Preservation-Based Community Development with New Markets Tax Credits

NTCIC supports community development and economic growth in low-income communities (LICs) through the adaptive reuse and rehabilitation of historic buildings. An affiliate of the National Trust for Historic Preservation, NTCIC has provided over $1.6 billion in capital to over $6 billion in tax credit investments, including New Markets Tax Credits (NMTC).

Our NMTC allocation finances historic rehabilitation projects in distressed LICs to create an impact that is in line with our preservation-based community development mission. We do this by combining NMTC and Historic Tax Credits (HTC) to attract private investment capital for underserved areas. As a certified Community Development Entity (CDE), we have received $633 million in NMTC allocation and supported nearly 100 high-impact rehabilitation efforts in the U.S. These projects have created more than 30,000 jobs, provided 2,000 units of housing, and revitalized over 9 million square feet of historic buildings.

WE SPECIALIZE IN NEW MARKETS TAX CREDIT INVESTING
With this year’s award, we will prioritize deploying our NMTC allocation to real estate projects that:
  • Rehabilitate historic buildings in “severely distressed” LICs
  • Are at least $5 million in total development costs
  • Support small business growth, incubation, and revitalization
  • Include mixed-income and affordable housing opportunities
  • Support community facilities that provide healthcare, education/workforce training, or services for children
Impact Goals Of Our New Markets Tax Credit Investments
  • Create quality and accessible jobs in low-income communities
  • Offer flexible lease rates to businesses within low-income communities - particularly small businesses affected by the global pandemicSupport investments that engage, support, and uplift local BIPOC communities, businesses, and issues.
  • Improve access to healthy and affordable food options within low-income communities
  • Catalyze additional private investments in the low-income communities we invest in by achieving success within them

HOW DOES THE NEW MARKETS TAX CREDIT WORK?

Qualified Community Development Entities (CDEs), organizations such as NTCIC, apply to the CDFI Fund for an award of New Markets Tax Credit allocation. If successful, these CDEs seek out private and corporate investors to make a Qualified Equity Investment (QEI) in the CDE in exchange for the ability to claim the NMTC. The CDE must then use the equity provided by the investor to make Qualified Low-Income Community Investments (QLICIs), such as a real estate loan, to a Qualified Active Low-Income Community Business (QALICB) in low-income communities. The taxpayer will be eligible to claim a tax credit equal to 5 percent of its equity investment in the CDE for each of the first three years and a 6 percent credit for each of the next four years (39 percent total).

What Makes A Low-Income Community Eligible for New Markets Tax Credits

NMTC eligibility is location-, need-, and use-based, unlike the HTC in which just the building must be eligible. Generally speaking, for a project to be considered an eligible QALICB, it must be located in and serve an LIC and experiencing investment challenges.

What Locations are Eligible for NMTCs? +

A project must be located in a qualified census tract that meets the determination of a Low-Income Community (LIC). The NMTC program defines Low-Income Communities as census tracts:

  • Where the poverty rate is at least 20%; or
  • Where the median family income does not exceed 80% of the area median family, or
  • Where the median family income does not exceed 85% of the area median family income provided the census tract is located in a high migration rural county; or
  • Where the census tract has a population of less than 2,000 and is contained within a Federally designated Empowerment Zone and is contiguous to at least one other LIC.
How does NTCIC determine a project’s need for NMTCs? +

The NMTC is meant to provide flexible and accessible capital to projects and businesses that are ineligible or unable to secure traditional financing to complete the project. As such, CDEs will review a project’s current financials to determine that “but for” (without) New Markets Tax Credit financing, the project/investment would not be feasible. Ways projects can show their need for NMTCs include:

  • Attempts to secure traditional investments
  • Existing financing gaps
  • Ongoing and extended fundraising needs
  • Limited debt service capabilities
What Project Uses are Eligible/Ineligible for NMTCs? +

The NMTC program is flexible regarding the types and purpose of projects. QLICIs can be used to finance:

  • A real estate investment that develops or rehabilitates a building to bring new commercial, industrial, retail, and/or housing opportunities to an LIC.
  • Commercial/manufacturing equipment purchases to enhance operations and create new job opportunities.
  • Supporting entrepreneurs and new/existing operating businesses by providing flexible and patient loans.
  • However, many CDEs seek investments in projects that also support their individual missions, such as those that provide vital goods and services, create jobs, or spur further investment in LICs.

Ineligible activities for NMTC investment include:

  • Residential rental properties
    • The income produced by the residential portion of an NMTC-eligible project can be no more than 80% of the total income generated.
  • Certain businesses such as:
    • Golf courses, race tracks, massage parlors, hot tub facilities, gambling facilities, country clubs, tanning salons, and stores where the principal business is the sale of alcohol for off-site consumption
What types of projects does NTCIC finance with its NMTC allocation? +

NTCIC will use its NMTC allocation to offer debt products to real estate projects that rehabilitate strategic historic properties located in Severely Distressed communities whose primary use provides direct benefits to low-income persons and locally-owned small businesses. For more information on our NMTC portfolio, contact info@ntcic.com

What is NTCIC’s Involvement in the New Market Tax Credit Program?

Community Development Entities have unique investment strategies and areas of focus. Some CDEs focus their deployment efforts in particular communities or cities, while others focus on particular investment types, such as real estate investments, or operating businesses.

As a CDE, NTCIC has the authority to offer New Markets Tax Credits to our investors in exchange for equity in real estate development projects located in low-income communities that fit NTCIC’s investment criteria.

Using the capital from our investors’ equity investments, we make loans and investments to historic preservation and adaptive reuse efforts in low-income communities at substantially better rates and terms with more flexible features than the market typically offers. These investments support project tenants by reducing rent pricing, providing capital for programming, or purchasing equipment. We work with our investment partners, project developers, and the local community to set, measure, and track project community impacts such as job creation, job quality and accessibility, program participation, and overall community support.

New Markets Tax Credits Helps

New Markets Tax Credits provide substantial support and impacts to:
Communities
New Markets Tax Credits enable NTCIC and our investment partners to support a variety of projects that support manufacturing, food, retail, housing, health, technology, energy, education, and childcare in low-income communities. This in turn provides jobs as well as improved access to community facilities and commercial goods and services within these communities.
Nonprofits, Small Businesses, & Mission-Oriented Developers
NTCIC’s NMTC investments are made in projects that are ineligible, unqualified, or have otherwise exhausted opportunities for traditional financing. NMTC investments provide non-traditional and flexible terms compared to conventional financing to ensure borrowers and tenants of the revitalized space receive investment benefits such as below-market rents and lowered interest rates.
Investors
In exchange for investing in NTCIC selected projects, our investors are awarded credits against their federal tax obligations. They can claim their allotted tax credits over seven years for a total of 39% of the New Markets Tax Credit project.

States NTCIC Serves

As a CDE, NTCIC can make investments in all 50 states, the District of Columbia, Puerto Rico and certain U.S. territories.

New Markets Tax Credit Map

The Impact of the New Markets Tax Credit Program

$8 for $1

Generated $8 of private investment for every $1 of federal funding

281 MIL

Created 218 million sq. ft. of manufacturing, office and retail space

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