The New Markets Tax Credit (NMTC) program provides federal tax credit incentives to investors who make qualified equity investments in Community Development Entities (CDEs) serving low-income communities. Texas businesses locating or expanding in qualifying census tracts may benefit from NMTC-supported financing that reduces borrowing costs.
How the NMTC Program Works
The NMTC program allocates tax credit authority to CDEs, which use it to attract investment capital. CDEs then deploy this capital as below-market loans or equity investments into qualifying businesses and real estate projects in low-income census tracts. The tax credit equals 39% of the investment, claimed over seven years, which enables CDEs to offer financing at significantly reduced costs.
Key Parameters
- Tax credit: 39% of the qualified equity investment over 7 years
- Minimum project size: Typically $5 million or more (due to transaction costs)
- Eligible areas: Low-income census tracts (population poverty rate of 20%+ or median family income at 80% or below area median)
- Eligible uses: Commercial real estate, operating businesses, and community facilities
Texas CDEs and Allocatees
Several Texas organizations hold NMTC allocations, including BCL of Texas, the National Development Council, and various national CDEs that deploy capital in Texas. These entities partner with businesses on qualifying projects in eligible census tracts.
Who Benefits from NMTC in Texas
NMTC financing is most practical for larger projects, typically $5 million and above, due to legal and transaction costs. Texas businesses building manufacturing facilities, healthcare centers, mixed-use developments, or large commercial projects in qualifying census tracts may benefit from NMTC-enhanced financing.
How to Explore NMTC for Your Project
Check whether your project location falls in a qualifying census tract using the CDFI Fund's mapping tool. If it does, contact Texas CDEs or your SBDC to discuss whether NMTC financing is feasible for your project size and type.
Find More Programs for Your Business
The New Markets Tax Credit Program in Texas is just one of many programs that Texas businesses may be eligible for. Federal, state, and local governments offer a range of grants, tax credits, loans, and incentives.
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