The New Markets Tax Credit Program (NMTC Program) helps economically distressed communities attract private investment capital. This federal tax credit helps to fill project financing gaps by enabling investors to make larger investments than would otherwise be possible. Communities benefit from the jobs associated with investments in manufacturing, retail, and technology. Communities also benefit from greater access to housing and public facilities such as health, education, and childcare.
All NMTC projects must be located in targeted areas of distress having a significant poverty rate or low median income when compared to the surrounding area or unemployment rates significantly higher than the national unemployment rate. Many types of property investments such as office, retail, industrial, educational, and healthcare real estate are allowed in the program.
How It Works
Private investors can invest in businesses or development projects within the qualified distressed area and over seven years can receive federal tax credits up to 39 percent of their entire Qualified Equity Investment (QEI). The investments are made via a Community Development Entity (CDE) that has been awarded allocation authority by a Community Development Financial Institutions Fund (CDFI Fund). Businesses and developers are able to get more flexible financing below-market interest rates and better underwriting terms. There are a variety of purposes for which the financing proceeds can be used, but they are most usually used to build or update real estate projects. The distressed communities can expect permanent quality jobs, improvement to access to services and good, and new construction and revitalization of the existing physical amenities in the community. This, in turn, helps to promote future development.