Details | New Markets Tax Credit


Funder

 

United Stated Internal Revenue Service

Implementer

 

Community Development Financial Institutions Fund

Description

 

The New Markets Tax Credit (NMTC) was designed to increase the flow of capital to businesses and low income communities by providing a modest tax incentive to private investors. Over the last ten years, the NMTC has proven to be an effective, targeted and cost-efficient financing tool valued by businesses, communities and investors across the country. The NMTC Program, enacted by Congress as part of the Community Renewal Tax Relief Act of 2000, is incorporated as section 45D of the Internal Revenue Code. This Code section permits individual and corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs) in qualified community development entities (CDEs). The NMTC expires on December 31, 2019. A low-income community is defined as any population census tract where the poverty rate for such tract is at least 20% or in the case of a tract not located within a metropolitan area, median family income for such tract does not exceed 80 of statewide median family income, or in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80% of the greater of statewide median family income or the metropolitan area median family income. As part of the American Jobs Creation Act of 2004, IRC 45D(e)(2) was amended to provide that targeted populations may be treated as low-income communities. The NMTC program attracts capital to low income communities by providing private investors with a federal tax credit for investments made in businesses or Economic development projects located in some of the most distressed communities in, census tracts where the individual poverty rate is at least 20 percent or where median family income does not exceed 80 percent of the area median. The NMTC Program also attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years. A NMTC investor receives a tax credit equal to 39 percent of the total Qualified Equity Investment (QEI) made in a Community Development Entity (CDE) and the Credit is realized over a seven-year period, 5 percent annually for the first three years and 6 percent in years four through seven. If an investor redeems a NMTC investment before the seven-year term has run its course, all Credits taken to date will be recaptured with interest.

Funding guidance

 

Applications open

 

None

Applications close

 

None

Type

 

Tax Credit

Category

 

Financing

Territory

 

United States

Applicant type

 

For Profit  |  Non Profit

Project

 

New Addition to an Existing Building  |  Rehabilitation of Existing Whole Building  |  Rehabilitation of Part of an Existing Building  |  Whole New Building Construction

Sector

 

Commercial

Sub-sector

 

City  |  Commercial  |  County  |  Data Center  |  Education  |  Health Care  |  Hospitatlity  |  Industrial  |  Multi Family  |  Retail  |  Single Family  |  Special Districts  |  State

Sustainability

 

Electric Vehicle Charging Infrastructure  |  Electric Vehicles  |  Energy Efficiency for Processes  |  Energy Efficiency in Buildings  |  Energy Management System  |  Energy Storage  |  Generation Systems  |  Water Use Reduction

Small business

 

False

Disadvantaged communities

 

True

Cost sharing amount

 

None

Cost sharing percent

 

None

Cost sharing note

 

Minimum repayment years

 

None

Maximum repayment years

 

None

Interest rate comment

 

Incentive