New Market Tax Credits (NMTCs) support economic development across diverse business sectors, yet certain industries demonstrate particularly strong alignment with program objectives and consistently secure substantial financing allocations. Understanding which industries benefit most from NMTCs, why these sectors prove especially suitable for the program, and how industry-specific characteristics influence transaction structures enables businesses to assess whether their sector positions them favorably for NMTC financing. This knowledge helps project sponsors develop compelling applications while clarifying for policymakers and community stakeholders where NMTC investments generate the greatest community impact and economic transformation.
The Framework for Industry Suitability
Before examining specific industries, understanding what characteristics make certain sectors particularly well-suited for NMTC financing illuminates why some industries dominate program allocations. The Community Development Financial Institutions (CDFI) Fund evaluates Community Development Entities (CDEs) partly on their ability to deploy capital into businesses generating substantial community benefit, particularly job creation for low-income community residents and provision of essential services addressing critical needs.
Industries requiring significant capital investment for facilities or equipment, creating substantial employment opportunities, providing services addressing community needs, operating successfully in low-income communities despite conventional lender reluctance, and demonstrating sustainable business models that can repay financing throughout seven-year compliance periods naturally align with NMTC program objectives. Conversely, industries with minimal capital needs, limited employment generation, prohibited activities under program rules, or highly volatile economics prove less suitable regardless of location.
Are There Specific Industries That Benefit More From New Market Tax Credits Than Others?
Analysis of NMTC allocation data reveals distinct industry patterns, with certain sectors consistently receiving disproportionate shares of financing relative to their representation in the overall economy.
Healthcare: The Dominant Beneficiary
Healthcare consistently ranks as the largest NMTC recipient industry, capturing approximately 20 to 25 percent of all allocations in typical years. This dominance reflects multiple factors making healthcare exceptionally well-suited for NMTC financing.
Federally Qualified Health Centers (FQHCs) represent the quintessential NMTC recipient, providing primary care, dental services, behavioral health, and preventive care to underserved populations regardless of ability to pay. These community health centers address critical healthcare access gaps in low-income communities where private physicians often refuse to practice due to low reimbursement rates and patient demographics. FQHCs require substantial capital for facility construction or renovation, medical equipment, health information technology systems, and operational infrastructure that conventional lenders often view skeptically despite stable federal grant support.
NMTC financing enables FQHCs to construct modern facilities rivaling private clinics in quality and amenities, helping attract talented providers who might otherwise avoid community health center practice. The stable revenue streams from federal Section 330 grants, Medicaid reimbursement, and private insurance create financial profiles supporting debt service despite serving predominantly low-income uninsured or underinsured patients.
Community hospitals and critical access hospitals in rural or urban low-income areas leverage NMTC financing for facility expansions, equipment modernization, and service line development addressing community health needs. These institutions provide emergency services, inpatient care, and specialty services unavailable from smaller clinics, anchoring healthcare infrastructure in underserved regions.
Specialty healthcare facilities including dental clinics, vision centers, dialysis facilities, mental health treatment centers, substance abuse recovery programs, and rehabilitation facilities all successfully access NMTC financing. The opioid epidemic, mental health crisis, and growing recognition of behavioral health as essential healthcare have driven increased NMTC allocations to facilities addressing these critical needs in communities lacking adequate resources.
The healthcare industry’s strength as an NMTC recipient stems from clear community benefit demonstration, substantial job creation spanning medical professionals to administrative staff, stable revenue from insurance and government programs supporting debt repayment, and politically popular missions that align with broad policy priorities around healthcare access and health equity.
Manufacturing: Job Creation Powerhouse
Manufacturing ranks second among NMTC recipients, typically capturing 15 to 20 percent of allocations. This sector’s prominence reflects its capacity for substantial direct job creation—often 50 to 300 positions per project—plus multiplier effects through supplier relationships and indirect economic impact.
Food and beverage manufacturing operations leverage NMTC financing for production facilities, processing equipment, cold storage infrastructure, and distribution capacity. These businesses often locate in low-income communities to access labor pools and reduce transportation costs for perishable products, naturally aligning with NMTC geographic requirements. The food manufacturing subsector particularly aligns with community development objectives when businesses focus on healthy food production, local sourcing from regional farmers, or serving food deserts.
Advanced manufacturing including aerospace components, medical devices, precision machining, electronics assembly, and technology hardware production utilize NMTC financing for sophisticated facilities and specialized equipment costing millions of dollars. These operations create skilled employment opportunities with wages significantly exceeding local averages, demonstrating the quality job creation that CDEs prioritize. The technical nature of these businesses often requires modern facilities that conventional lenders hesitate to finance in distressed communities, creating ideal scenarios for NMTC intervention.
Traditional manufacturing including furniture, textiles, metal fabrication, plastics, and industrial products continues receiving NMTC support, particularly when businesses commit to workforce development partnerships, local hiring, and living wages. These industries faced substantial domestic decline during recent decades, making their commitment to manufacturing in low-income U.S. communities rather than offshoring particularly valued by NMTC stakeholders.
The manufacturing sector’s NMTC success stems from clear job creation metrics, physical presence requiring substantial capital investment, sustainable business models serving established markets, and alignment with policy priorities around domestic manufacturing revival and skilled employment opportunities.
Commercial Real Estate: Community Infrastructure Development
Commercial real estate projects capture approximately 10 to 15 percent of NMTC allocations, focusing on developments that create community infrastructure rather than purely speculative ventures. Mixed-use developments combining retail, office, and sometimes residential components revitalize struggling commercial corridors, transforming vacant or underutilized properties into economic anchors.
