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Demand Remains High in NMTC Incentive’s Fourth Year with $5 Billion in Allocation Authority

Published by Brad Elphick on Monday, February 5, 2024 - 6:09AM

The calendar year (CY) 2023 round of the new markets tax credit (NMTC) is the fourth consecutive round with $5 billion available in allocation authority. 

One common theme between these rounds is the demand for the incentive. In CY 2023, community development entities (CDEs) requested $14.7 billion in NMTC allocation authority, nearly triple the $5 billion available. Demand outweighed supply by nearly three times in each of the previous three $5 billion rounds ($14.8 billion was requested in the CY 2022 round, $14.7 billion was requested in the CY 2021 round and $15.1 billion was requested in the CY 2020 round). 

The Community Development Financial Institutions (CDFI) Fund announced Jan. 26 that it received applications from 196 CDEs for the CY 2023 round. The announcement states that applicants are headquartered in 44 states as well as the District of Columbia and Puerto Rico. While these applicants may have their headquarters in these states, many CDEs have investment footprints that extend beyond the state they’re headquartered in, so even states without CDEs headquartered in their state could receive NMTC investments.

Like demand, the number of applicants has also been consistent over the past four years, trickling down from 208 applicants for the CY 2020 round to 199 in CY 2021 to 197 in CY 2022 to 196 applicants in CY 2023. This downward trend in the number of applicants has actually been going on since the CY 2013 round that received 310 applications. The lone exception was when the number of applicants in CY 2020 (208) edged out CY 2019 (206).

The number of awardees has also been fairly consistent during the previous three $5 billion rounds. There were 100 awardees for the CY 2020 round, 107 awardees in the CY 2021 round and 102 awardees in the CY 2022 round.  As a result, the average award size has fluctuated between $47 million and $50 million. It’s likely that the average award size will remain consistent which would lead to around 100 awardees in the CY 2023 round as well. 

Below is a look at how CY 2023 demand compares to the historical NMTC applications and allocations:

Blog Graphic: NMTC Application Demand

Through the first nineteen rounds of the NMTC incentive, the CDFI Fund has made 1,563 awards totaling $76.1 billion in tax credit allocation authority. The $76.1 billion includes $3 billion in Recovery Act Awards and $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone.

Continued Push for NMTC Permanence

The NMTC still has two years left on its five-year extension enacted at the end of 2020 and expiring in 2025. However, community development advocates are pushing for permanence and other key NMTC legislative priorities. Sens. Ben Cardin, D-Maryland; Steve Danes, R-Montana; Chuck Schumer, D-New York; Bill Cassidy, R-Louisiana; Maria Cantwell, D-Washington; Tim Scott, R-South Carolina; Robert Menendez, D-New Jersey, and Marsha Blackburn, R-Tennessee, reintroduced Feb. 2, 2023, the New Markets Tax Credit Extension Act (S. 234), which would make the NMTC a permanent part of the tax code, set the initial annual allocation authority at $5 billion, index it for inflation annually and allow NMTCs to be taken against alternative minimum tax liability. Reps. Claudia Tenney, R-New York; Terri Sewell, D-Alabama; Mike Kelly, R-Pennsylvania; and Danny Davis, D-Illinois, reintroduced April 6 the House companion bill, H.R. 2539. While NMTC permanence or other related proposals were not added to the bipartisan, bicameral bill currently winding through Congress, H.R. 7024, the Tax Relief for American Families and Workers Act, the NMTC still has strong bipartisan support and permanence will likely be considered with other tax proposals in 2025, when nearly 40 tax provisions in the tax code expire.

To join the push for NMTC permanence and to work together to help resolve technical regulatory and administrative NMTC incentive issues, become a member of the NMTC Working Group

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