CDFI Fund Releases Report on NMTC Program Data Through 2007

October 20, 2008

Washington, DC - Today, the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund released a report analyzing the activities undertaken and impact of the New Markets Tax Credit (NMTC) Program. The report titled, “The New Markets Tax Credit Program: Promoting Investment in Distressed Communities,” is based upon data collected by the CDFI Fund between 2002 and 2007.

"I am encouraged by these findings and the progress of the NMTC Program to date," said CDFI Fund Director Donna J. Gambrell. "Investing in low-income communities involves risks, both real and perceived, that can be difficult to overcome. The evidence in this report shows that the NMTC Program offers an efficient and valuable means to help mitigate these risks, thus facilitating the flow of capital in underserved and often untested markets."

In the relatively short period of time since its inception, the NMTC Program has become an increasingly popular and critical tool for facilitating the investment of private sector capital in low-income communities.

The summary findings in the report released today indicate that, among other things:

• New Markets Tax Credit investments are being made in communities with significantly higher levels of distress than are minimally required under program rules. Over 75 percent of NMTC-financed projects were located in census tracts that met one or more of the following distress criteria: 1) a poverty rate of at least 30 percent; 2) a median family income at or below 60 percent of the applicable area median family income; or 3) an unemployment rate at least 1.5 times the national average.
  
  
• There is a strong demand for tax credit allocations. The total amount requested by Community Development Entities (CDEs) since program inception is over eight times the amount of allocation authority available to be awarded.
  
  
• The NTMC Program is tremendously cost effective. As the report shows, every $1 of federal tax revenue foregone as a result of the credit is estimated to induce over $14 of investments in projects in low-income communities.
  
  
• Community Development Entities have been successful in securing investor capital. Through 2007, investors placed over $9 billion into CDEs, or approximately 75 percent of the $12.1 billion in allocation authority awarded in the first four allocation rounds.
  
  
• The NMTC Program is fostering new investor relationships. Over 76 percent of NMTC investors were not affiliated with the CDEs in which they made an investment, and over 61 percent of the dollars invested came from entities that had never before made an investment in the CDE.
  
  
• Virtually all NMTC product offerings include non-traditional rates and terms. Over 98 percent of the transactions offered preferential rates and terms to the borrowers. The most common features are below market interest rates (83 percent of transactions), lower origination fees (59 percent of transactions), and longer than standard periods of interest-only payments (54 percent of transactions).

The PDF of the complete report is available by clicking below:

"New Markets Tax Credit Program: Promoting Investment in Distressed Communities"

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[CDFI-2008-47]