Understanding New Market Tax Credits for Community Development
Learn about New Market Tax Credits (NMTC) and how they can be used to finance projects in low-income communities, creating jobs and stimulating economic growth. Discover the benefits, risks, and impact of NMTC investments in this comprehensive guide.
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HEALTHCARE COMMUNITY DEVELOPMENT GROUP H C D G NEW MARKETS TAX CREDITS 101 January 2019 HEALTHCARE COMMUNITY DEVELOPMENT GROUP 5665 North Scottsdale Road, Suite 110 Scottsdale, AZ 85250 http://hcdgsolutions.com Phone: (480) 427-3943 http://hcdgsolutions.com
NMTC OVERVIEW New Market Tax Credits When and how can they be used? How are these transactions structured? Risks and Rewards What are the common deal issues? Roles and Responsibilities Investors Community Development Entity Leverage Lenders Qualified Active Low-Income Community Business Consultants and Advisors PROPRIETARY PROPRIETARY HCDG 2 2019 New Market Tax Credits | JANUARY 2019
NEW MARKETS TAX CREDITS NMTC are a financing source for compelling projects in low income communities toward improving their economic climate, (hence the name New Markets ); NMTC enable projects to achieve their financing requirements rather than suffer from financing shortfalls; NMTC debt is structured with a below-market interest rate, the principal for which is effectively forgiven upon maturity; NMTC for hospitals typically target projects with total budgets in the $10MM to $25MM range; NMTC generally provide some net 15% to 20% of total project budget financing. Example: A hospital seeks $20MM in financing for operating rooms construction for which $16MM in financing has been apportioned leaving a $4MM funding gap, in turn filled by NMTC proceeds. PROPRIETARY PROPRIETARY HCDG 3 2019 New Market Tax Credits | JANUARY 2019
IMPACT OF INVESTMENT Finances projects which traditional banking channels won t, while creating jobs, facilitating the delivery of social services and driving private investment into low-income communities Between 2003 and 2012, NMTC Financing created over 750,000 jobs in economically distressed communities across America NMTC Investments between 2003 and 2010 generated over $5.3 billion in federal tax and over $3 billion in state and local tax revenue PROPRIETARY PROPRIETARY HCDG 4 2019 New Market Tax Credits | JANUARY 2019
