Blog

Certifying Eligibility for NMTC Allocations

If you want to receive a New Markets Tax Credits (NMTC) allocation, your organization must be an eligible community development entity (CDE), which is a domestic corporation or partnership that is an intermediary vehicle for loans, investments, or financial counseling in low-income communities (“LICs”).

 The Community Development Financial Institutions (CDFI) Fund certifies domestic corporations or partnerships as CDEs if their applications meet the requirements. While only CDEs may apply for an NMTC allocation, CDEs or organizations with a pending CDE certification application are eligible to apply for an NMTC allocation.

Organizations may submit CDE Certification Applications at any time, except when specific deadlines apply to an open application period for the New Markets Tax Credit Program (”NMTC Program”). Entities designated as a Specialized Small Business Investment Company (SSBIC) by the Small Business Administration automatically qualify as CDEs.

A primary portion of the application determines whether an area served by the development is low-income, or underserved. Basic eligibility requires project development in a census tract with income at or lower than 80 percent area median income or poverty to be greater than 20 percent.

The application must demonstrate that the applicant meets each of the following requirements to become certified:

• *At the time of application, the organization is a legal entity;
• *The organization has a primary mission of serving low-income communities (LICs); and
• *The organization maintains accountability to its targeted LICs.

Once a certified CDE is awarded an allocation of NMTCs, it may offer these NMTCs for sale to investors.

An Example of How the Tax Credit Works

*The CDFI Fund awards a tax credit allocation of $1 million to a CDE.

*The CDE offers the tax credit to a single investor in exchange for a $1 million equity investment.

*This generates a $50,000 credit annually for the first three years and a $60,000 credit annually for the final four years. The total credit value over 7 years is $390,000.

Let’s Work Together to Develop our Communities

If you want to learn more about NMTCs, contact Savage & Associates at 215.880.9441 in Philadelphia, or 202.817.3941 in Washington D.C. to arrange a consultation. Dionne Savage can assist you to gain access to the benefits provided by the New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, Historic Tax Credits, and other vital economic development tools that benefit local communities throughout the United States. Visit our website at Savage & Associates 24 hours a day, seven days a week for more information.