Growing Opportunity, Rooted in Community with New Markets Tax Credits
What are New Markets Tax Credits?
The federal New Markets Tax Credit (NMTC) Program catalyzes community and economic development through the use of federal tax credit incentives that attract private investment to underserved, economically distressed communities across the U.S.
Authorized in the Community Renewal Tax Relief Act of 2000, the U.S. Treasury’s Community Development Financial Institution (CDFI) Fund’s NMTC Program aims to break the cycle of disinvestment in low income communities through private investment to reinvigorate (or just invigorate) struggling local economies. In urban areas, vacant commercial properties and outdated manufacturing, education, or healthcare facilities may evidence this lack of investment. However, in rural areas, such as in much of the state of Alaska, the lack of basic infrastructure is evidence of this lack of investment.
McKinley Alaska Growth Capital and the NMTC Program
McKinley Alaska Growth Capital (MAGC) has successfully secured $120 million in NMTCs, receiving NMTC allocation in 2002, 2003, 2009, and 2020. To date, MAGC is the only Alaska-based entity to have received NMTC allocation and currently has $20 million in available allocation for deployment. MAGC actively applies for NMTC allocation annually and seeks to work with for-profit, nonprofit and Native-owned entities to create jobs and support expanded infrastructure, commercial activity and community facilities needed across low-income communities in Alaska and nationwide, including:
- Improvements to power systems to ease the cost of living and doing business;
- Accessible broadband to enable commerce and connection;
- and Community facilities across healthcare, education, and nonprofit support services to build stronger tomorrows
How does the NMTC Program work?
The CDFI Fund allocates/awards tax credit authority to Community Development Entities (CDE) such as MAGC, through an annual competitive application process. CDEs offer tax credits to investors in exchange for an equity investment in the CDE. Using the capital from these equity investments, CDEs make loans to operating businesses or real estate development projects in low-income communities on better rates and terms, with more flexible features, than found elsewhere in the market. The project benefits from a subsidy of the portion of the project cost after a seven-year compliance period.
For Project Developers – The NMTC Program provides below-market debt with flexible terms intended to complete a project’s overall funding and accelerate execution. At the end of a seven-year compliance period, a portion of the NMTC proceeds are transferred to the project, forgiving/subsidizing roughly 20% of the NMTC financed project cost.
Project eligibility requirements
Community Impact Criteria:
- MAGC will only focus on projects that positively contribute to the economic and social well-being of low-income communities
Project Requirements:
- Total capital requirement/project size of $5 million or more, ideally seeking “last-mile” financing with other sources of funding secured (equity, grants, loans, etc.)
- For-profit or non-profit operating businesses or real estate development in a low-income community that meets the following criteria throughout a seven-year compliance period:
- At least 50% of the total gross income of such entity is derived from activities conducted within the low-income community
- At least 40% of the use of tangible property of such entity is within the low-income community
Demographic and Location Requirements:
Only certain areas are eligible for the NMTC Program. Use this mapping tool (which uses 2010 U.S. Census data) to see if your project is in a qualifying area.
The mapping tool ensures that one or more of the following criteria are present in a community when determining eligibility:
- Poverty rates greater than or equal to 30%
- Unemployment rates at least 1.5 times the national average
- Median family income does not exceed 60% of statewide median family income
Areas that do not qualify based on the criteria above, may still qualify if the business or project is owned, employs, or serves a Target Population of individuals, including American Indians/Alaska Natives who are:
- Low-income persons
- Otherwise lack adequate access to loans or equity investments
- Live in qualified rural (non-metropolitan) communities
Past Projects
With previous NMTC allocation, MAGC is proud to have supported important low-income community projects including:
GCI TERRA – Northwest Alaska
MAGC’s NMTC supported a 2011 upgrade to rural infrastructure, replacing satellite delivered internet with GCI broadband service to multiple communities.
Total investment: $31.1 million
NMTC equity contribution: $7.3 million
Jobs created: 190 ongoing jobs
Maniilaq Elder Care Facility – Kotzebue, Alaska
MAGC’s NMTC supported construction of a 14,340 square foot facility in Kotzebue which fulfilled a critical need for elder care for low-income residents from villages across the region.
Total investment: $18.6 million
NMTC equity contribution: $3.8 million
Jobs created: 150 construction jobs and 20 ongoing jobs
Please get in touch with our team to see if NMTC are a fit for your business or project!
If you have questions, please contact Mary Miner at [email protected]