Summary of the U.S. Treasury Department’s New Markets Tax Credits Program and the Benefits of working with the CDE Inventive Development, Inc. on Investments

The New Markets Tax Credit (NMTC) Codified in Section 45D of the Internal Revenue Code, was enacted in 2000 with the goal of stimulating economic and community development and job creation in low-income communities. NMTCs encourages private capital investment in low-income communities and is administered by the US Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund).  NMTCs are allocated on an annual basis to applicants that qualify and are certified as Community Development Entities (CDEs). Since 2000 well over $20 billion dollars in NMTCs have been awarded for projects across the country with over half being real estate projects.

NMTCs are equal to 39% ($.39 of every $1.00) of the Qualified Equity Investment with a portion claimed by the investor each year over a seven-year NMTC compliance period. (i.e. 5% in years 1-3 and 6% in years 4-7). Unlike Rehabilitation and Low-Income Housing Tax Credits, State involvement is not necessary, and NMTCs hold a shorter compliance period and is are dependent on the capitalized expenditures on the underlying real property, but rather is solely a function of the amount of the QEI. A NMTC investor need not own an interest in the owner of the underlying real property being developed. CDEs are responsible for compliance during the life of the investment and have a federally mandated 3% management fee to manage credits (*in addition to any private equity or fees paid to the CDE).

NMTCs may only be used for investments in projects that meet the geographic criteria of a federally designated Low Income Community defined as a census tract with a poverty rate of more than 20% or a median family income of less than 80% of the applicable area median income. NMTCs must also go into what are called Qualified Equity Investments (QEIs), which is the equity investment in a CDE that triggers the availability of the NMTC to the equity investor. CDEs must use substantially all the proceeds of a QEI to make Qualified Low-Income Community Investments (QLICIs), within 12 months of receipt. A QLICI is an equity investment in, or a loan to, a Qualified Active Low Income Community Business such as a corporation, partnership or LLC qualified to receive QLICIs.

TMI & Partners, Ltd has developed a partnership with  Inventive Development, Inc. (IDI) is a Certified Community Development Entity (CDE) with a “national scope” of interest which allows the company to make investments anywhere within the 50 States and U.S. Territories. This means that IDI has the authority to apply for, and or secure from other CDEs, NMTCs for application into investments. The principals of IDI bring a wide and diverse array of sophisticated transactional business, executive level Federal, State and local government and international trade experience. IDI is a project developer in the trade finance, industrial, commercial and residential sectors.  IDI conducts business in the NMTC arena as either an investment partner and/or a fee for services consultant. Routinely projects require a hybrid of both approaches to attain success.

NMTC Fact Sheet

New Markets Tax Credits (NMTC) Interactive Map