The New Markets Tax Credit (NMTC) team at FORVIS is pleased to share some recent news concerning the NMTC Program. On September 22, 2023, the Community Development Financial Institutions (CDFI) Fund announced the calendar year 2022 allocatees of the NMTC Program. There were 102 Community Development Entities (CDEs) that received a combined $5 billion in allocation from a pool of 197 applicants. In total, all applicants requested $14.8 billion in tax credit allocation authority.
The award recipients are headquartered in 36 different states and the District of Columbia. Forty-nine of the award recipients focus on a national service area, 20 focus on a multistate service area, 18 will focus on a statewide service area, and 15 will focus on a local service area (citywide or countywide). Approximately 82% of the NMTC proceeds are likely to be used to support investments in businesses with the remaining balance of investments going to support real estate projects. It also is expected that more than 18% of the investments will be made in rural communities. Moreover, all 102 allocatees committed to providing at least 85% of their investments in areas characterized by: 1) multiple indicia of distress; 2) significantly greater indicia of distress than required by NMTC Program rules; or 3) high unemployment rates.
The announcement brings the total amount awarded through the NMTC Program to more than $76 billion. Historically, NMTC Program awards have generated $8 of private investment for every $1 invested by the federal government. Through the end of fiscal year 2022, NMTC Program award recipients deployed more than $62.9 billion in investments in low-income communities and businesses.1
About the NMTC Program
The NMTC Program, established by Congress in December 2000, permits individual and corporate taxpayers to receive a nonrefundable tax credit against federal income taxes for making equity investments in financial intermediaries known as CDEs. CDEs that receive the tax credit allocation authority under the program are domestic corporations or partnerships that provide loans, investments, or financial counseling in low-income urban and rural communities. The tax credit provided to the investor totals 39% of the cost of the investment and is claimed over a seven-year period. The CDEs in turn use the capital raised to make investments in low-income communities. CDEs must apply annually to the CDFI Fund to compete for NMTC Program allocation authority. Since the inception of the NMTC Program, the CDFI Fund has completed 19 allocation rounds and has made 1,563 awards totaling $76 billion in tax allocation authority. This includes $3 billion in Recovery Act Awards and $1 billion of special allocation authority used for the recovery and redevelopment of the Gulf Opportunity Zone.
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