Treasury announces New Markets Tax Credit (NMTC) allocations for 2020, increased to $5 billion
Treasury announces NMTC allocations for 2020
The U.S. Treasury Department's Community Development Financial Institutions (CDFI) fund today announced the “notice of allocation availability” for the calendar year 2020 allocation of the New Markets Tax Credit (NMTC) program.
The NMTC allocation for the 2020 round is set at $5 billion in tax credit allocation authority—an increase of $1.5 billion over the $3.5 billion allocated in NMTCs initially authorized for 2019.
The CDFI fund provided the allocation availability notice [PDF 209 KB] which is scheduled to be published in the Federal Register on September 23, 2020.
Historically, NMTC awards have generated $8 of private investment for every dollar invested by the federal government. Through the end of fiscal year 2018 (the most recent data available), NMTC program award recipients deployed approximately $52.5 in investments in low-income communities and businesses—resulting in the creation or retention of more than 836,000 jobs, and the construction or rehabilitation of more than 218.3 million square feet of commercial real estate.
The NMTC program allows an investor a tax credit against its federal income taxes for making qualified equity investments (QEIs) in Community Development Entities (CDEs).
The Treasury Department allocates the NMTCs to the CDEs that, in turn, make qualifying investments (generally loans) to businesses located in low-income communities. The NMTC totals 39% of the cost of the QEI in the CDE and is claimed over a seven-year credit period. Investors in leveraged NMTC transactions can increase their tax benefit by pooling borrowed funds with their cash investments to receive tax credits on the full amount of their investment. Qualified businesses benefit from favorable NMTC financing terms and the potential for partial debt forgiveness after the end of the NMTC period.
According to a CDFI fund release, 1,254 awards have been made to date—totaling $61 billion in tax credit allocation authority—to CDEs through the NMTC program.
Changes to NMTC program for 2020
The CDFI fund is implementing several changes to the NMTC program for 2020 including:
- Prior QEI issuance requirements: Prior-year NMTC allocatees will be subject to revised minimum thresholds for QEI issuance and closing of Qualified Low-Income Community Investment (QLICIs) with respect to their prior-year NMTC allocations.
- 2020 application registration: The 2020 round applicants are required to complete and save an application registration in the CDFI fund’s awards management information system (AMIS) by a specified deadline in order to submit the 2020 allocation application. Applicants that do not complete the application registration by the specified deadline, will not be able submit a 2020 round allocation application in AMIS.
- CDE certification application: October 6, 2020
- NMTC application registration in AMIS: October 9, 2020
- NMTC allocation application in AMIS: November 16, 2020
- QEI issuance and QLICI requirements: January 15, 2021
© 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.