Chicago Development Fund, a certified Community Development Entity (CDE), provides financing to projects in Chicago’s low-income communities through the New Markets Tax Credits (NMTC) program. NMTCs can subsidize up to 20% of a project’s capital needs, usually in the form of low interest, forgivable debt with a term of at least seven years.
Congress created the New Markets Tax Credits program in 2000 to incentivize investments that create jobs and provide services in economically disadvantaged areas. Since 2000, the CDFI Fund—a division of the US Treasury that administers the program—has awarded $57 billion in NMTC allocation to CDFI-certified Community Development Entities (CDEs). In order to use NMTCs, a project must obtain financing from a CDE that has been awarded tax credits.
The program primarily is used to fund commercial, industrial, community facility, and mixed-use real estate projects, as well as operating businesses located in qualifying Census tracts. Qualifying Census tracts, known as Low Income Communities (LICs), are determined by income and poverty data from the U.S. Census. NMTCs can be layered with many different financing sources, such as traditional debt, grants, tax increment financing and Historic Tax Credits.