New Markets Tax Credits
Encouraging financial investment and economic development in distressed communities
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, an agency within the U.S. Treasury Department, administers the NMTC program. Community Development Entities (“CDE”) submit applications on an annual basis to the CDFI Fund for an NMTC allocation. This application process is extremely competitive. Generally, in their applications, these CDEs will target certain geographic and types of investments should they receive a NMTC allocation.
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. Generally, projects that in addition to bringing investment in these designated low-income communities create jobs, provide job training, health care, education, access to healthy foods or will serve as a catalyst for additional development will be attractive.
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 an equity like investment 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 with the resulting tax credits being the primary return to the investor.
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 CDE’s 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.