The New Markets Tax Credit program was initially introduced back in 2000. This was just one part of a much larger plan to revitalize low-income and impoverished communities within the US (and its’ territories). It is known as the Community Renewal Tax Relief Act of 2000. Originally intended as a temporary solution, the program was approved for an extension earlier this year. This new program extension is reportedly going to be permanently available.
The highest priority of the NMTC is to incentivize private investors to support and facilitate the revitalization of economically disadvantaged areas. As noted by the Community Development Financial Institutions US Department of Treasury site, “Historically, low-income communities experience a lack of investment, as evidenced by vacant commercial properties, outdated manufacturing facilities, and inadequate access to education and healthcare service providers”. After a great deal of thought, calculation, and bureaucracy, the CDFI worked out the NMTC program.
How the New Markets Tax Credit Program Actually Works
Both individuals and corporate investors are encouraged to make equity investments in Community Development Entities. The incentive for doing so is a tax credit of 39% of the original equity investment made. Rather than being an immediate return, it is applied over a standard 7 fiscal years.
As a small business owner, you could stand to benefit from this program. But first, you have to qualify as a Community Development Entity. Have questions about your eligibility to receive NMTC enhanced funding or available funding? The CDFI has a handy resource page that can help!
Who Stands to Benefit the Most from This Program?
According to the NMTC Coalition, “The most popular use of the NMTC in rural America is to support the manufacturing sector. NMTC financing typically goes to business expansions, new equipment and facilities, and working capital”. Thus far, the NMTC program has helped finance more than 5 billion dollars for manufacturing projects.
This isn’t to say that the NMTC program is only meant for the manufacturing sector. So far the program has contributed to roughly 178 million sq./ft. of office, retail, and manufacturing space. Nearly 6,000 businesses have found financing with NMTC so far.
You could be next! Just make sure that you have everything in order before applying. Don’t forget, that includes your books, your business plan, etc…