Traditionally, investors focus projects on areas with high income and a promise of steady cash flow. This often leaves out low-income communities. The federal government established the New Markets Tax Credit program (NMTC) through Congress to combat this imbalance. The goal is to attract private investment to low-income communities, both urban and rural, to improve the quality of life, foster development, and promote economic growth.
For a region to qualify for the program, a census tract should indicate a 20 percent poverty rate or no more than 80 percent Area Median Income (AMI). The AMI refers to the median point of income distribution in a region. This tiered metric, is used by the Department of Housing and Urban Development to determine qualification for low-income housing programs.
Investors who support qualifying projects in these areas receive tax credits of up to 39 percent of the original investment cost, claimable over seven years. The investor is required to commit funds to Community Development Entities (CDEs). These local corporations or partnerships act as intermediaries for providing credit and financial advice in low-income communities.
Juan Carlos Benitez's Blog 