In anticipation of the announcement of the $3.5 billion of New Markets Tax Credits (NMTC) allocation awards by the U.S. Department of the Treasury's Community Development Financial Institutions Fund next month, Stites & Harbison will conduct its fifth annual New Markets Tax Credits Workshop on Wednesday, February 13th. With a distinguished panel, the workshop will address: (i) the basic elements of the NMTC program; (ii) how best to position a project to receive a NMTC allocation; and (iii) understanding the NMTC process as explained by a veteran of a $30 million NMTC project. For more information on the upcoming workshop, click here.
Historically, underserved communities experience a lack of private investment resulting in vacant commercial properties, lack of operating enterprises, and poor access to education, healthy foods, and healthcare services. The New Markets Tax Credit Program is designed to break this era of disinvestment by incentivizing capital investment in business and real estate projects in low-income communities by way of a federal income tax credit.
In dollars, the following example is what NMTCs, as a soft federal subsidy, can mean to a project. Hypothetically, a $20 million NMTC-qualified real estate project located in a qualified census tract in Kentucky receives a $20 million NMTC allocation. The net cash benefit to the project is $4,940,000 which requires no repayment. Consequently, the $20 million project referred to above can be built for $15,060,000, which represents a 24.7% discount off the project cost.
The results from the NMTC program to date are impressive, to say the least. Since 2001, NMTCs have generated more than $44.4 billion in investments in low-income communities and businesses. NMTC awards have generated $8.00 of private investment for every $1.00 invested by the federal government, resulting in the creation or retention of more than 750,000 jobs and the construction or rehabilitation of more than 190 million square feet of commercial real estate.