Can NMTC be used for housing?

Can NMTC be used for housing?

The NMTC program is intended to encourage commercial investment activity in low-income neighborhoods. They can then use the loan proceeds to build housing without having to meet the 20-percent commercial-income requirement.

How do you qualify for NMTC?

Basic eligibility for NMTC requires a development to be in a census tract with income at or lower than 80 percent area median income, or poverty to be greater than 20 percent.

What is a NMTC loan?

Investing in Lower-Income Communities That’s why we participate in the New Markets Tax Credit (N.M.T.C.) program, a federal initiative that encourages investment in lower-income communities. Self-Help’s N.M.T.C. program helps borrowers finance the purchase, construction and renovation of real property.

How does the NMTC work?

The NMTC Program attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries called Community Development Entities (CDEs).

What is a community development entity?

A Community Development Entity (CDE) is a domestic corporation or partnership that is an intermediary vehicle for the provision of loans, investments, or financial counseling in low-income communities.

What are federal historic tax credits?

The federal historic rehabilitation tax credit (HTC) program is an indirect federal subsidy to finance the rehabilitation of historic buildings with a 20 percent tax credit for qualified expenditures.

Who invests NMTC?

New Market Tax Credit Investors Most investors in NMTC tax credits are banks and other financial institutions, but any person or entity may purchase them. New Market Tax Credits amount to 39% of the amount invested over seven years.

What can NMTC be used for?

NMTC loan transactions can be structured to look almost identical to a traditional commercial or real estate loan, with the NMTC benefit being used to reduce financing costs to the borrower while providing the lender with additional return through the tax credit, or additional equity cushion where the tax credits are …

What is a Qalicb?

Finally, a tax-exempt entity may act as a qualified active low-income community business (“QALICB”). A QALICB is the entity that actually engages in the development, business, or charitable activity in the distressed community.

Is a CDFI a CDE?

Certification as a Community Development Financial Institution (CDFI) or Community Development Entity (CDE) allows an organization to apply for awards under the CDFI Fund’s competitive programs, including the Capital Magnet Fund, CDFI Bond Guarantee Program, Community Development Financial Institutions Program, and …

How do I monetize historic tax credits?

Generally, these credits are monetized in three different ways:

1. A state can refund the amount of a credit at a discounted rate;
2. Limited partnerships or a syndication structure can be used to transfer the credit; or.
3. The state taxing authority can issue a tax credit certificate which can be sold to a third party.

How long do historic tax credits last?

five years
The historic rehabilitation tax credit (HTC) program provides a 20% credit taken ratably over five years, beginning in the tax year in which the building is placed in service.

What is an allocation in the NMTC program?

But in the NMTC Program, the CDFI Fund awards a NMTC “allocation.” An allocation is the maximum qualified investment a party can make in a project that can be counted toward the calculation of tax credits.

How big of a project can get a NMTC?

Given the significant costs associated with putting together a NMTC deal, there is some point at which the benefits are outweighed by the costs. This threshold amount is often estimated at $5M in project costs. If a project is smaller than that, NMTCs may not be the way to go. How are Projects Awarded NMTC Allocations?

What are the two types of NMTC deal structures?

There are two general NMTC deal structures, leveraged and unleveraged. In both structures, the CDE acts as a sort of financial middleman between the funding entities and the QALICB, analyzing the transaction and monitoring compliance with the Program. Let’s start with the simpler structure, unleveraged.

How does the power of the NMTC work?

A draft version of the CDFI Fund allocation agreement can be seen at the Fund’s website, though it’s meant tohe-power-of-the-nmtc-program be tailored for each allocation. Once a CDE is awarded the allocation, it works with each project’s QALICB to finalize the structure for their NMTC deals.