The Senate Finance Committee's version of the tax reconciliation bill, released on June 16, 2025 (the Bill), would permanently extend the New Markets Tax Credit (NMTC), which was due to expire at the end of 2025.

The NMTC program, administered by Treasury's Community Development Financial Institutions (CDFI) Fund, was established in December 2000 by Congress. The program was designed to encourage investment in operating businesses and real estate projects in low-income communities. It allows individual and corporate investors to receive a tax credit against their federal income tax for making qualified equity investments in investment vehicles called CDEs. An investor's credit totals 39% of the investment in a CDE and is claimed over seven years. Most transactions are structured so that one party gets the credit and the project benefiting the low-income community receives a forgivable loan. A CDE must use substantially all of the investment to make qualified investments in low-income communities (see Tax Alert 2023-1586).

The Bill would amend IRC Section 45D(f)(1)(H) to change the provision ending the NMTC in 2025. Instead, the language would read that the NMTC limitation is $5b for each calendar year after 2019.

The House-passed bill did not mention the NMTC.

Implications

Historically, the program has gone through cycles of expiration and extension. If the NMTC permanence in included in the final legislation, industry participants and those hoping to benefit from NMTC financing for their projects will have an easier time making the type of long-term planning that is often required for these types of transformative investments.