New Markets Tax Credit financing

The New Markets Tax Credit (NMTC) program is run by the CDFI Fund, part of the US Treasury, with the IRS. The CDFI Fund awards tax credits, in a yearly competition, to Community Development Entities (CDEs): certified lenders and investors whose mission is serving low-income communities. A CDE offers the credits to investors, who put money into the CDE in return. Each investor gets a federal tax credit worth 39% of what it put in, claimed over seven years (5% a year for three years, then 6% a year for four).

The CDE then lends to or invests in businesses in low-income communities, passing on the benefit as better terms. The CDFI Fund says about 95% of these investments have terms better than the market, such as lower interest rates, subordinated debt, lower fees, higher loan-to-value, lower debt service coverage requirements and longer terms.

You do not apply to the CDFI Fund. A business goes to a CDE that has an award. The CDFI Fund's searchable awards database lists them by state, and its latest QEI issuance report shows which still have credits left to use. Demand far outstrips supply, so expect competition for each CDE's credits.

Who qualifies: a "qualified active low-income community business," in a census tract that counts as a low-income community (a poverty rate of at least 20%, or median family income no more than 80% of the area's; the CDFI Fund's mapping tool shows each tract). At least half its gross income must come from business there, and at least 40% of its property use and of its employees' services must be there. The CDFI Fund gives examples: an operating business such as a manufacturer or grocery store, commercial or mixed-use real estate, and community facilities such as charter schools and health centers. Some kinds are excluded: residential rental property, golf courses, country clubs, gambling facilities, racetracks, massage parlors, hot tub and suntan facilities, some farming businesses, and stores mainly selling alcohol to take away.

Seven years: the investor's credits can be taken back if, during the seven years, the money stops qualifying, for example if your business no longer meets the tests above. So the CDE will want you to stay qualified, and to report to it, for the whole period.

Congress made the program permanent in 2025, at $5 billion of credits a year. Applications from CDEs for the latest round closed on November 10, 2026, with awards expected in fall 2027.