The New Markets Tax Credit (NMTC) program was created to stimulate economic growth in low-income communities by providing tax incentives to private investors. While this program is often associated with for-profit businesses, it also offers significant benefits to nonprofit organizations. In this article, we will explore how nonprofit organizations can leverage the NMTC program to promote their mission and have a positive impact on their communities
Community Investment
The NMTC program also allows nonprofits to invest in their communities in a variety of ways. Nonprofits can use NMTC financing to support community facilities such as health clinics, schools, and community centers. This not only enhances community members’ access to vital services but also generates employment opportunities and boosts economic activity in the region.
Flexible Financing
One of the most attractive aspects of the NMTC program for nonprofits is the flexibility it offers in financing. Nonprofits can choose to combine NMTC financing with other funding sources such as grants and donations to complete their projects. This allows nonprofits to stretch their resources further and take on larger projects that may have been out of reach otherwise.
How Much is the Credit?
An investor can obtain a tax credit equivalent to 39% of their investment in a CDE, spread across seven years. For the initial three years, the credit stands at 5% annually, and for the subsequent four years, it’s 6% per year.
Given an investment of $75,000 in a CDE, the investor can obtain a cumulative tax credit of $29,250, broken down as:
- Year 1 (investment year): $3,750
- Year 2: $3,750
- Year 3: $3,750
- Year 4: $4,500
- Year 5: $4,500
- Year 6: $4,500
- Year 7: $4,500
Technical Assistance
Navigating the NMTC program can be complex, especially for nonprofits who may not have experience with tax credit financing. However, there are organizations and consultants that specialize in providing technical assistance to nonprofits seeking NMTC financing. These experts can help nonprofits understand the program, identify eligible projects, and guide them through the application process.
Increased Visibility
Participating in the NMTC program can also bring increased visibility to nonprofits and their mission.
The program gains substantial attention and often attracts media attention, which can help raise awareness about the work of nonprofits in their respective communities. This can lead to increased support and donations from individuals and organizations who want to support the nonprofit’s efforts.
The NMTC program offers a unique opportunity for nonprofits to access financing and make a significant impact in their communities. By utilizing this program, nonprofits can invest in community facilities and bring economic growth to low-income areas.
Nonprofits can leverage technical support and improved visibility to utilize the NMTC program and access fresh prospects for their organization and the communities they assist.
Getting Started
Have you considered using the NMTC program for your nonprofit? Speak with our New Market Tax Credit Expert to get started.
