The Community Development Financial Institutions Fund (CDFI Fund), which comes under the U.S. Department of the Treasury, released a report of its New Markets Tax Credit (NMTC) allocation awards made in 2012.
As per the report, the Treasury is providing 85 organizations from 28 states and D.C. a total of $3.5 billion under the tenth round of the NMTC program.
NMTCs were created in Dec 2000 to incentivize investment projects in low-income and distressed communities
Corporate and individual investors are provided federal income tax credits worth 39 percent of equity investments made in community development entities (CDEs), to be claimed over a seven year period.
Each dollar invested into NMTC by the federal government generates another eight dollars in private investment.
In 2012, 282 CDEs applied to the CDFI Fund, requesting $21.9 billion in NMTCS. Out of this pool of applicants, 85 CDEs were selected in a competitive process and awarded $3.5 billion (16 percent of total requested).
The awards range in size from a minimum of $15 million to a maximum of $80 million, with the average allocation amount being $41.2 million.
Thirteen of the 85 CDEs were government controlled entities and their subsidiaries, which together received $420 million. Another 26 were Community Development Financial Institutions (CDFIs). Eight were real estate developers who received a total of $260 million.
Deborah La Franchi, co-founder and president of the Los Angeles, California-based National New Markets Fund which was awarded a $75 million NMTC allocation, said that the projects they target tend to have a huge impact, but are very difficult to finance unless there are NMTCs involved.
Donna J. Gambrell, director of the CDFI Fund, said that more than 70 percent of NMTC investments to-date have ended up in communities classified under the highest distress category, above and beyond the requirements set forth by the NMTC program for qualified investments.
Gambrell said the results demonstrate how essential NMTC is for spurring economic development for underserved communities.
Out of the total of $3.5 billion, around $744 million has been allocated to CDEs that will be investing in rural area projects. Another $1.859 billion will be invested in major urban areas, and the remaining $824 million in minor urban areas.
In the ten rounds awarded so far by the CDFI Fund, a total of $36.5 billion in NMTCs have been allocated to 749 recipients. This includes a billion dollars meant for redevelopment and recovery efforts in Louisiana and other Gulf Coast states after Hurricane Katrina, and another $3 billion under the Recovery Act.
Read the full report on the 2012 NMTC allocations – Download (pdf)