$5 Billion New Markets Tax Credit Allocation to Boost Economic Development in Underserved Communities

The U.S. Department of the Treasury's Community Development Financial Institutions (CDFI) Fund has taken a significant step towards revitalizing underserved communities across the nation with the announcement of a $5 billion allocation in New Markets Tax Credits (NMTC) for the 2023 calendar year. This initiative is designed to stimulate economic development and job creation in areas that have historically been left behind in terms of investment and economic opportunities.

With 104 Community Development Entities (CDEs) across 35 states, Puerto Rico, and the District of Columbia receiving these tax credits, the program is set to make a substantial impact. Notably, $1.2 billion of the total allocation is earmarked for rural America, and at least 85 percent is directed towards severely distressed communities. This targeted approach underscores the program's commitment to addressing the needs of the most vulnerable populations.

The NMTC program has a proven track record of success, having leveraged over $135 billion in total capital investment and created more than 1.2 million jobs since its inception in 2000. The program has financed a wide range of projects, including nearly 3,000 community services and facilities such as hospitals, schools, and daycare centers, significantly improving the quality of life in low-income areas.

Despite its achievements, the demand for NMTCs far exceeds the available supply, with 196 CDEs applying for $14.7 billion in tax credits against the $5 billion awarded. This disparity highlights the critical need for continued investment in underserved communities. Advocates are now pushing for the NMTC program to be made permanent, with bipartisan support in Congress through the New Markets Tax Credit Extension Act.

The NMTC program offers a 39 percent federal tax credit over seven years for investments in qualifying census tracts, incentivizing private sector participation in community development. As the program faces potential expiration in 2025, its extension is seen as vital for sustaining economic growth and reducing disparities in underserved communities across the United States.