Which came first, the industry or the housing? This age old debate is answered differently in each community, based on their indigenous needs. When considering a community for redevelopment or revitalization, some of the factors taken into consideration are:
• The distance to public transportation
• The distance to reasonable employment for prospective tenants
• If certain industry is brought to a local area would there then be adequate housing available for the industry employees?
• Are there potential prospects in the area to work in the potential industry?
The New Markets Tax Credit (NMTC) Program was established in 2000 as part of the Community Renewal Tax Relief Act of 2000. Its purpose is to help generate revenue in low income communities by incentivizing corporations with additional equity to bring business to a particular community. Typically, growth of stable industry will help to revitalize a community by employing the residents in the immediate area. By providing equity to certified Community Development Entities, the NMTC Program facilitates the development of industry in low income areas.
The NMTC works like a typical tax credit in that it is a reduction in the Community Development Entity’s tax liability. However, this is where the similarities end. The reduction in tax liability is 39% of the total cost to develop the industry. When determining the income potential of a particular industry that may receive NMTC, the credits work as follows:
• The credit equals 39% of the investment, paid out over 7 years:
o 5% in each of the first three years
o 6% in each of the final four years
For a total of 39% of the output of equity
The New Market Tax Credit program was created in 2000 as an additional revenue resource to bring adequate business to communities in need of revitalization. If you have found the New Market Tax Credit program to be beneficial in your communities, or have seen this program at work in a particular area, we invite you to share your experience with us on this blog.