THE NEW MARKETS TAX CREDIT PROGRAM

The New Markets Tax Credit (NMTC) Program was authorized by Congress in 2000 for the purpose of encouraging capital investment in low income communities.  It permits taxpayers to receive a credit against Federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). Substantially all of the qualified equity investment must in turn be used by the CDE to provide investments in low-income communities. 

The credit to the investor is equal to 39 percent of the cost of the investment and is claimed over a seven-year period. In each of the first three years, the investor receives a credit equal to five percent of the total amount of the investment, and in each of the final four years, the value of the credit is six percent.  Investors may not redeem their investments in CDEs prior to the end of the seven-year period.

The NMTC Program is administered by the CDFI Fund in the US Treasury Department.  During the life of the program, the CDFI Fund has been authorized to allocate authority to CDEs to issue up to $16 billion in equity to investors who can claim NMTCs.  This includes $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone.

Through 2006, the Fund had made 233 awards totaling $12.1 billion in allocation authority.