Grocery-anchored retail centers addressing food deserts represent particularly compelling NMTC projects, combining essential service provision with substantial employment and commercial corridor revitalization. These projects often struggle to achieve financial feasibility in low-income communities where conventional developers perceive inadequate purchasing power, making NMTC subsidy essential for viability.
Office developments housing professional service businesses, nonprofit organizations, government agencies, or corporate operations create employment opportunities and professional environments in communities often lacking quality workspace. These projects demonstrate that low-income communities can support modern commercial space when appropriate infrastructure exists.
Industrial and flex space developments providing affordable space for small manufacturers, distributors, and business service providers enable entrepreneurship and business growth across multiple tenants, multiplying community impact beyond single-user facilities.
The real estate sector’s NMTC traction reflects its ability to create lasting physical infrastructure, generate construction employment during development, produce permanent jobs among tenants and property management, and catalyze surrounding investment through demonstration effects.
Education: Building Human Capital Infrastructure
Educational facilities capture approximately 8 to 12 percent of NMTC allocations, recognizing education’s fundamental role in economic mobility and community development. Charter schools represent the largest educational subsector receiving NMTC support, with hundreds of schools having financed facilities through the program. These schools provide educational alternatives to struggling traditional public schools while creating teaching and administrative employment.
Early childhood education centers and daycare facilities address critical needs for working parents while providing early learning opportunities improving children’s developmental trajectories. The childcare sector particularly benefits from NMTC financing due to challenging economics—high costs for families combined with low profit margins for providers—that make facility development difficult without subsidies.
Vocational training centers, career and technical education programs, and workforce development facilities directly connect education to employment, perfectly aligning with NMTC economic development objectives. These programs teach trades, technical skills, and professional competencies enabling low-income residents to access better employment opportunities.
The education sector’s NMTC success reflects long-term community benefit, stable operating models often supported by government funding, clear missions serving disadvantaged populations, and policy consensus supporting educational investment.
Community Facilities: Addressing Diverse Needs
Community facilities representing various purposes collectively capture significant NMTC allocation shares. Recreation centers, YMCAs, Boys & Girls Clubs, and similar facilities providing youth programming, fitness opportunities, and community gathering spaces address social needs while creating employment and volunteer opportunities.
Arts and cultural facilities including theaters, museums, cultural centers, and performance venues preserve cultural heritage, provide entertainment and educational programming, and contribute to community identity and pride. These facilities often struggle to secure conventional financing due to nonprofit status and mission-driven rather than profit-maximizing operations.
Social service facilities housing food banks, homeless services, job training, legal aid, and other support programs address critical needs among vulnerable populations. While these facilities may create limited direct employment, they enable economic participation by helping clients overcome barriers to employment and self-sufficiency.
Technology and Innovation: Emerging Opportunities
Technology businesses remain underrepresented in NMTC allocations relative to the sector’s economic importance, though growing recognition of technology’s role in modern economic development has increased allocations to data centers, telecommunications infrastructure, technology incubators, and software development operations locating in low-income communities.
Data centers provide high-speed internet access while employing technical personnel and creating substantial property tax revenue. Telecommunications infrastructure projects expand broadband access essential for modern economic participation. Technology incubators and accelerators nurture startup businesses while providing workspace, mentorship, and capital access.
Hospitality and Entertainment: Selective Support
Hotels, restaurants, and entertainment venues receive more limited NMTC support, typically when clearly demonstrating catalytic community impact beyond typical commercial hospitality operations. Hotels in emerging downtown districts or near convention centers leverage NMTC financing when clearly connected to broader revitalization strategies. Restaurants focusing on local sourcing, workforce development, or serving as anchor tenants in food deserts occasionally access NMTC support.
Industries With Limited NMTC Success
Certain industries rarely if ever receive NMTC financing due to program restrictions or poor alignment with objectives. Prohibited activities including private golf courses, country clubs, gambling facilities, liquor stores, and massage parlors face statutory exclusion. Purely residential real estate doesn’t qualify except as subordinate components of mixed-use developments.
Professional services, financial services, and other office-based businesses without substantial community service missions struggle to demonstrate sufficient community benefit to justify NMTC allocation compared to competing healthcare, manufacturing, or education projects. Retail businesses beyond grocery stores face skepticism about whether commercial operations serving primarily market-rate customers merit subsidy.
Industry Selection Implications for Applicants
Understanding industry patterns helps project sponsors assess their NMTC prospects realistically. Businesses in heavily supported sectors like healthcare or manufacturing should emphasize industry-typical benefits while differentiating their specific projects. Businesses in less commonly supported sectors must work harder to demonstrate exceptional community benefit, job creation, or critical service provision justifying allocation.
CDEs often develop industry specialization, building expertise and relationships in healthcare, manufacturing, or real estate. Identifying CDEs with track records in your industry improves application prospects significantly compared to approaching generalist CDEs lacking sector knowledge.
Conclusion
While NMTCs theoretically support any qualifying business in low-income communities, practical allocation patterns reveal strong industry preferences reflecting job creation capacity, community benefit alignment, capital intensity, and sustainable business models. Healthcare dominates due to clear access benefits and stable economics, manufacturing thrives through employment generation, commercial real estate creates lasting infrastructure, education builds human capital, and community facilities address diverse needs. Businesses in these favored sectors enter NMTC processes with inherent advantages, though even less typical industries can succeed by demonstrating exceptional community benefit and financial sustainability. Understanding these industry dynamics enables realistic assessment of NMTC prospects while highlighting for policymakers where program investments generate greatest community transformation.