New Markets Tax Credit (NMTC) Program authorized
by Congress in 2000 for the purpose of encouraging capital investment
in low income communities. It permits taxpayers to receive a credit
against federal income taxes for making qualified equity investments
in designated Community Development Entities (CDEs). Substantially
all of the qualified equity investment must in turn be used by the
CDE to provide investments in low-income communities.
The credit to the investor is equal to 39 percent of the cost of
the investment and is claimed over a seven-year period. In each
of the first three years, the investor receives a credit equal to
five percent of the total amount of the investment, and in each
of the final four years, the investor receives a credit of six percent.
Investors may not redeem their investments in CDEs prior to the
end of the seven-year period.
NMTC Program is administered by the CDFI Fund in the US Treasury
Department. Since the NMTC Program's inception, the CDFI Fund
has made 749 awards allocating a total of $36.5 billion in tax credit
authority to CDEs through a competitive application process. This
includes $1 billion of special allocation authority to be used for
the recovery and redevelopment of the Gulf Opportunity Zone.