Where $5 Billion in New New Markets Tax Credits Are Going



Among the recent projects to benefit from NMTC is the revitalization of downtown Van Wert, Ohio, by Van Wert Forward and financial partner Central Insurance.

Image courtesy of Van Wert Forward

Five years ago Site Selection documented how Williams Sausage’s $44 million, 200-plus-job expansion into a second manufacturing complex and new corporate office in Northwest Tennessee was enabled in part by New Markets Tax Credits (NMTCs) — a program administered by the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) that applies to certain low-income and rural Census tracts underserved by more traditional financing.

The program awards tax credit allocations to Community Development Entities (CDEs), “financial intermediaries through which investment capital flows from an investor to a qualified business located in a low-income community,” the Treasury Department explains. “CDEs use their authority to offer tax credits to investors in exchange for equity in the CDE. With these capital investments, CDEs can make loans and investments to businesses operating in distressed areas that have better rates and terms and more flexible features than the market.” Investors in CDEs are able to claim over a seven-year period a tax credit equal to 39% of their original equity stake.

That Williams Sausage deal involved five CDEs, as well as state and local incentives, and enabled the region to win the project over nearly 160 other communities in 17 states. No wonder it was named Deal of the Year for the 2017 Journal of Tax Credits Industry Award.

Now a new wave of credits may be able to one day take credit for Deals of the Year to come.

In September the CDFI Fund announced $5 billion in new NMTCs had been awarded to 102 CDEs headquartered in 36 states and the District of Columbia. They were selected from a pool of 197 applicants that requested an aggregate total of $14.8 billion in tax credit allocation authority, said the Treasury Department.

Nearly half of them (49) will focus investment activities on a national service area. Twenty will focus on a multi-state service area; 18 on a statewide area; and 15 on local city or county areas. The Treasury Department estimates that award recipients will make nearly $1 billion in NMTC investments in non-metropolitan counties.

We broke down the awarded allocations by state and community, though it should be noted that many of these CDEs’ activities are national or multi-state in scope:

Top 5 States by Number of NMTC Allocatees

State No. of CDEs Total $

California 11 $585 million
New York 7 $365 million
Missouri 6 $340 million
Texas 5 $230 million
Georgia 5 $220 million

Top 5 Cities by Number of NMTC Allocatees

City No. of CDEs Total $

New York 7 $365 million
Los Angeles 5 $235 million
Phoenix 4 $250 million
Chicago 4 $200 million
Washington, D.C. 4 $190 million



The Treasury Department says in the 19 rounds to date, the CDFI Fund has made 1,563 allocation awards totaling $76 billion in tax credit authority, including $3 billion in Recovery Act awards and $1 billion that was specifically set aside for recovery and redevelopment in the wake of Hurricane Katrina. A total of $62.9 billion in NMTCs have been invested in low-income communities from the program’s inception through FY 2022.

Analysis by the Federal Reserve Bank of Minneapolis last year noted that tribal communities in particular are beginning to see more effective deployment of NMTCs for such projects as community college facilities. And the most recent progress report issued by the New Markets Tax Credit Coalition offers numerous examples of how the program has directly backed job-creating projects, including many in Native American communities. One of the most recent projects in the Coalition’s database is the rehab of a historic building in downtown Van Wert, Ohio, led by Van Wert Forward in partnership with Central Insurance Company.

“Fostering a rich community, sense of connection, and culture where people feel proud to establish roots and raise their families plays a critical role in attracting and retaining top talent,” Central said in its annual report. “In 2022, Central joined Van Wert Forward as a financial partner in the restoration and revitalization of downtown Van Wert. Our investment of $17 million embodies an ongoing commitment to the place we’ve called home for over a century. We’re proud to double down on the lives and futures of those who live and work here today, tomorrow, and for generations to come.”

Their building is on one of three main blocks being rehabbed with those tax credits, notes Joe Dunay, marketing director for Van Wert Forward, in a first phase representing $27 million in overall investment. “This ambitious initiative aims to activate over $100 million in equity, new markets tax credits, historic tax credits and other financial opportunities,” Dunay says of the overall project. “Leveraging these resources, we've been able to expand the project into multiple phases, with the potential to develop more than 50 parcels in our downtown district, over 100 residential units and upwards of 30 commercial spaces.

“To maximize impact, we've organized these blocks into ‘clusters,’ enabling us to concentrate financial investment into specific areas,” he explains. “In the context of a small rural community like ours, the economics of investing in historic infrastructure become viable only when tax credits and philanthropy are integrated from the outset to reset the market. This financial strategy will continue into future phases, with Phase Two already earmarked for a projected $20 million investment, slated to commence between late 2023 and early 2024.

The NMTC program is currently set to expire on December 31, 2025. Legislation to extend the program was introduced in the spring. Analysis by Novogradac published early this month asserts that the program’s 20-year track record and bicameral, bipartisan support in Congress have earned it a spot in the nation’s tax code rather than being subjected to repeated extensions. The analysis compares the situation to the mere seven years it took to make the low-income housing tax credit permanent.

“There’s little debate about the effectiveness of the incentive,” Michael Novogradac writes, noting that $8 in private investment are catalyzed by each single dollar invested in the program by the federal government. “In the first 18 rounds of allocation (plus an extra round of recovery NMTCs in 2008), the CDFI Fund awarded $71 billion in tax credit issuance authority, which led to a broad range of development, including the construction of 77 million square feet of manufacturing space, 118 million square feet of office space and 77 million square feet of retail space,” he writes. “More importantly, the use of NMTCs continues to evolve–with increased emphasis on rural investment, investments in underserved states and supporting businesses that have notable social impact in addition to job creation.”

“The New Markets Tax Credit plays a critical in financing many vital businesses and community projects in our nation’s low-income communities,” said Graham Steele, assistant secretary for financial institutions at the U.S. Department of the Treasury and the former director of the Corporations and Society Initiative at Stanford Graduate School of Business. “The investments that will result from today’s announcement will help preserve and create hundreds of thousands of jobs and spur economic growth in these urban, rural, and Tribal communities across our country. It is important that Congress sustains these investments by making the New Markets Tax Credit permanent.” — Adam Bruns and Daniel Boyer