New Markets Tax Credit Program

The NMTC Program Stimulates New Investments in Low-Income Communities

The New Markets Tax Credit (NMTC) program is a federal subsidy program designed to incentivize investments into low-income communities, providing approximately 25% of project cost in flexible, below market funding that is typically forgiven at the end of the 7-year compliance period.
New Markets Tax Credits

NMTC Incentivize Investments  in Low Income Communities for Economic Revitalization

New Markets Tax Credit program investors make investments in companies known as Community Development Entities (CDEs) that in turn make loans to businesses in low-income communities. The intent of the program is to spur positive economic revitalization in these areas.

A CBO Financial Subsidiary, Community Development Funding, LLC was one of only 66 groups to receive New Markets Tax Credit allocation in Round 1 in 2003, and one of 62 groups to receive an allocation in Round 2 – one of only 10 organizations to receive both 1st and 2nd round allocations. Since then, the CBO team has gone on to secure additional allocations for our own CDE, and assisted numerous clients with establishing CDEs and successfully applying for a direct New Markets Tax Credits allocation award. New Markets Tax Credits create benefits to tax credit investors, businesses that need capital, and state and local government and economic development authorities seeking to improve low income communities.

new market tax credit financing structure

Discover the unique benefits to borrowers, investors, and the US Economic Development Administration (EDA) from the NMTC Program.
Borrowers
Investors
States - Municipalities - EDAs
Build Communities

Borrower Benefits

  • Potential new or additional source of capital for qualified borrowers
  • Provide capital where previously unavailable
  • Result in availability of capital at substantially lower cost
  • Result in conversion of up to 30% of project debt to borrower equity
Leverage Tax Credits

Investor Benefits

  • NMTC essentially guarantees return of investment plus a return on the investment regardless of borrower performance
  • Investors can further increase investment return and project subsidies with additional tax credits (e.g., historic and renewable tax credits)
Facilitate Economic Revitalization

Public Benefits

  • Opportunity to combine public funding with tax credits to induce development
  • Potential additional sources of revenue to agency as a CDE
  • Potential positive economic revitalization in these areas

Important Considerations for NMTC Financing

We are here to help you with any questions you might have. Feel free to submit a Free Project Analyis Request for more detailed information regarding your specific scenario.

What is a Low-Income Community for the NMTC Program?

New Markets Tax Credits for Low Income Communities

In the context of the New Market Tax Credit program, a low-income community is a census tract with at least 20% poverty, or one that has a median family income that is at or below 80% of the area’s median family income.

What are Eligible NMTC Activities?

Eligible NMTC Investment Projects for NMTC Allocations

A new markets tax credit program investment is made in the form of equity-like loans to businesses located in low-income census tracts or ones that predominantly serve or primarily employ low-income persons.

New markets tax credit program financing typically is applied as “gap financing” for the development of commercial, industrial, and retail real estate projects (including community facilities).

Other NMTC program projects may also include for-sale real estate housing designated for moderate-to-low-income families, renewable technologies, and sustainable, environmentally friendly technologies operating on a commercial scale.

How to Access NMTCs?

How to Access the New Markets Tax Credits program

There are two ways to access the New Markets Tax Credit program. To fund a single project, you will need to solicit CDEs that currently have an allocation and have an investment strategy that complements your business model and geographic location.

If you have rather large project or a pipeline of projects in need of financing, the best option is to form a CDE and apply directly for an allocation from the New Markets Tax Credit Program.

The New Markets Tax Credit Program can play an important role in revitalizing communities through equity investments resulting in building projects, job creation, and other community development activities that benefit from private investment. The tax incentives realized from making equity investments in distressed communities can be beneficial to a broad spectrum of entities and result in the development of both inner city and rural communities. These contributions make a demonstrable community impact in the form of low income urban centers, retail stores, local small technology firms, inner city shopping centers, and other NMTC projects that utilize NMTC allocation awards.

Equity investments are typically seen in the form of money invested into companies through the purchase of stock shares of that particular company, but they can also include private equity investments into real estate funds or other investment vehicles.

The NMTC program is an incentivizing factor when it comes to community development and economic growth through the use of tax incentives to attract private investments in low-income communities. As of 2020, the NMTC Program has:

  • Resulted in approximately $8 of private equity investment for every $1 from federal income tax funding
  • Generated over368 million square feet of office space, manufacturing space and retail space
  • Assisted in the financing of over 9,500 businesses

NMTC Program applicants must be certified as Community Development Entities by the CDFI Fund. For more information on Community Development Entity Certification and CDFI, please see our CDFI page. 

CDE Certification is intended to be utilized by community development financing intermediaries. Any businesses seeking new market tax credits for  financing should directly contact CBO Financial.

What Requirements Must Be Met by the Borrower to Qualify?

