The President’s budget includes a windfall increase for the New Markets Tax Credit program with a request for a two-year cycle. This increase would provide up to $8.5 billion in tax credit allocation for a two-year cycle 2014 and 2015. That is a total $5 billion increase over the presently proposed $3.5 billion single-year cycle. The application cycle for this improvement is in process now and applicants are looking for health center projects to include.
The combining of two years’ worth of appropriation represents a large but fleeting window to finance your upcoming capital project with New Markets Tax Credits, which can provide approximately 20% of the value of project costs in the form of, effectively, a loan which is not repaid. We will not see another funding opportunity like this for two years.
What Health Centers can do to Access the NMTC Program:
Capital Link is working to ensure that health centers are lined up with potential NMTC allocatees and prepared with financeable business plans prior to the announcement. Once the announcement is made, allocation will be allotted to eligible projects very quickly, so health centers should prepare now.
Step 1: Complete the short questionnaire, including your contact information, health center name, brief project description with cost estimates, and project address including zip code so Capital Link can help you determine if your project is eligible for tax credit investment. To learn if your project is eligible, please submit the survey as soon as possible.
Step 2: Contact Mark Lurtz at firstname.lastname@example.org or 636-244-3082 with any questions or to provide additional information about your project.
Background: The New Markets Tax Credit Program:
In 2000, Congress passed legislation creating a new economic development tax credit program called New Markets Tax Credits (NMTC). This tax credit was designed to stimulate private investment in low-income communities. The program is administered by the Community Development Financial Institutions (CDFI) Fund under the US Department of the Treasury.
Through a series of competitive application cycles, the CDFI Fund allocates tax credits to Community Development Entities (CDEs). As organizations focused on providing financing in economically-distressed areas, CDEs work to attract investors (primarily banks and large corporations), who provide them with capital in exchange for federal tax credits. The CDEs, in turn, lend or invest this capital and other loans in businesses located in targeted census tracts to spur economic growth.
Because the service areas of many federally qualified health centers (FQHCs) overlap these specific census tracts, health centers can often qualify to utilize NMTC investments as part of their capital financing. NMTC transactions typically provide below-market, interest-only loans during the seven-year tax credit period; most transactions are also structured so that all or a portion of the original investment amount can become equity to the health center at the end of year seven—in effect, the NMTC portion of the investment does not need to be repaid.
If you’d like more information about the program, visit our website for our publication “Spotlight on Capital Resources: New Markets Tax Credits,” available as a free download to health centers and PCAs.