2018 New Markets Tax Credit Allocation Awards Announced
The New Markets Tax Credit (NMTC) program is a popular federal program that incentivizes impactful projects in qualified census tracts by providing a credit against federal tax liability for certain investments made in those census tracts. It attracts private investment to distressed communities throughout the country and in Native American communities. NMTC projects have resulted in $8 of private investment for every $1 of federal tax credits provided, making it a very successful program.
Congress provided $3.5 billion in allocation authority for 2018. Yesterday, the CDFI Fund, a division of the Treasury Department, announced the 73 Community Development Entities (CDEs) that received a portion of this allocation. The awards authorize CDEs to invest in projects up to the total amount of allocation received. This CDE investment triggers the federal tax credits.
Each CDE applies for allocation annually in a competitive application process; its application indicates the types of projects, geographical reach, and types of investment they intend to make. CDEs focus on projects in underserved areas where NMTC funding can fill a gap in financing and incentivize development that will positively impact underserved communities. Approximately 20% of this year’s award will be deployed to rural communities. Projects funded in the past include charter schools, manufacturing facilities, grocery stores, retail space, federally qualified health care clinics and child care facilities. While the transaction costs of an NMTC funded project can be high, it is a useful program to fill a gap in the capital stack of a project that will create jobs and/or otherwise benefit the community.
The NMTC legislation is temporary; unless it is extended or made permanent, 2019 is the last year for which another $3.5 billion in allocation authority is authorized.