The borrower must be a Qualified Active Low-Income Community Business (QALICB), which is a business that meets the following requirements:

  • It is a corporation (for profit or nonprofit), or a partnership
  • It actively conducts any business except residential rental, development, sale or licensing of intangibles, golf course, golf club, massage parlor, hot tub facility, suntan facility, racetrack, off-sale liquor
  • Less than 5% of its assets consist of “collectibles” (e.g., antiques, jewelry, wine, etc.)
  • Less than 5% of its assets consist of “financial property” (e.g., stocks, bonds, cash other than reasonable working capital)
    40% of its tangible assets are located in a low-income community
  • 40% of employee services are rendered in a low-income community

NMTC Financing Property Types & Locations

Please contact us regarding specific geographic locations. New Markets Tax Credits are typically applicable for the following property types:

  • Arenas
  • Affordable Housing
  • Banking Services
  • Financial Services
  • Commercial Usage
  • Education Facilities
  • Energy Development Facilities
  • Entertainment Purposes
  • Public Assembly Purposes
  • Farmland Areas
  • Food Sales
  • Food Services
  • Healthcare Facilities
  • Hotels
  • Industrial Facilities
  • Infrastructure Purposes
  • Lodging Facilities
  • Residential Use
  • Mixed-Use Purposes
  • Multi-Family Housing
  • Office Facilities
  • Parking Facilities
  • Public Services
  • Religious Worship Facilities
  • Residential Purposes
  • Retail Locations
  • Senior Housing
  • Single-Family Housing
  • Stadiums
  • Storage Facilities
  • Student Housing Purposes
  • Technology Facilities
  • Science Facilities
  • Utility Purposes
  • Warehouse Facilities
  • Workforce Facilities

Does Your Project Qualify for Low-Cost Financing or New Markets Tax Credits?

Reach out to our specialists to discuss how we can work together.
Get a Free Project Analysis

Other Financing Services

CBO Financial provides a range of services to help plan and finance projects located in low income communities, including below-market loans and subsidies.

Project Planning And Financial Modeling

Start a project right by identifying anticipated predevelopment expenses, project budget, sources/uses of funds, cash flow forecasts and debt service coverage.
Project Planning And Financial Modeling

Financing Request Package Development

Developing a comprehensive Financing Request Package (FRP) is an important first step in securing financing and/or project subsidies for community devlopment.
Financing Request Package Development

CDE Certification Application Services

CBO Financial can help guide you through the process of assembling the board and take a leadership role in developing and filing the certification application.
CDE Certification Application Services

CDFI Certification Application Services

CBO Financial can assist with the Community Development Financial Institution certification application process for existing lenders.
CDFI Certification Application Services

New Markets Tax Credits Placement Services

CBO Financial can provide an access point to the NMTC industry to secure flexible, forgivable financing for up to 25% of project cost.
New Markets Tax Credits Placement Services

New Markets Tax Credits Allocation Application Services

For entities with a pipeline of projects, an application for a direct allocation of NMTCs may be appropriate. Applications are accepted annually.
New Markets Tax Credits Allocation Application Services

Historic Tax Credit Application Services

CBO Financial can assist with the Community Development Financial Institution certification application process for existing lenders.
Historic Tax Credit Application Services

Pennsylvania RACP Application Preparation

Prepare a compelling Part I application to the Pennsylvania (RACP), to be followed by Part II if/when invited to apply.
Pennsylvania RACP Application Preparation

You see challenges. We see possibilities.
Your community sees change.

Established in 1999, CBO Financial is a financial consulting firm that specializes in helping businesses secure funding for development projects in the nation’s most distressed communities. Our experts understand how to present economic, environmental, and societal benefits to public and private organizations so your project receives the funding it needs to move forward quickly and reasonably. A CBO Financial subsidiary, Community Development Funding, LLC, has received six awards under the federal New Markets Tax Credit program totaling $150M. In addition the team has taken a leadership role in securing 18 awards for clients totaling over $400M.
Our Services
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The funding is out there

CBO can be your access point for a variety of flexible financing sources including gap financing using New Markets Tax Credits, Historic Tax Credits, Tourism Tax Credits, Property Assessed Financing, Opportunity Zone Funds and others.
Programs
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 a Significant Impact

CBO is on a mission to help elevate the lives of people living in distressed communities by providing flexible, below-market gap financing to high-impact projects that cannot otherwise move forward. Does your project qualify for financing?
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Million-dollar stories

The CBO team has funded over $1 billion in projects for local and national nonprofits, for-profit developers, and municipal agencies. Our team can help you find the low-cost financing or new market tax credits needed for your projects.
Projects

Does Your Project Qualify for Low-Cost Financing or New Markets Tax Credits?

Reach out to our specialists to discuss how we can work together.
Get a Free Project Analysis