New Markets Tax Credit Available

Economic development organizations now have access to a new, large source of capital. The New Markets Tax Credit (NMTC) is expected to attract up to $15 billion in new private investments to organizations that promote business development in low-income areas.

Under the program, which is administered by the Treasury Department’s Community Development Financial Institutions (CDFI) Fund, nonprofit and for-profit organizations apply to the fund to be certified as community development entities (CDEs). An eligible organization must serve low-income communities or persons and include low-income people on its board of directors. Existing funds and specialized small business investment companies automatically qualify.

Once designated, development entities need to apply separately for tax credit allocations. Only for-profit CDEs (including those that are subsidiaries of nonprofit CDEs) can provide New Market Tax Credits to their investors. Taxpayers that acquire stock or other equity interests in these development entities receive an annual tax credit totaling more than 30 percent return over seven years. Community Development Entities are required to use the taxpayer investments to make loans to, or equity investments in, businesses or other CDEs operating in rural and urban low-income areas.

For a complete program description and application materials, visit the CDFI Fund website at www.cdfifund.gov or call 202/622-8662.

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