as healthcare centers, educational institutions, and community centers.

Ineligible Activities:

• Residential Rental Property: Investments in projects where revenue from the rental of residential units is 80% or more of overall revenue.
• Certain Businesses: Businesses involved in gambling, liquor stores, and certain other activities are not eligible for NMTC investments.

The NMTC Program offers several benefits to both investors and communities:

Investor Benefits:

• Tax Credits: Investors receive a tax credit worth 39% of their original investment.
• Return on Investment: The tax credit provides a guaranteed return on investment, regardless of the borrower’s performance.
• Market Entry: Investors gain access to new, unsaturated markets, increasing their chances of success.

Community Benefits:

• Economic Growth: Investments stimulate economic activity and job creation in low-income communities.
• Access to Capital: The program provides capital where it was previously unavailable, often at lower costs.
• Community Development: Investments support the development of essential community facilities and services.

The New Markets Tax Credit Program is a powerful tool for driving economic development in low-income communities. By leveraging private capital through CDEs, the program fosters job creation, business growth, and community revitalization.