Fill financing gaps and boost working capital for businesses, as well as not-for-profit organizations operating in low-income, urban and rural communities with the New Markets Tax Credit (NMTC).

Pursue benefits of NMTC financing, assess if NMTC investing can help realize your goals, and design an investment portfolio with guidance from our professionals.

What Is the New Markets Tax Credit?

Under the Community Renewal Tax Relief Act of 2000, the NMTC aims to spur investments in eligible low-income, urban and rural communities to help promote development, create quality jobs, and increase services in these traditionally underserved communities.

Common NMTC projects can include:

• Commercial, office, industrial, or mixed-use real estate development, rehabilitation, or expansion
• Community or not-for-profit facilities
• Equipment financing
• Working capital
• Tribal-owned developments

What Are the Benefits of the New Markets Tax Credit?

The NMTC produces a 39% federal tax credit to investors for which they provide low-interest loans or equity in exchange. This can help fill financing gaps on your projects to pay for construction costs, equipment purchases, or other working capital needs.

The benefit is often structured to be forgiven at the end of seven-year compliance period.

NMTC investments can also benefit investors to:

• Reduce federal tax liabilities
• Support environmental, social, and governance (ESG) initiatives by promoting environmentally sustainable outcomes and social support for low-income individuals
• Meet Community Reinvestment Act (CRA) compliance goals

Who Can Qualify for the New Markets Tax Credit?

Many businesses or not-for-profit organizations can qualify if they’re in a low-income census tract or serve low-income persons. The project, called a Qualified Active Low-Income Community Business (QALICB), must meet certain threshold requirements and maintain compliance with NMTC regulations during the seven-year compliance period.  

Certain leisure businesses such as massage providers, gaming facilities, liquor stores, racetracks, tanning facilities, or golf courses don’t qualify. 

How the Process Works

Like many federal incentive programs, the NMTC has certain requirements and its structure can appear complex. Confidently pursue NMTC initiatives and determine eligibility through a fact-based assessment of your business needs, operations, and nuances with our professionals guiding your through the process.

Development budgets for NMTC projects generally range from $5 million to $30 million; currently there are no limit restrictions. Due to transaction costs, a soft minimum of $5 million is generally recommended, but options may exist for smaller projects. 

Transaction Lifecycle

Although the NMTC has a seven-year compliance period, project life cycles can last longer as NMTC allocation is scarce and securing allocation for projects can be difficult. 

Attract allocation to your project to unlock the benefit of NMTCs with our guidance throughout the life cycle.

Common New Markets Tax Credit Structure

NMTC transactions typically use a leveraged structure to provide the most benefit to the project and the investor. Our professionals can help you navigate the structure and assist you during each step. 

• NMTC equity is paired with a leverage loan to provide the capital to make the QEI
• The Sub-CDE uses this QEI to make Qualified Low-Income Community Investments (QLICIs) in the QALICB, which funds payment for construction costs, equipment, or other working capital needs
• At the end of the seven-year compliance period, the NMTC structure is unwound and the QALICB often retains the remaining NMTC benefit