U.S. Treasury Awards $5 Billion in New Markets Tax Credits to Boost Economic Development in Underserved Areas

The U.S. Department of the Treasury's CDFI Fund has announced the allocation of $5 billion in New Markets Tax Credits (NMTC) for the 2023 calendar year. This significant investment is set to bolster economic development in underserved communities across the nation, with 104 Community Development Entities (CDEs) receiving allocations. The recipients span 35 states, Puerto Rico, and the District of Columbia, highlighting the program's broad reach.

The NMTC program, established in 2000, has been a crucial tool for attracting private investment to low-income areas. Bob Rapoza, spokesman for the NMTC Coalition, emphasized the program's success, stating that it has leveraged over $135 billion in total capital investment and created more than 1.2 million jobs through public-private partnerships.

Of particular note is the CDFI Fund's estimate that $1.2 billion, or more than 20 percent of the allocations, will be directed to rural America. Additionally, at least 85 percent of the total $5 billion is earmarked for severely distressed communities, underscoring the program's focus on areas most in need of economic stimulus.

The demand for these tax credits far outstrips the supply, with 196 CDEs applying for a total of $14.7 billion in credits. The 104 successful applicants represent only 53 percent of the total applications, indicating a significant unmet need for investment in low-income communities across the country.

Since its inception, the NMTC program has financed over 8,500 projects, including nearly 3,000 community services and facilities such as hospitals, schools, and daycare centers. These investments have brought vital services to areas that previously lacked access to quality facilities.

While the program was extended through 2025 at $5 billion in annual credit authority, its future beyond that date remains uncertain. Bipartisan legislation has been introduced in both the U.S. Senate and House to make the NMTC a permanent part of the Internal Revenue Code, which would provide long-term stability for this important economic development tool.

The impact of the NMTC program on local communities has been substantial. By providing a 39 percent federal tax credit over seven years for investments in qualifying census tracts, the program has successfully channeled capital into areas with high poverty rates or low median family incomes. This influx of investment has been crucial in creating jobs, increasing economic opportunities, and improving lives in marginalized communities.

As the nation continues to face economic challenges, particularly in underserved areas, the NMTC program stands out as a proven mechanism for driving economic growth and community development. The potential for its permanence could signal a long-term commitment to addressing economic disparities and fostering sustainable development in America's most vulnerable communities.