New Market Tax Credit

Funding development projects to enhance communities
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New Market Tax Credit

New Market Tax Credit Benefits

The New Market Tax Credit (NMTC) Program incentivizes community development and economic growth by using tax credits that attract private investment to distressed communities.

According to Community Development Financial Institutions Fund, low-income communities, have historically, experienced a lack of investment, as evidenced by vacant commercial properties, outdated manufacturing facilities, and inadequate access to education and healthcare service providers. The New Market Tax Credit Program (NMTC) aims to break this cycle of disinvestment by attracting the private investment necessary to reinvigorate struggling local economies.

The NMTC Program attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries called Community Development Entities (CDE).  The credit totals 39% of the original investment amount and is claimed over a period of seven years.  

How it Works:

  • Tax credits awarded by the US Department of Treasury to CDE.
  • Colorado Enterprise Fund works as a CDE, with investors, typically large banks, to provide funding towards the project.
  • Investors are awarded credits against their federal tax obligations.
  • Investors lend capital to businesses, developers, or non-profits at preferential rates and terms to complete the project.

Types of NMTC projects include:

  • Manufacturing
  • Hospitality
  • Community Services
  • Retail
  • Healthy Food Access
  • Technology 

Criteria for NMTC projects:

  • Project will create quality jobs.
  • Project will impact the community via development, economic growth, or positive environmental impact.
  • Priority is given to projects located in underserved or distressed communities.
  •  Community poverty rate exceeds 20% or median family income is below 80% of state median income.

 

To date, CEF has allocated $27 M in NMTC to the Colorado businesses below.  

TruStile Doors (2020) 

TruStile Doors is based in Denver and manufactures interior and exterior doors for residential and commercial uses.  The facility is located in an area with 15.7% unemployment and a median family income of 48.4%.  TruStile used an NMTC loan to:

  • Remove environmental contaminants in the site's soil
  • Build a 260,000 sf manufacturing, warehouse, and office facility
  • Install a 1.5 megawatt photovoltaic roof-mounted solar array
  • Install a biomass boiler system that utilizes sawdust waste to heat and cool the facility
  • Purchase and install equipment to increase production

Benefits of the project to the community:

  • Created 825 construction jobs (80% filled by Targeted Job Seekers*)
  • Retained 300 permanent jobs and created 200 permanent jobs (84% filled by Targeted Job Seekers*)
  • Added environmental systems are estimated to reduce carbon emissions by 22,000 tons annually and eliminates the transportation of 650 tons of waste monthly.

*Targeted Job Seekers = low-income person, resident of a low-income community, person with lower levels of education, or person that faces barriers to employment. 

indieDwell Colorado (2021) 

indieDwell Colorado is a 501c3 nonprofit organization based in Pueblo that seeks to change the building industry by offering high-quality, durable, sustainable, energy-efficient homes to underserved communities.  The facility is located in a distressed area with a 21.2% unemployment rate, a median family income of 35.9%, and a 44.8% poverty rate.  indieDwell Colorado used an NMTC loan to: 

  • Finance a portion of its operating expenses for two production lines being added at the facility to keep up with demand for affordable housing modular units.

Benefits of the project to the community:

  • Retained 58 permanent jobs 
  • Created 113 permanent jobs
  • 86% of permanent positions filled by Targeted Job Seekers*

*Targeted Job Seekers = low-income person, resident of a low-income community, person with lower levels of education, or person that faces barriers to employment.