The New Markets Tax Credit (NMTC) was established in 2000. Congress authorizes the amount of credit, which the Treasury then allocates to qualified applicants. From 2003 through 2020, the program has parceled out credits worth $26 billion (in 2020 dollars). The NMTC has supported more than 5,300 projects in all 50 states, the District of Columbia, and Puerto Rico through program year 2016. Some 43 percent of the US’s roughly 73,000 census tracts qualify for NMTC investments; by 2016, approximately 3,400 had received NMTC projects. In recent years, all applicants have pledged to place at least 75 percent of their NMTC projects in “severely distressed” census tracts. The credit is currently set to expire in 2021, though Congress has extended it several times over its lifetime.

HOW DOES THE CREDIT WORK?
NMTC investors provide capital to community development entities (CDEs), and in exchange are awarded credits against their federal tax obligations. Investors can claim their allotted tax credits in as little as seven years—5 percent of the investment for each of the first three years and 6 percent of the project for the remaining four years—for a total of 39 percent of the NMTC project. A CDE can be its own investor or find an outside investor. Investors are primarily corporate entities—often large international banks or other regulated financial institutions—but any entity or person is eligible to claim NMTCs.