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CDFI Fund announces “Round 20” allocations for New Markets Tax Credits
September 2024
In brief
What happened?
The US Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund on September 19 announced $5 billion in New Markets Tax Credit (NMTC) allocations intended to spur investment and economic growth in low-income urban and rural communities. This constitutes the 20th round of NMTC allocations to such communities. [Community Development Financial Institutions Fund announcement, 9/19/2024]
Why is it relevant?
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 this Round 20 announcement of the NMTC program. Benefits include up-front cash via forgivable loans for real estate or operational projects.
Actions to consider
The Round 20 NMTC program announcement offers businesses the potential to receive between 10% to 20% or more 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
The US Department of the Treasury, through the CDFI Fund, awards allocation authority to Community Development Entities (CDEs). These CDEs act as intermediary vehicles for awards and loans to businesses in distressed communities.
Applications
The CDFI Fund announced that it received 196 applications from CDEs for Round 20 of the NMTC program. The applicants requested an aggregate of $14.8 billion in benefit allocation.
Allocation awards
The full allocation award of Round 20 was announced on September 19. Out of the 196 applications received, 104 CDEs received awards. It is estimated that these award recipients will make nearly $1.19 billion in NMTC investments in nonmetropolitan counties and $3.79 billion in metro areas.
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.
Underserved states
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 Arizona, California, Colorado, Florida, Kansas, Nevada, North Carolina, Texas, Virginia, West Virginia, and Puerto Rico. Note that Tennessee is not considered underserved for Round 20 allocation.
Observation: 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, and
- structure and finance projects.
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