New Markets Tax Credits Will Spur Investments in North Carolina’s Low-Income Communities

March 23, 2012 at 12:32 pm

Earlier this month, TD Bank, headquartered in Toronto, CA, was selected to receive a $65 million New Markets Tax Credit (NMTC) allocation. These tax credits will be used to make investments in urban and rural low-income areas in Florida, North Carolina, and South Carolina.

The New Markets Tax Credit Program was established in 2000 as part of the Community Renewal Tax Relief Act, with the goal of incentivizing revitalization efforts in low-income and impoverished communities. It provides tax credits to investors for equity investments in certified Community Development Entities (CDE), which invest in low-income communities. The credit equals 39% of the investment paid out (5% in each of the first three years, then 6% in the final four years, for a total of 39%) over seven years. CDEs, defined as, “a domestic or partnership that is an intermediary vehicle for the provision of loans, investments, or financial counseling in Low-Income Communities (LICs),” must be certified through the Community Development Financial Institutions (CDFI) Fund, must be a legal entity, and have a primary mission of serving LICs (more on CDEs here).

TD Bank’s NMTC allocation will have an immediate impact on small businesses and communities across North Carolina.  Research has shown that every $1 in foregone tax revenues due to the NTMC results in $14 of investments in LICs.  TD bank has 23 branches in North Carolina, primarily in the southern and western parts of the state. The NMTC allocation will help borrowers access financing for the purchase, construction, and renovation of real property. It will provide qualifying businesses with below-market interest rates and more flexible loan terms like longer amortizations and higher loan-to-value ratios. The types of businesses that will be directly impacted include charter schools, commercial real estate developers, child care providers, churches, and other nonprofits. This is particularly important now, as many small businesses cannot access affordable financing from traditional lenders, either due to the cost or due to the tightened qualifying criteria for loans.

Ed Timberlake, Small Business Lending Manager


Entry filed under: CDFI, Economic Development, Small Business. Tags: , , .

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