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CDFI Fund announces $5 billion for New Markets Tax Credit allocation awards
September 2021
In brief
Approximately every 15 months the US Department of the Treasury, through the Community Development Financial Institutions (CDFI) Fund, awards allocation authority to Community Development Entities (CDEs). These CDEs act as intermediary vehicles for the issuance of awards and loans to businesses located in distressed communities.
Companies that secure a new location, expand a current location, and/or invest in new assets in conjunction with job creation may find potential value available through the round 17 New Markets Tax Credit (NMTC) program. Benefits include up-front cash via forgivable loans for real estate or operational projects.
[CDFI Fund Announces $5 Billion in New Markets Tax Credits, Community Development Financial Institutions Fund (9/1/21)]
The takeaway: The round 17 NMTC program offers businesses the potential to receive between 10% to 25% return on investment (ROI) in the form of cash benefits for qualified projects, with the objective of encouraging development in severely distressed areas and increasing project ROI.
In detail
Allocation awards
The CDFI Fund announced on September 1 the Round 17 NMTC allocation awards, giving each of 100 CDEs a share of the $5 billion allocation announcement.
Working with CDEs
Funded CDEs target projects in various industries located in qualifying distressed locations. Eligible project types include community centers, manufacturing, healthcare, healthy foods/grocery, renewable energy, mixed-use projects, or projects that help create or maintain jobs in the area while making a positive community impact.
Observation: While projects in all states are eligible to receive funding under the program, for this round many CDEs may focus on projects located in areas declared underserved by CDFI, including Florida, Georgia, Kansas, Nevada, New Mexico, Tennessee, Texas, Virginia, West Virginia, Wyoming, and Puerto Rico. Note that Idaho loses its underserved designation for Round 17.
Navigating the competitive and complex process of securing NMTC allocations requires careful attention. Among many considerations, businesses must:
- determine business and location eligibility
- analyze the impact of the project in the community
- identify available allocation from CDEs at both the federal and state level
- structure and finance projects.
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