On May 23, the U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund) awarded 73 Community Development Entities (CDEs) $3.5 billion in New Markets Tax Credit (NMTC) allocation authority. The allocation awards, made through the calendar year (CY) 2018 round of the NMTC Program, will help stimulate economic growth in low-income areas nationwide. The 73 CDEs receiving awards today were selected from a total of 214 applicants that requested an aggregate total of approximately $14.8 billion in NMTC allocation authority. The awardees are headquartered in 35 different states, the District of Columbia, and Puerto Rico. The CDFI Fund estimates that these NMTC award recipients will provide more than $682 million in NMTC investments in non-metropolitan areas.
Today's announcement brings the total amount of allocation authority awarded through the NMTC Program to $57.5 billion. Based on historical data, NMTC awards have generated over $8 of private investment for every $1 invested by the federal government. As of the end of fiscal year 2017, NMTC Program award recipients deployed over $48.6 billion of investments in low-income businesses and communities, resulting in the retention or creation of over 800,000 jobs and the rehabilitation or construction of over 205 million square feet of commercial real estate.
The NMTC Program is designed to encourage capital investment in low-income areas that have traditionally had inadequate access to capital. Established by Congress in 2000 and extended through 2019, the NMTC Program permits institutional investors to receive a credit against federal income taxes for making equity investments in CDEs. For every $1 invested into a CDE, a thirty-nine percent (39%) tax credit is generated over a seven-year period. CDEs that receive NMTC allocation authority use the capital raised to make investments in, or loans to, businesses located in low-income communities. The resulting subsidy to a project generated from the monetized NMTCs can amount to as much as twenty to twenty-five percent (20% – 25%) of the total cost of the project. The NMTC Program has proven to be an effective means of rebuilding economically distressed communities, and new and rehabilitated projects are being developed throughout the country as a result of the NMTC Program, including manufacturing facilities, community facilities, schools, retail centers, office buildings, hospitals and hotels.
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