CDFI Fund: New Markets Tax Credit ProgramDeadline: October 28, 2019
The New Markets Tax Credit Program (NMTC) Program helps economically distressed communities attract private capital by providing investors with a federal tax credit. Investments made through the NMTC Program are used to finance businesses, breathing new life into neglected, underserved low-income communities.
Through the NMTC Program, the CDFI Fund allocates tax credit authority to Community Development Entities (CDEs) through a competitive application process. CDEs are financial intermediaries through which private capital flows from an investor to a qualified business located in a low-income community. CDEs use their authority to offer tax credits to investors in exchange for equity in the CDE. Using the capital from these equity investments, CDEs can make loans and investments to businesses operating in low-income communities on better rates and terms and more flexible features than the market. In exchange for investing in CDEs, investors claim a tax credit worth 39 percent of their original CDE equity stake, which is claimed over a seven-year period.
Amount: CDEs receive a New Markets Tax Credit allocation to offer investors in exchange for equity investments in the CDE and/or the CDE’s subsidiaries; or to receive loans or investments from other CDEs that have received NMTC allocations.
Eligibility: A CDE is a domestic corporation or partnership that is an intermediary vehicle for the provision of loans, investments, or financial counseling in Low-Income Communities (LICs). To become certified as a CDE, an organization must submit a CDE Certification Application to the Fund for review. The application must demonstrate that the applicant meets each of the following requirements to become certified:
- Be a legal entity at the time of application
- Have a primary mission of serving LICs
- Maintain accountability to the residents of the targeted LICs