Learning About NMTC: New Markets Tax Credits

At Thursday’s conference in Chicago put on by the Metropolitan Planning Council, I got a chance to learn about NMTC, or New Market Tax Credits.  These Treasury Department instruments are a unique set of financing tools for the purpose of kickstarting commercial property development in low-income areas.

Established by Congress in 2000, NMTC was designed by the Clinton administration to spur new and increased investments into real estate projects and operating businesses in low-income communities. The NMTC permits individual and corporate investors in low-income communities to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years (five percent for each of the first three years, and six percent for each of the remaining four years). The investment in the CDE cannot be redeemed before the end of the seven-year period.

A subset of the Community Development Financial Institutions program, the NMTC program has made 836 awards allocating a total of $40 billion in tax credit authority to CDEs through a competitive application process. This $40 billion includes $3 billion in Recovery Act Awards and $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone.

Where Are Eligible Low-Income Areas?

The fastest way to discover the status of an address with regard to NMTC is to use the website operated by the accounting firm Novogradc & Company and head to the NMTC Mapping Tool located therein. It’s a bit tricky, but worth the results:

First, head to this link. Then select the “NMTC Mapping Tool”, by clicking the image.

Waiting a few seconds will produce a pop-up window that looks like this:

screenshot of NMTC eligibility map

It’s inside this window that the search form is usable, based on 2000 census data.

Note that no results in this form are to be used for decisions — all results need to be confirmed with the CDFI Fund website!

Watch for more coverage of NMTC and CDFI funding options here at The Source.

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