The New Market Tax Credit Program, created in 2000, is designed to encourage new or increased investments into projects located in low-income communities. The program is administered by the Community Development Financial Institution Fund (CDFI) of the U.S. Treasury Department and reciprocates individual and corporate investment with tax credits which can be applied against federal income tax liability. New Markets investments have financed more than 4,800 businesses, helped create or retain 197,000 jobs, and has spurred more than $90 billion in funding to businesses in low-income communities.
Investors receive the credit in exchange for making equity investments in Community Development Entities, the investment vehicle for new markets tax credits, which in turn loan or invest funds in or to Qualified Active Low Income Community Businesses on favorable terms. Generally, the program offers institutional and individual investors a 39 percent credit against their federal income tax liability, which is based on the amount invested and taken over seven years. It requires investment in distressed areas, particularly those with high unemployment, high poverty rates and low median incomes for residents. The credit can be used for commercial real estate development as well as for working capital and equipment financing.
Source: New Markets Support Community