In a Notice of Allocation Availability, the Treasury's Community Development Financial Institutions Fund (CDFI Fund) announced on May 23, 2019, an allocation of up to $3.5 billion for the calendar-year 2018 round of the New Market Tax Credit (NMTC) program.

Background

Congress established the NMTC Program in 2000 to permit individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in community development entities (CDEs). The credit totals 39 percent  of the investment and may be claimed by the investor over seven years. The CDE must use substantially all the investment to make qualified investments in low-income communities. Treasury's CDFI Fund, which selects successful applicants, has allocated $57.5 billion in tax credit allocation authority through the New Markets Tax Credit Program.

2019 awards

The 73 CDEs receiving awards this year were chosen from a pool of 214 applicants and are headquartered in 35 states, Puerto Rico and the District of Columbia. The CDFI announcement states that these award recipients are anticipated to make more than $682 million in NMTC investments in non-metropolitan counties, approximately 20 percent of which will be made in rural communities.

Other resources

For additional information, the CDFI announcement refers interested parties to the NMTC Award Book and allocation application.

For more information on the NMTC program, review the program fact sheet and visit www.cdfifund.gov/nmtc. For more on the CDFI Fund, review its fact sheet and visit www.cdfifund.gov

Implications

First, congratulations are due to all 73 successful CDEs. Second, now that the award has been announced, CDEs will be further evaluating the pipeline of potential projects. Taxpayers that have projects and could benefit from an NMTC allocation should consider reaching out to CDEs that received awards, as the CDEs seek to finalize their pipelines quickly once their allocation is awarded. CDEs are expected to focus on projects that are in significantly distressed census tracts. Some of the themes coming out of this current round of awards include the following:

• 72 out of the 73 successful CDEs have committed to providing at least 75 percent  of their investments in areas that have (i) multiple indicia of distress; (ii) significantly greater indicia of distress than required by NMTC Program rules; or (iii) high unemployment rates
• 49 percent  or 36 CDEs must deploy approximately $682 million into non-metropolitan projects
• Approximately 76 percent  or $2.6 billion of NMTC investment will likely finance operating projects in low-income communities
• Approximately 24 percent  or $809.1 million of NMTC investment will likely finance real estate projects in low-income communities

Although no timetable has been set, the application round historically opens one to three months after the release of awards. Existing CDEs and those that may want to set up a CDE should start considering their options and begin planning for the 2019 application. Also, taxpayers that have upcoming projects in 2020 and need assistance financing the project, should consider NMTC financing and present the project to a CDE for potential pipeline inclusion in the CDE's 2019 application.

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