New Markets Tax Credits
FRBSF Community Investments (pdf, 187 kb)
Stockton Williams, The Enterprise Foundation
Making the New Markets Tax Credit Count (FRBSF Community Investments, August 2003)
Robert Rapoza, President, Rapoza Associates
Summary
On December 21, 2000, the Community Renewal Tax Relief Act of 2000 was signed into law. The legislation includes the NMTC, which is intended to spur the investment of $15 billion in new private capital into community development financial institutions (CDFIs) and other entities that make loans and equity investments in businesses located in low- and moderate-income areas.
By making an equity investment in an eligible “community development entity” (CDE), individual and corporate investors can receive an NMTC worth more than 30 percent of the amount invested over the life of the credit in present value terms. A CDE is any for-profit corporation or partnership that (i) has the primary mission of serving or providing investment capital for low- and moderate-income communities and/or individuals, (ii) maintains accountability to residents of low- and moderate-income communities through their representation on a governing or advisory board and (iii) receives certification as a CDE from the Department of Treasury.