Ninety-nine community development entities (CDEs) have been selected to receive $5 billion in New Markets Tax Credits (NMTCs), announced Treasury Department officials at the end of October.
The awards, which include $1.5 billion from the American Recovery and Reinvestment Act (ARRA), make up the seventh allocation round for the federal program, which aims to stimulate economic and community development in low-income neighborhoods by bringing in private capital. The credit provided to an investor totals 39 percent of the investment in a CDE and is claimed over seven years.
Going into the latest round, officials had sought to ensure that rural areas would receive their share of the NMTC awards.
Officials said seven allocatees met the criteria for a “rural CDE” designation and received allocations totaling $470 million. In addition, 49 allocatees will be required to deploy some or all of their investments in non-metropolitan counties. These CDEs received allocations totaling more than $3 billion and will be required to target about $965 million in non-metropolitan counties.
Based on the estimates of allocatees, it is anticipated that about $2.8 billion will be invested in major urban areas, $1.2 billion in minor urban areas, and $921 million in rural areas.
The Community Development Financial Institutions Fund did a good job spreading the wealth, says Gary Perlow, managing principal of the Baltimore office of Reznick Group, an accounting and business advisory firm. Typically, there have been have been 65 allocatees per round. With the additional ARRA funds, officials increased that number rather than just making larger awards to the same number of organizations.
A number of organizations familiar to the affordable housing industry or their affiliates received NMTCs in the latest round, including Great Lakes Capital Fund, Local Initiatives Support Corp., Low Income Investment Fund, Mercy Housing, Michigan State Housing Development Authority, and Wisconsin Housing and Economic Development Authority.
NMTC investments can be used to finance a variety of activities. In this round, about $2.9 billion is expected to go toward making loans or equity investments in real estate projects in low-income communities. Another $2.1 billion will be used to finance and support loans to or investments in businesses, and about $79 million will likely capitalize other CDEs.
Legislation has been introduced to extend the NMTC program for another five years.
Other highlights from the 2009 NMTC round include:
- Allocation awards ranged from $4 million to $125 million, with the average amount about $50 million.
- 53 of the allocatees are nonprofit organizations or subsidiaries of nonprofits. They received $2.7 billion.
- 25 are certified Community Development Financial Institutions or their subsidiaries. They received $1.2 billion.
- 16 are government-controlled entities or subsidiaries of such entities. They received $790 million.
- 14 are banks, bank holding companies, publicly traded institutions, or subsidiaries of such entities. They received $835 million.
- 18 are real estate development companies or their subsidiaries. They received $598 million.
- 249 CDEs applied for allocations, requesting $22.5 billion in allocations.