U.S. Bancorp Impact Finance believes all communities should have equitable access to opportunity and growth. New Markets Tax Credits (NMTCs) and other tax credits support business growth and job creation, helping to close longstanding economic gaps in distressed and underserved communities of color that have been disproportionately affected by generations of disinvestment.
NMTC projects involve real estate construction and rehabilitation, capital, equipment and operating funds for both nonprofit and for-profit organizations. The goal of the program is to encourage private capital investment in underserved urban and rural communities.
We invest in NMTCs to fund projects, then assist with all aspects of the financial transaction and regulatory compliance. We can act as a:
NMTCs work best with well-defined eligible projects that bring tangible benefits to distressed communities. Examples of qualifying projects include:
Projects must be in a Qualifying Census Tract in a highly distressed area and meet at least one of these criteria:
NMTCs can be combined with federal and state HTCs, which encourage private-sector investments to restore and re-use historic buildings. These projects preserve our nation's history and serve as a local economic engine, bringing new affordable housing, amenities and employment opportunities to communities in need.
We use our expertise in state and federal HTC investments to help you restore and preserve historic properties in your community.
Historic Tax Credits can come from federal or state governments and can be used to rehabilitate a range of properties, such as multi-family housing, certified historic structures, office buildings, community facilities and more.
U.S. Bancorp Impact Finance can tailor solutions to your needs and goals. Talk to us about direct federal HTC equity investments, direct state HTC equity investments (available in certain states) and other financing types to move your project forward.
Certain situations may allow for combining New Markets Tax Credits with Historic Tax Credits. This process, sometimes referred to as “twinning”, can allow you to raise additional equity for your project.
You can discuss this specialized approach with our team to determine if your project qualifies and whether twinning would be advantageous to you.
U.S. Bank was among the investors who helped fund the Tate Etienne and Prevost Center (TEP Center) in New Orleans. The Center is a mixed-use facility offering affordable housing for seniors and the Lower Ninth Ward Living Museum.
The historic building was formerly the McDonogh 19 Elementary School, a place that played a pivotal role in school desegregation during the civil rights movement.
New Markets Tax Credits are administered by the U.S. Treasury’s Community Development Financial Institutions Fund (CDFI Fund). The CDFI Fund annually provides credits to dozens of Community Development Entities (CDEs), which in turn provide credits to real estate projects and operating businesses to close financial gaps.
Here are two key restrictions to keep in mind:
NMTCs work well for projects with a minimum cost of approximately $4 million. Below that level, the costs can exceed the benefits.
Multiple CDEs often combine their tax credits to achieve the necessary scale for a project. Typically, each CDE may support $5 million to $10 million of project value. Thus, a $25 million project may require three to five CDEs. As a result, maximum project value rarely exceeds $50 million.
New Market Tax Credit funding can provide 20-25% of a project’s costs in the form of interest-only loans that can be forgiven or restructured after seven years.
Federal HTCs can provide up to 20% of the qualified rehabilitation expenses associated with returning a historic property to use. In addition, many U.S. states—almost 40 —also offer a 25% state-level HTC that can be used to further boost the benefit of this important restoration tool. Because Historic and New Markets Tax Credits can be utilized in the same project, it is possible to offset more than 50% of total costs by combining the four types of tax credits: state and federal NMTCs and state and federal HTCs.
When a project uses NMTCs or HTCs, the remaining funds needed to finance the project can come from various other sources, such as:
Among other requirements, federal HTCs may be utilized for a wide variety of properties, including income-producing commercial, industrial, and rental residential facilities. HTCs cannot be used for owner-occupied residential properties.
The National Park Service (which oversees historic standards and maintains the National Register of Historic Places) and the National Trust for Historic Preservation (which advocates for the preservation of America’s architectural history) both can help you get started with HTC programs.
We offer a full suite of products and services, including tax credit financing. Renewable Energy Tax Credits (RETC) help provide clean energy options to our nation's homes, towns and businesses. Solar, wind and other types of projects are not only good for the environment, they also create jobs for local communities.
Low Income Housing Tax Credits (LIHTC) offer federal subsidies that help finance the construction and renovation of low-income rental housing. Our platform provides affordable housing lending to bring safe and affordable housing to those who need it most.
Meet your financial goals while generating positive social or environmental benefits. We pair qualified investors seeking attractive after-tax returns with customized state and federal tax credit investment portfolios. These new and vital sources of capital stimulate community and economic development projects.
U.S. Bancorp Impact Finance has expertise spanning all types of tax credit financing. Reach out to our team to discuss how we can help support your organization and community.
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