New Markets Tax Credit Program
The New Markets Tax Credit Program stimulates economic and community development and job creation in the nation’s low-income communities by attracting investment capital from the private sector.
The NMTC Program provides tax credits to investors who make “qualified equity investments” (QEIs) in investment vehicles called CDEs. CDEs are required to invest the proceeds of the qualified equity investments in low-income communities. Low-income communities are generally defined as those census tracts with poverty rates of greater than 20 percent and/or median family incomes that are less than or equal to 80 percent of the area median family income.
The credit provided to the investor totals 39 percent of the investment in a CDE and is claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not redeem their investments in the CDEs prior to the conclusion of the seven-year period.