The New Markets Tax Credit (NMTC) is a federal tax incentive program that was authorized by Congress in 2000 to help spur investment in businesses that are located in low-income communities. The NMTC is intended to have the same type of positive influence on business and economic development that the Low Income Housing Tax Credit has had on the construction of affordable housing.
NMTC loans and investments generally must remain outstanding for seven years. The New Market Tax Credit is a “location-based” incentive, therefore a business venture qualifies for the credit based on their location, rather than their business activity.
A 20% credit is available for the rehabilitation of historical buildings and a 10% credit is available for non-historic buildings, which were first placed in service before 1936.
New Market Tax Credit Requirements
All loans made under the NMTC program must meet certain program and location eligibility guidelines. For all loan and investment requests, the business must be located and operational in specially targeted low-income communities as defined under the NMTC program. The types of real estate projects to consider under this program include:
- Multi-tenant office buildings
- Grocery and/or shopping centers
- Owner-occupied properties
- Retail distribution centers
- Business and office parks
- Single-site manufacturing facilities
- Mixed-use developments (retail/office/residential)
- Charter schools, childcare centers and other community facilities.