New Markets Tax Credit a Promising Tool for Building Project Capital in Low-Income Communities

Here at the CIF-NCAF Combined Conference this week, representatives from Rural Development Partners outlined what they consider to be one of the most promising and least understood tools for capital attraction in low-income communities -- the Federal New Markets Tax Credit Program.

The NMTC program provides incentives for investments in a wide range of projects serving low-income communities. Community Development Entities field local projects and decide which are worthy for funding, generally in the form of low-interest loans. Investors are guaranteed a 39 percent tax credit against their allocations over seven years as long as 85 percent or more of the capital received by the CDE is invested in the project.

Steve Baker, a founding member of and consultant for Rural Development Partners, said that the time is right to pursue the new NMTC allocations that are out there. While there is a lot of competition for the funds, it looks like it pays to be persistant. Baker told our group that “half of the potential economic developers throw in the towel too soon and, therefore, half of the potential new markets don’t get established.

To date, an accumulation of $26 billion has been allocated to the program.
With bipartisan accolades and its recent designation as one of the top 50 programs in the U.S. government, it looks like the NMTC program is here to stay.

To find your local CDE, visit www.cdfifund.gov and look under “What We Do” / “New Markets Tax Credit.”