Congress created the New Markets Tax Credit (NMTC) Program in 2000 to stimulate private investment and economic growth in low-income communities. A federal tax credit of 39% is provided over seven years for Qualified Equity Investments (QEIs) made through designated Community Development Entities (CDEs). Substantially all (at least 85%) of the QEI must in turn be used by CDEs to make loans to or investments in businesses and projects in low-income communities.
NMTCs may be utilized in a wide range of qualified business activities, from small business lending to financial counseling to real estate development. Eligible real estate development projects encompass community facilities, including those for charter schools. With NMTC financing, CDEs can make equity investments in or, more commonly, loans to charter schools for facilities projects in qualifying low-income census tracts. Benefits can include reduced interest rates, seven-year terms, longer amortization periods or no principal amortization, and low-cost debt refinancing. To date $50.5 billion of tax credit allocation authority has been awarded in 13 rounds through a competitive process administered by the CDFI Fund. According to the CDFI Fund, transactions totaling $45.1 billion have been reported since the program’s inception through 2016. Approximately $5.4 billion in allocation remains to be deployed.
A number of NMTC allocatees have included charter schools specifically or community facilities generally as one of the proposed uses of their tax credits. The Local Initiatives Support Corporation (LISC) received charter school utilization information from Rapoza Associates, which tracks utilization of NMTC allocations for specific asset classes as reported by CDEs. This downloadable table lists NMTC utilization for charter schools by year. Rapoza Associates compiled the data through analysis of U.S. Treasury Department CDFI Fund data and publicly available project announcements.
Last updated: August 2017