The Federal New Markets Tax Credit (“NMTC”) program was created by Congress to encourage financial investment and economic development in lower-income communities throughout the United States. If you are developing real estate in an area that was either historically or is currently distressed, your project may be eligible for a NMTC investment.
The CDFI Fund, a branch of the U.S. Department of the Treasury, administers the NMTC program. Community Development Entities (“CDE”) will submit applications on an annual basis to the CDFI Fund for NMTC allocations. This application process is extremely competitive. Generally, in their applications, these CDEs will target certain geographic and types of investments for their allocations.
CDEs that receive an allocation from the CDFI Fund will in turn agree to dedicate these tax credits to projects located in qualified census tracts that meet the investment criteria established in their applications.
CDEs generally will contribute a NMTC allocation into a project in one of two ways:
- Provide a low interest loan, typically 200-400 basis points below market rates to the project sponsor, or
- Provide a forgivable loan to the project sponsor. For this type of investment, the funds essentially become an equity investment in the project by the CDE or its designated investor in exchange for the tax credits.
As a result, these credits can provide a significant financial boost to many types of projects including community facilities and commercial ventures.
The program has become extremely competitive and therefore, many projects are competing for each CDEs allocation. Brian Wishneff & Associates has established great working relationships with many of the CDEs that have received NMTC allocations and as a result feel that if anyone can bring a NMTC allocation to your project, we can do it.
If you would like to investigate the potential use of NMTCs for your project, please contact us and we can help determine your projects eligibility. If your project is located in an eligible census tract, we can help to secure a CDE and if successful structure the NMTC portion of your project. For more information on the services BW&A provides with regard to the securing, structuring, underwriting and syndication of new market tax credit transactions, please see the Consulting Services page above.