Looking Ahead: Popular Types of Transactions for NMTC Investors
The types of transactions that are popular for New Markets Tax Credits (NMTC) investors have changed over time. For instance, five years ago, charter schools were an extremely lucrative and common form of NMTC investment. However, with significant increases in political regulations, charter schools as NMTC investments have become less popular in recent years. Here is a look ahead with what some investors believe may be popular types of transactions for NMTC investors in 2022.
Racial Equity Transactions – Increasing social unrest and high-profile media attention to cases such as the killing of George Floyd over the past few years have led many investors to focus on racial equity as a major interest. As a result, investors are increasingly demanding investments that focus on supporting minority-owned businesses or developing communities with large minority populations. The idea behind racial equity transactions is for NMTC investors to focus their capital investments toward the advancement of historically disadvantaged groups, including Black, Hispanic, Asian-Indian, Asian-Pacific, and Native American populations.
Manufacturing Businesses – The NMTC program can support the creation and expansion of manufacturing businesses in low-income or economically-disadvantaged communities. Tax credits are useful in building new facilities or expanding existing facilities, creating jobs, and fostering economic growth. The development of shared industrial spaces and business incubators also can contribute to manufacturing businesses that benefit these communities.
Healthcare, Community Health, and Health Care Services – The COVID-19 pandemic has brought healthcare and healthcare services to the forefront of many people’s minds. As a result, investors have become increasingly interested in using NMTCs to fund various healthcare initiatives, including neighborhood and community health centers, family health centers, federally qualified health care facilities, and similar entities. In addition, the NMTC program can provide incentives for investors to build or purchase new buildings and expand or repurpose existing buildings to provide new or additional healthcare services to more underserved populations. These projects include both medical and behavioral health services.
Overall, investors are looking for community-driven, focused projects ready to begin at a moment’s notice. Projects should be able to articulate their goals and specifically explain how they are going to achieve those goals and how those goals will impact the surrounding community. Furthermore, since it is unclear when the next round of NMTC awards will occur, projects that are ready to go when the awards do occur may have an advantage for investors who are ready and willing to invest.
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Savage & Associates is an economic development law firm providing sophisticated legal and business advice to clients interested in making significant changes in their communities. We advise developers, investors, nonprofit organizations, entrepreneurs, and anyone looking to effectuate change. You can contact our offices by calling 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. to discuss your ideas with us. You can also find Savage & Associates online 24 hours a day, seven days a week, to get more information about the innovative financial tools that we can use to make your vision a reality. From New Markets Tax Credits to Historic Tax Credits, we can design the unique transaction best designed to achieve your objectives.