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New Markets Tax Credits (NMTC)

A federal tax credit program designed to generate private-sector capital investment in low-income areas for projects that develop communities, stimulate economic growth, and create jobs.

BACKGROUND

The New Markets Tax Credit (NMTC) program is a federal tax credit program designed to generate private-sector capital investment in low-income areas. The program permits individual and corporate taxpayers to receive credit against their federal income taxes for making qualified equity investments in projects that finance community development, stimulate economic growth, and create jobs.

ELIGIBILITY

An applicant must demonstrate that its proposed project will provide long-term benefits to the low-income community. The applicant and/or project must also be located in an eligible census tract. Priority will be given to projects located in census tracts that have a poverty rate of greater than 30%, area median income of less than 60% of the metropolitan statistical area, and unemployment rate of more than 1.5 times the national average.

USES

Appropriate uses of funds include:

  • Property acquisition, if associated with substantial renovation or new construction;
  • New building construction or substantial renovation;
  • Machinery & equipment, if associated with growth, new construction, or substantial renovation; and
  • Working capital, if associated with business growth, new construction, or substantial renovation.

FINANCING

NMTC financing consists of an equity investment from an investor and a loan from a third party lender (Leverage Lender) on a non-recourse basis funded into an Investment Fund. The Investment Fund is used to make Qualified Low-Income Community Investments (QLICIs), in the form of loans, to a Qualified Active Low-Income Community Business (QALICB, Borrower).

PROCEDURE

An applicant must submit an eligibility application including detailed information on how its project will benefit the low- income community. Eligible applicants will then submit detailed project information for PIDC’s final review. The application process is competitive and PIDC will approve those applications that best meet the goals of its NMTC program.

FEES

An Application fee equal to $500 payable at the time of application submission-nonrefundable. An origination fee equal to 3.0% of the allocation. A Program administrative fee up to 0.5% of the allocation per year over seven years. An exit fee equal to 2% of allocation and Direct expenses, including legal, accounting fees and closing costs.

Fees are subject to change. Please confirm all transaction fees with PIDC prior to application.



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