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The New Market Tax Credits (NMTC) program has become a vital tool in fostering economic growth and revitalizing low-income and distressed census tracts.
By incentivizing private investment, New Market Tax Credit (also known as New Markets Tax Credits or NMTC) has transformed countless neighborhoods, bringing new opportunities to local businesses and communities.
Here’s a look into how this program came about and why it is considered a cornerstone of community development efforts across the United States.
History of NMTC
The NMTC program was created as part of the Community Renewal Tax Relief Act of 2000 to boost investment in low-income and distressed communities across America.
Administered by the U.S. Department of Treasury’s Community Development Financial Institution (CDFI) Fund and the Internal Revenue Service (IRS), New Market Tax Credit lives out its mission by offering federal tax credit incentives to entities who invest in Community Development Entities (CDEs) like Dakota Business Lending. Those CDEs use the investment to finance a wide range of projects that help revitalize distressed areas in their local communities.
Did You Know? (as of September 2023)
- Dakota Business Lending is the 1st ND-based financing entity to receive a NMTC allocation.
- The NMTC program spans across all 50 states, the District of Columbia, and Puerto Rico.
- Since inception, the NMTC program has awarded $76B+ over the course of 19 allocation rounds to CDEs across America.
- In 2023, a total of 102 CDEs across the nation received NMTC allocations and have been working to administer NMTC dollars throughout the next year.
- As of FY 2022, NMTC projects nationwide have created and retained over 857M
- On average, every $1 of NMTC allocation generates more than $8 in private investment.
- The tax credit equals 39% of the investment paid out over 7 years.
Purpose of NMTC
The primary goal of the NMTC program is to drive investment into low-income and distressed communities that have historically struggled to get financing. By providing tax incentives to investors, NMTC encourages the development of projects that stimulate the following impact:
- Economic Development – Attracting private investment to spur economic growth.
- Job Creation – Generating quality and accessible jobs to individuals in low-income and distressed areas.
- Community Revitalization – Supporting projects that enhance the social and economic foundation of communities.
Development of NMTC
Over the years, the NMTC program has adapted to meet ever-changing economic conditions and community needs. The allocation process has become more streamlined and the focus on measurable impacts has strengthened.
Evolution of NMTC Program
- 2000 – Establishment of the NMTC program under the Community Renewal Tax Relief Act.
- 2005 – Expansion through the Gulf Opportunity Zone Act, which extended the program’s reach to areas affected by natural disasters.
- 2015 – Reauthorization through the Protecting Americans from Tax Hikes (PATH) Act, ensuring continued support for distressed communities.
- 2020 – Further extension included in the COVID-19 relief package, highlighting the program’s importance during economic crises.
- 2024-2025 – The CDFI Fund plans to open a $10B allocation combined round in the fall to help even more CDEs across the U.S. administer this program.
The NMTC program continues to foster community development by driving revitalization and breathing new life into areas that need it most.
Businesses, banks, and investors are encouraged to utilize this program to help further its mission of transforming communities across the nation…starting right here in North Dakota.
Sources:
- https://nmtccoalition.org/
- https://www.cdfifund.gov/programs-training/programs/new-markets-tax-credit
- https://www.cdfifund.gov/programs-training/programs/new-markets-tax-credit/award-announcement-step
- https://www.novoco.com/periodicals/articles/nmtc-has-record-success-and-wide-support-time-permanence-now
