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.