An Introduction to the New Markets Tax Credit

November 8, 2023

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Are you a non-profit organization with a desire to make positive changes through construction projects in your local low-income communities? Unfortunately, you may find it difficult to establish investors for your efforts. This is where the New Markets Tax Credit (NMTC) Program can help. At Moran Consultants, we have experience with numerous projects that use tax credits to further their community renewal. This includes the New Markets Tax Credit, Historic Tax Credits, and Low Income Housing Tax Credits. Here is an introduction to the NMTC program. Learn how it could benefit your project and how Moran Consultants can help you to protect your project and investment from inherent risks.

What Is the New Markets Tax Credit, and How Does It Work?

A New Markets Tax Credit is often beneficial for non-profits and community development groups who want to bring service to lower-income areas. This tax credit can help developers increase the flow of capital during challenging construction projects. It does so by attracting the aid of private investors with a tax incentive. The New Markets Tax Credit Coalition states that this credit is available to expand businesses, revitalization projects, and community centers.

“The NMTC is an important source of financing for businesses and community facilities in America’s most distressed rural and urban communities. Congress authorized the NMTC in 2000 to bring down the cost of capital in communities outside of the economic mainstream. Taxpayers receive a 39 percent tax credit (taken over seven years) for qualified investments into Community Development Entities (CDEs), organizations with a tax record of loans and investments in underserved areas.”

This tax credit promotes the revival of economically distressed communities. As investors make equity investments, they receive moderate tax credits for their support. Community development entities can then use these investments to breathe life into local businesses, daycares, real estate projects, and more. Thanks to the NMTC program, investors are incentivized to invest in community rehabilitation. This in turn gives businesses access to affordable financing. And, it supports construction projects that help to renew low-income areas.

How Could Your Project Benefit From a New Markets Tax Credit?

A New Markets Tax Credit may aid in offsetting your project costs. This can help in restoring community centers, reviving vacant establishments, and preserving historic buildings. To qualify for a New Markets Tax Credit, your CDE must first be certified by the Community Development Financial Institutions Fund (CDFI). Applicants must be legal entities, dedicate themselves to serving low-income communities, and maintain accountability to their residents. If these requirements are met, your CDE can apply for certification.

Let Us Help Protect Your Investment

Moran Consultants has years of experience working with projects funded through tax incentive programs like the New Markets Tax Credit. If you are an investor, we can help you understand the nuances of the NMTC program and protect your investment. Give us a call at 866-545-3350 to get started, or send us a message through our website. Our team of consultants is ready to help you navigate project complexities, identify issues, and determine fast solutions. Let us know more about your project to see how our specialists can take care of your construction consulting needs!

Headshot of Tim Amorello