New Market Tax Credit Program Defined
The New Market Tax Credit (NMTC) program was a product of the bipartisan legislation enacted in the Community Renewal Tax Relief Act of 2000. The program uses tax incentives to attract private capital investments in both urban and rural low-income areas of the United States. The idea behind the NMTC legislation was that there are good business opportunities in low income communities, but the cost and scarcity of capital in these ‘New Markets’ is a substantial impediment to spurring economic growth. To date in the 15 rounds of the program, the CDFI Fund has made 1,178 allocation awards totaling $57.5 billion of NMTC’s have been awarded through Community Development Entities (CDE). CDE’s compete in the application process for annual allocations of New Markets Tax Credits. Once a CDE receives an award allocation it then acts as a financial intermediary which the capital investment flows through from the NMTC investor to the Qualified Active Low-Income Community Business (QALICB). NMTC investments have financed a wide variety of operating businesses and real estate projects, including manufacturers, health care and child care providers, charter schools, supermarkets and alternative energy companies. To date the NMTC program has been one of the US governments most efficient job creators devised. Through the end of 2018 the NMTC program had created over 1,000,000 jobs.
Typical Project Profile
CHHS invests in urban and rural areas across the United States in businesses that provide direct healthcare to severely economically distressed communities. This financing can be for development, modernization and operations of community medical facilities. The typical size of projects financed by CHHS is from $5 to $30 million. A major factor in whether to fund a project or not is job creation, both short term construction jobs as well as full time employment positions. We look for the project to be aligned with the community vision and goals, as well as serve a vital need for the community. To this end we will have discussions with community stakeholders as well as look for letters of support from local officials supporting the development of the project.
Transaction Funding Process Summary
Our process starts once we receive a completed application, our team will review the application within 3-5 days. Once projects have been determined to meet or exceed our internal criteria, projects are presented to our advisory board for their final approval. Frequently projects under consideration have lined up consultants, lawyers as well as bank financing, but we will also work as a strategic partner through the process. Due to our streamlined approach, CHHS has garnered a reputation for closing projects in a timely fashion and in a professional manner. We also pride ourselves on making quick and sound decisions, open and honest communications with all parties and a great team of advisors. Prior to closing of a project, CHHS require that the QALICB must enter into a Community Benefits Agreement. A Community Benefits Agreement is used to ensure that the investment capital is used to address additional economic and community development goals for positive and sustainable impacts. Typical impact goals are associated with meeting key job creation numbers or driving key community benefits such as supporting local education initiatives, reduced rents for non-profit organizations, or job training.
CHHS Priority Weighing
CHHS historically receives significantly more requests for funding than our allocation allows. This necessitates a thorough pragmatic review of individual project attributes in relationship to our core mission.