Navigating the New Markets Tax Credit (NMTC) program requires understanding eligibility criteria that determine which projects can access this valuable financing tool. For developers, business owners, and community organizations seeking NMTC financing, clarity about eligibility requirements saves time and increases the likelihood of securing funding.
The Foundational Framework of NMTC Eligibility
The NMTC program operates through Community Development Entities (CDEs) that receive allocation authority from the Community Development Financial Institutions (CDFI) Fund. These CDEs deploy capital into Qualified Active Low-Income Community Businesses (QALICBs) operating within designated low-income communities. Understanding eligibility requires examining geographic requirements, business qualification standards, and prohibited business activities.
Geographic Eligibility Requirements
Projects must be located in qualified census tracts that meet one of two criteria: a poverty rate of at least 20% or a median family income not exceeding 80% of the area median. These geographic parameters ensure NMTC investments flow to genuinely distressed communities.
Additionally, businesses located outside these tracts may still qualify if they can demonstrate that at least 50% of their employees, sales, or services involve low-income communities or low-income persons. This flexibility recognizes that businesses sometimes need locations outside distressed areas for operational reasons while still serving those communities meaningfully.
Manufacturing and Production Facilities
Manufacturing operations consistently rank among the most common NMTC recipients. These projects qualify because they typically create significant employment opportunities for low-income community residents while producing goods that serve broader markets. Eligible manufacturing projects span diverse industries, including food production, textiles, furniture, metal fabrication, electronics assembly, and specialized industrial products. These businesses often require substantial capital for facilities, equipment, and working capital that NMTC financing effectively provides.
Healthcare Facilities and Services
Healthcare projects constitute a significant category of NMTC investments, addressing critical service gaps in underserved communities. Federally Qualified Health Centers (FQHCs), community health clinics, dental facilities, specialty care centers, urgent care clinics, and hospital expansions all qualify for NMTC support. Mental health treatment centers, substance abuse rehabilitation facilities, behavioral health clinics, pharmacy operations, medical laboratory facilities, and diagnostic imaging centers also successfully access NMTC financing.
Educational Facilities and Institutions
Educational infrastructure projects receive substantial NMTC support. Charter schools represent the most common educational project type, with hundreds having leveraged NMTC financing for facility construction or renovation. Early childhood education centers and daycare facilities qualify, addressing the critical need for affordable childcare that enables parents to maintain employment. Vocational training centers, workforce development facilities, and career and technical education programs also meet eligibility standards.
Commercial Real Estate Development
Mixed-use developments combining retail, office, and sometimes residential components qualify when they demonstrate community benefit and economic impact. These projects often revitalize deteriorating commercial corridors, transforming vacant or underutilized properties into vibrant economic anchors. Community facilities encompassing multiple uses—perhaps a health clinic, workforce training center, and community meeting space within a single development—exemplify the comprehensive approach NMTC investments can support.
Grocery Stores and Food Access Projects
Food deserts—areas lacking access to fresh, affordable, nutritious food—plague many low-income communities. Full-service grocery stores opening in these areas qualify for NMTC support, addressing a critical community need while creating employment. Beyond traditional supermarkets, food cooperatives, specialty food retailers focusing on healthy options, and food distribution facilities serving multiple retail outlets also qualify.
Community Facilities and Cultural Centers
Multi-purpose community centers offering diverse services and programming consistently qualify for NMTC financing. These facilities might house recreational programs, after-school activities, senior services, job training, health screenings, and community meetings. Arts and cultural facilities, including theaters, museums, cultural centers, and performance spaces, qualify when they demonstrate significant community access and impact.
Industrial and Technology Centers
Industrial parks, warehouse facilities, distribution centers, and flex space developments that house multiple small businesses qualify for NMTC support. Incubator facilities and shared workspace developments designed to support entrepreneurs also qualify. Data centers, telecommunications infrastructure, broadband deployment projects, and technology incubators qualify when they enhance economic opportunity in low-income communities.
Hotel and Professional Services
Hotels developed in low-income communities to support tourism, business travel, or revitalization initiatives qualify under certain conditions. These projects must demonstrate clear community benefit through job creation or catalytic impact on surrounding areas. Professional service businesses, including legal services, accounting firms, engineering consultancies, and business services, qualify when they operate in and serve low-income communities. Call centers employing significant numbers of low-income community residents consistently qualify.
Prohibited Business Types and Activities
Understanding what doesn’t qualify proves equally essential. The NMTC program explicitly prohibits certain business types regardless of location or community impact. These prohibited categories include private or commercial golf courses, country clubs, massage parlors, hot tub facilities, suntan facilities, and racetracks.
Businesses deriving more than a de minimis amount of revenue from alcohol sales as a principal activity—essentially liquor stores and bars—also face disqualification, though restaurants where alcohol accompanies food service typically qualify. Rental residential real estate projects generally don’t qualify, except for mixed-use developments where residential components are subordinate to commercial elements. Gambling facilities and private country clubs that restrict membership based on protected characteristics are also prohibited.
Special Considerations for Qualification
Beyond basic eligibility, businesses must demonstrate that they’re “active” operations rather than passive investment vehicles. The company must generate at least 50% of its gross income from active conduct of trade or business activities. Businesses must also meet size standards, with tangible property not exceeding certain thresholds relative to the NMTC investment.
Navigating NMTC Eligibility
The NMTC program’s eligibility framework casts a wide net, supporting diverse project types unified by their potential to generate community benefit through job creation, service provision, and economic revitalization. From manufacturing facilities to healthcare centers, educational institutions to grocery stores, the program recognizes that comprehensive community development requires investments across multiple sectors.
Understanding these eligibility parameters enables project sponsors to assess realistically whether NMTC financing suits their needs and to structure projects that maximize qualification likelihood. For expert guidance on navigating NMTC eligibility requirements, explore our NMTC advisory services, review eligible projects in our project portfolio, or request a free project analysis to determine your project’s qualification potential.