CDFI Fund awards $5 billion in New Markets Tax Credits to 100 Allocatees

Special Guest Story by: Rohit Kejriwal

Scarlet Oak Capital Impact

The Community Development Financial Institutions Fund of the U.S. Department of Treasury awarded 100 Community Development Entities (CDEs) $5 billion in New Market Tax Credits (NMTCs) in September 2021. Of the 100 CDEs which won a NMTC Allocation, 71 have a national or multi-state footprint, 13 have a statewide footprint, and 16 have a citywide or countywide footprint. Four Ohio based CDEs won a total of $215MM of allocation; all four of whom have a local or a statewide-only focus.

Of the overall award, 54% will be invested in major urban areas, and 22% each will be invested in minor urban areas and rural areas. Nearly $4 billion will be used toward supporting operating businesses or owner-occupied real estate, with the remaining $1 billion invested in commercial real estate projects. Additionally, 37% of the CDEs are also designated as Certified Community Development Financial Institutions (CDFIs); 14 CDEs are Minority CDEs, and 16 CDEs are have a rural designation.

This is the first $5 billion award in the 20+ year history of this program and is over 40% larger than any previous NMTC annual award. Congress has authorized at least five additional $5 Billion awards which are scheduled to be announced annually between 2022-2026.

The NMTC program is designed to fill capital gaps for projects in low-income communities across all 50 states and US Territories, which otherwise would not be feasible. These economically disadvantaged communities’ benefit from the completion of new projects which generate much needed economic and/or social impacts for the area. Potential projects can include healthcare, education, manufacturing, retail, technology, mixed-use real estate, office/headquarters, industrial, among others. Projects are awarded NMTCs by CDEs based on the project impacts they will directly create on a low-income neighborhood and their need for this particular financing.