New Market Tax Credit Program
NMTC Program Qualification Process

• 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:

• 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.

• 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).

• 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.

• 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.

New Markets Tax Credit Program Overview

The New Markets Tax Credit Program (NMTC Program) stands as one of the most powerful federal tax credits for community development. This markets tax credit program has channeled over $60 billion into low-income census tracts nationwide, supporting manufacturing facilities, healthcare centers, and other projects prioritizing job creation.

Through the NMTC Program, investors receive 39% federal tax credits over seven years for qualified investments via certified Community Development Entities (CDEs). The CDFI Fund administers this New Markets Tax Credit, ensuring resources reach distressed communities effectively. The markets tax credit program creates mutual benefit: investors gain valuable tax credits while communities receive critical development capital.

NMTC Program Tax Credit Benefits

The New Markets Tax Credit provides 39% tax credits against federal income taxes—5% annually for years 1-3 and 6% for years 4-7. This NMTC Program structure makes impact investing financially attractive.

Through the markets tax credit program, investors fund manufacturing facilities, healthcare centers, and mixed-use developments in underserved areas. The CDFI Fund ensures these tax credits align with community needs. Corporate investors find the New Markets Tax Credit Program ideal for ESG goals while supporting job creation in qualified census tracts.

How the NMTC Program Works

The NMTC Program operates through CDEs certified by the CDFI Fund to channel investments into Qualified Low-Income Community Investments (QLICIs). These markets tax credit program investments must benefit residents in eligible census tracts meeting specific poverty criteria.

To access tax credits, investors partner with CDEs holding NMTC allocations. The New Markets Tax Credit Program requires compliance reporting to ensure job creation and community benefits. Projects range from manufacturing facilities to community centers.

NMTC Program Eligibility Requirements

Key Criteria for Markets Tax Credit Program

The New Markets Tax Credit requires partnering with Treasury-certified CDEs. These entities direct tax credits to qualified census tracts where poverty exceeds 20% or median income falls below 80% of area median. The NMTC Program supports commercial real estate, manufacturing facilities, and community facilities demonstrating job creation potential.

Understanding Qualified Census Tracts

Census tracts eligible for the New Markets Tax Credit Program meet CDFI Fund distress criteria. The markets tax credit program targets these communities specifically, using tax credits to incentivize investment where needed most.

Qualified Low-Income Community Investment (QLICI)

QLICIs represent actual NMTC Program investments in low-income communities. These tax credit-incentivized investments include business loans, real estate equity, and manufacturing facilities funding. The markets tax credit program requires QLICIs to benefit qualified census tracts substantially.

Types of NMTC Program Investments

• Commercial Real Estate: Creating employment in census tracts
• Manufacturing Facilities: Providing stable job creation
• Healthcare Centers: Improving access while generating employment
• Mixed-Use Developments: Combining commercial and community spaces

NMTC Allocation Process

The CDFI Fund manages New Markets Tax Credit Program allocations through competitive rounds. CDEs demonstrate ability to deploy tax credits effectively in qualified census tracts, emphasizing job creation and poverty alleviation. Successful markets tax credit program applicants receive $30-80 million allocations. The NMTC Program has awarded $60+ billion since inception.

NMTC Program Financing Strategies

The New Markets Tax Credit offers flexible financing combining debt and equity. The markets tax credit program allows structuring deals maximizing tax credits and community impact. Many transactions leverage tax-exempt bonds or USDA programs. Financial intermediaries help optimize NMTC Program benefits while supporting manufacturing facilities in qualified census tracts.

CBO Financial NMTC Program Expertise

CBO Financial specializes in New Markets Tax Credit Program complexities. We help clients maximize tax credits while ensuring job creation and community impact. Our markets tax credit program expertise spans project structuring, compliance, and reporting. We work with the CDFI Fund and CDEs to identify optimal investments in qualified census tracts, whether developing manufacturing facilities or mixed-use projects.

NMTC Program Success Metrics

Impact of Tax Credits on Job Creation

The New Markets Tax Credit Program results:

• Job Creation: 894,000+ jobs nationwide
• Tax Credits: $60+ billion generating $100+ billion investment
• Census Tracts: 4,000+ qualified communities
• Manufacturing Facilities: Thousands supported
• CDFI Fund Leverage: $8 private per $1 NMTC

The markets tax credit program demonstrates how tax credits drive economic development effectively.

Frequently Asked Questions

How do tax credits work in the New Markets Tax Credit Program?
The NMTC Program provides 39% tax credits over seven years. The markets tax credit program structures credits as 5% (years 1-3) and 6% (years 4-7).

Which census tracts qualify for NMTC Program investments?
Qualified census tracts have poverty rates exceeding 20% or median incomes below 80% of area median. The CDFI Fund maps eligible New Markets Tax Credit areas.

What role does job creation play?
Job creation is primary for NMTC Program success. Projects must demonstrate employment benefits for tax credits. Manufacturing facilities create the most jobs per dollar.

How does the CDFI Fund support the program?
The CDFI Fund administers the markets tax credit program, managing allocations and ensuring tax credits support genuine development in census tracts.

Can manufacturing facilities receive support?
Yes, manufacturing facilities are ideal New Markets Tax Credit projects, creating substantial job creation in qualified census tracts.

What makes NMTC different?
The markets tax credit program specifically targets distressed areas. Unlike other tax credits, NMTC requires investments in qualified census tracts with demonstrated job creation.

Ready to leverage the New Markets Tax Credit Program? Our experts help maximize tax credits through the NMTC Program. Whether developing manufacturing facilities or mixed-use projects in census tracts, we guide you through CDFI Fund processes to maximize job creation and impact.

Contact us to explore how the markets tax credit program benefits your organization.

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.