The NMTC program provides tax credits to individual or corporate investors who make qualified equity investments in certified Community Development Entities (CDEs). These CDEs are specialized organizations that have a mission to promote economic and community development in low-income areas.
In turn, CDEs must apply for and receive certification from the CDFI Fund. Once certified, they compete for allocation authority, which is the right to issue a specified amount of tax credits. The CDFI Fund allocates these credits to selected CDEs through a competitive application process.
Investors contribute capital to a CDE in exchange for the issuance of qualified equity investments (QEIs). In return, investors become eligible to receive NMTC equal to 39% of their total qualified investment amount. The credit is claimed over seven years—5% for each of the first three years and 6% for each of the subsequent four years.
Next, CDEs deploy the invested capital to finance projects and businesses in low-income communities. These projects can include real estate developments, small business expansions, and the construction or renovation of community facilities like healthcare centers and educational institutions.
The ultimate goal of the NMTC program is to stimulate economic growth, create jobs, and improve access to essential services in low-income areas. By leveraging private investment, the program aims to attract businesses and projects that contribute to the overall well-being of the community.
New Markets Tax Credits have been used in a wide range of projects, including affordable housing, healthcare facilities, manufacturing plants, and retail developments. The program has proven successful in promoting positive economic development and revitalization in underserved communities across the country.