The New Markets Tax Credit (NMTC) Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income taxes in exchange for equity investments in specialized financial institutions called Community Development Entities (CDEs). Funds invested into CDEs allow them to finance operating businesses and real estate development in low-income communities across the country. The tax credit totals 39 percent of the original investment amount and is claimed over a period of seven years (five percent for each of the first three years, and six percent for each of the remaining four years). The CDE has 12 months to invest “substantially all” of the proceeds from the equity investments, known as Qualified Equity Investments (QEIs) into Qualified Low Income Community Investments (QLICIs) — that is, loans to or equity investments in qualified businesses and/or CDEs, the purchase of qualifying loans originated by other CDEs, or financial counseling to businesses located in low-income communities.
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Business Eligibility for CDFI Programs:
Eligibility for the financial products and services offered by Community Development Financial Institutions (CDFIs) is determined by each CDFI based on the needs of the targeted communities and populations that they serve.
CDFI Entity Eligibility for Development Programs:
An organization wishing to receive awards under the NMTC Program must be certified as a Community Development Entity (CDE). To qualify as a CDE, an organization must: 1) Be a domestic corporation or partnership at the time it applies for certification; (2) Demonstrate a primary mission of serving or providing investment capital for low-income communities or people; and (3) Maintain accountability to low-income communities through representation on the organization’s governing board of advisory board to the entity.