About the NMTC Program
Advocating for the NMTC Program
Since 2000, the NMTC Program has generated investment in low-income communities across all 50 states, the District of Columbia and Puerto Rico. According to the U.S. Treasury Department’s Community Development Financial Institutions Fund, the program has raised more than $31 billion in private capital, leveraging about $8 of private capital for every $1 of NMTC investment in distressed communities.
A survey by the New Markets Tax Credit Coalition found that the program has:
- Helped support more than 15,000 businesses in low-income communities
- Developed or rehabilitated over 68 million square feet of real estate
- Created more than 500,000 jobs
The NMTC Program received a long term extension of five years (2015-2019) under the Tax Increase Prevention Act in December 2014, at its current level of $3.5 billion annually. Despite being named one of the nation's most innovative government programs by Harvard University, the NMTC remains at risk. Without legislative action, the future of using private capital to spur community and economic revitalization in low-income urban, suburban and rural areas hangs in jeopardy.
Your support is needed to encourage members of Congress to cosponsor legislation extending the NMTC program. With continued outreach, we can meet our ultimate goal to make the NMTC program permanent.
Why NMTC Works
The New Markets Tax Credit (NMTC) program stimulates local economies in low-income, distressed communities. A proven, cost-effective tool, the NMTC supports job creation and encourages small businesses to expand.
Because of the NMTC, cities gain new tools for economic development, developers enjoy subsidized rates on debt or receive additional tax credit equity and investors fulfill CRA objectives and diversify their investment portfolio with commercial and mixed-use real estate.
Through the NMTC, Enterprise bridges financing gaps and provides a cushion against cash flow obstacles as projects reach stabilized operations.
Enterprise NMTC projects have ranged from an elementary school in Portland, Ore., to a domestic violence shelter in Harlem, N.Y., to a retail shopping center in Cleveland. In each case, our allocation has helped facilitate the completion of a vital local project.
Our investments also help cover up-front costs associated with installing energy-efficient, water-saving and other sustainable green-building features through our Enterprise Green Communities NMTC program.
We urge all members of the affordable housing and community development industries to get engaged in defending this critical tool.
How NMTC Works
The federal government authorizes the New Markets Tax Credit (NMTC). The U.S. Congress authorizes the amount of annual credit authority (or allocation authority) for the NMTC. Then, the Community Development Financial Institutions Fund (CDFI Fund) under the U.S. Department of the Treasury competitively reviews applications and awards allocation authority to qualified Community Development Entities.
The Community Development Entities (CDEs) determine what projects get funded. CDEs can receive Qualified Equity Investments from investors up to the amount of the allocation authority that the CDE has received. CDEs then use the Qualified Equity Investments to make a loan or equity investment in a project or business called a Qualified Active Low-Income Community Business. The financing proceeds can be used for a variety of purposes. The proceeds are often used to construct or rehabilitate real estate projects.
Developers and business owners get flexible financing. CDEs are required to offer financing with non-traditional or more flexible terms than conventional financing. As a result, borrowers benefit from below market interest rates and underwriting terms. Many CDEs will only fund transactions that either could not qualify for any conventional financing, or could not qualify for enough conventional financing to cover the entire cost of the project.
Low-income communities benefit from investments. CDEs in part select NMTC projects based on the expected community impact. Communities benefit from newly created construction and permanent jobs, improved access to goods and services and new recreation and entertainment options. In addition, increased foot traffic in previously underserved markets can encourage future development.
Investors get a 39 percent tax credit over a seven-year period. The NMTC is based on the amount of the Qualified Equity Investments (QEI) an investor makes. Investors receive a tax credit of 5 percent of the QEI per year in the first three years and 6 percent per year in the final four years. The Qualified Equity Investments can be made up of an equity investment from the tax credit investor plus “leverage loans” from banks, affiliates of the Qualified Active Low-Income Community Business or other third parties.