Leveraging NMTC and State and Local Incentives for Economic Development
The New Markets Tax Credit (NMTC) program continues to play a vital role in bringing private investment into underserved and economically distressed communities. With the recent $10 billion allocation announcement and the 2023 allocation actively being deployed, businesses and organizations have unparalleled opportunities to access flexible, impactful financing. When combined with state and local negotiated and statutory credits and incentives, the NMTC becomes part of a powerful suite of tools to drive economic development. Read on to learn more.
How the NMTC Enhances Projects
The NMTC program provides a federal tax credit equal to 39% of the qualified investment, distributed over seven years. This patient capital is particularly beneficial for projects that face challenges securing traditional financing. NMTC funds can help support:
- The expansion of healthcare, education and manufacturing facilities
- Community-focused business ventures
- Green and sustainable projects
- Other impactful projects focused on job creation
The program’s emphasis on serving low-income communities makes it a catalyst for revitalization and economic growth.
State and Local Incentives: Adding Value
In addition to NMTC funding, many states and municipalities offer a variety of negotiated and statutory credits and incentives, such as:
- Property tax abatements – These lower property taxes for a set period to encourage development.
- Tax increment financing (TIF) – This redirects future property tax revenues to finance current improvements.
- Job creation tax credits – These incentives are tied to the creation of new jobs in target communities.
- Grants and infrastructure assistance – These direct funding or provide reduced costs for infrastructure development.
When combined with NMTC funding, these incentives can fill additional financing gaps, making otherwise challenging projects financially viable.
The Power of Combining the NMTC With State and Local Incentives
The synergy of NMTC funding with state and local credits and incentives allows businesses to unlock greater financial and social impact. Here’s how these tools can potentially work together:
- Enhanced financing structures – Combining the NMTC with property tax abatements or TIF can significantly reduce upfront costs and long-term operating expenses.
- Maximized community impact –Layering funding streams enables larger, more impactful projects, such as mixed-use developments that include affordable housing, commercial spaces and community services.
- Stronger project viability – The integration of state and local incentives improves financial feasibility, helping to ensure projects move from concept to execution.
- Tailored solutions for complex needs – Negotiated incentives can be customized to align with specific project needs and community goals, creating a win-win scenario for all stakeholders.
Why Now’s the Time to Act
With the 2023 NMTC allocation released on September 29, 2023, CDEs are actively deploying funds. At the same time, the new $10 billion NMTC allocation offers a fresh opportunity for businesses to secure financing. Many CDEs prioritize projects that strategically combine NMTC funding with other incentives, further demonstrating the value and viability of the project.
Engaging early and positioning your project as a comprehensive economic development initiative increases the likelihood of securing funding.
How Creative Planning Can Help You Maximize Opportunities
The combination of NMTC funding and state and local incentives creates an unmatched opportunity to drive economic development. If you think your business has a project that aligns with these programs, we’d love to have a conversation. Creative Planning can help you navigate the process and secure the resources needed to bring it to life. Together, we can unlock the full potential of NMTC and other incentives to transform your vision into a reality that benefits both your business and the communities you serve.
Creative Planning specializes in aligning federal, state and local incentives to optimize financial outcomes for clients. We bring expertise in navigating these complex programs and help to ensure all funding streams are integrated effectively.
Our services include:
- Identifying incentive opportunities – We’ll help you find the right mix of NMTC, state and local programs to maximize project funding.
- Structuring financing solutions – We craft customized financial models that combine multiple incentive streams to ensure project viability.
- Engaging with stakeholders – We facilitate negotiations with CDEs, local governments and other partners to align project goals.
- Streamlining compliance – We help ensure all incentives meet regulatory and reporting requirements, avoiding delays and penalties.
At Creative Planning, we help businesses maximize the value of available programs, structuring funding solutions that align with community goals and deliver significant financial and social returns. Schedule a call today to start building a foundation for impactful growth and sustainable development.
