By Jeff Cotton, CEO of True Mountain Capital

Securing New Markets Tax Credit (NMTC) financing can be transformative for companies and organizations developing or expanding facilities in underserved communities. However, navigating the complexities of the NMTC program requires expertise, strategic planning, and the right partnerships. True Mountain Capital distinguishes itself as a leading consulting firm uniquely positioned to assist clients in obtaining NMTC funding.

With nearly $500 million in financing closed for approximately $750 million in project capitalization, True Mountain Capital brings over a decade of experience to the New Markets and Historic Tax Credit industry. This extensive experience aids clients in navigating the complex NMTC process effectively.

Comprehensive Approach to Financial Solutions

We employ a holistic approach to financial solutions, combining debt, equity, and tax strategies to meet the unique demands of each client. This approach ensures that every project is equipped to maximize potential subsidies appropriately aligned with the client's goals.

Our proprietary True Mountain Summit™ platform enhances efficiency by streamlining the sourcing, qualification, structuring, and management of all phases of project development. This technological leadership allows clients to successfully navigate the NMTC funding process with reduced complexity and increased chances of success.  To obtain a detailed analysis of your project and a demo of Summit™ please use the following request form.

Tailored Consulting Services

True Mountain Capital offers a wide range of consulting services tailored to client needs. Our hands-on approach ensures active involvement from initial evaluation through project funding, construction and operations. Services range from initial eligibility and community benefits analysis, to financial structuring and modeling, to financial closing management and execution, as well as back-end whole loan trading.

Strategies for NMTC Success

To ensure success in obtaining NMTC financing, the following strategies are essential:

1. Thorough Understanding of Eligibility Criteria:
• True Mountain Capital helps clients assess their projects against NMTC eligibility criteria, which include factors such as poverty rates, median family income and unemployment levels within the targeted community​.  We also offer a free online tool that allows clients to rapidly determine eligibility for each of these factors.
2. Strategic Project Structuring:
• Proper structuring of projects is crucial to meet the requirements and attract investor interest. True Mountain Capital guides clients in structuring deals that maximize tax credit benefits while aligning with community development goals​
3. Collaboration with Local Stakeholders:
• Engaging local stakeholders, including community leaders and organizations, is vital for gaining support and ensuring that projects address real community needs.
4. Effective Use of Data and Analytics:
• Utilizing data-driven insights to identify opportunities and optimize project impact is a key strategy. True Mountain Capital leverages data analytics and artificial intelligence to help clients make informed decisions throughout the NMTC process
5. Long-term Vision and Sustainability:
• Focusing on the long-term sustainability of projects ensures lasting impact. True Mountain Capital emphasizes strategies that promote economic growth and community revitalization beyond the initial NMTC funding​

Your Partner in the NMTC Funding Process

The NMTC process can be challenging and time-consuming, with timelines ranging from several months to over a year. Our expertise and hands-on approach provide clients with the guidance and support needed to successfully navigate this process, from understanding eligibility criteria to structuring projects for maximum impact.

True Mountain Capital is the ideal partner for obtaining NMTC financing with our unique blend of industry knowledge, comprehensive financial solutions, innovative technology, and commitment to community development. By choosing True Mountain, clients will gain a trusted partner in achieving NMTC funding success.  For more information please contact us at True Mountain Capital .

Warm regards,

Jeff Cotton
President & CEO
True Mountain Capital, LLC
jcotton@truemountaincapital.com
(901) 347-7276

At True Mountain Capital, we understand that determining New Markets Tax Credit (NMTC) eligibility can be a complex and time-consuming process. That's why we're excited to introduce our new NMTC Eligibility Mapping Tool, designed to streamline this process and provide you with accurate, up-to-date information at your fingertips.

Why We Created the NMTC Eligibility Mapping Tool

Our mission has always been to support community development and investment in underserved areas. The NMTC Eligibility Tool is a significant step toward that goal. By providing a user-friendly, efficient, and accurate way to check NMTC eligibility, we're making it easier for developers, planners, and investors to bring their projects to fruition.

Key Features of the NMTC Eligibility Mapping Tool

1. User-Friendly Interface

We designed the tool with simplicity in mind. Whether you're a seasoned developer or new to the NMTC program, our intuitive interface ensures you can easily enter information and get the results you need.

2. Comprehensive Data Integration

The tool uses the most recent data from the Community Development Financial Institutions (CDFI) fund and the 2020 US Census American Community Survey (ACS). This ensures that our eligibility assessments are based on the latest information, giving you confidence in the results.

3. Instant Results

Time is of the essence in community development projects. Our tool provides immediate results, so you can quickly determine if your area qualifies for NMTC incentives and move forward with your plans.

4. Detailed Reporting

Transparency and documentation are key in any project. Our tool generates detailed reports that outline the specific criteria and data points used in the eligibility determination. This can be crucial for securing funding and support.

5. Interactive Map Visualization:

Understanding the geographic distribution of NMTC-eligible areas is easier with our interactive map. It visually displays eligible and non-eligible zones, helping you make informed decisions about where to focus your efforts.

How to Use the NMTC Eligibility Mapping Tool

Using our tool is straightforward and efficient. Here’s how you can determine NMTC eligibility for your potential NMTC project:

Step 1: Access the Tool

Visit our website and navigate to the NMTC Eligibility Tool at https://truemountaincapital.com/explore/nmtc/eligibility-tool/.

Press the “Get Started” button on the right.

Step 2: Enter Address Information

Input the address for the area you’re interested in. Just type in the full address to specify the location.

Step 3: Submit the Information

Click the "Check Eligibility" button to submit your information. Our tool will analyze the data and automatically select the matching 2020 census tract used to determine eligibility.

Step 4: Review the Results

The tool will display whether the area is eligible for NMTC incentives. If it is, you will receive a report outlining the demographic and economic factors considered in the determination. This report can be shared with stakeholders or used in your project planning documentation. 

The Benefits of Our NMTC Eligibility Mapping Tool

• Efficiency: Quickly determine NMTC eligibility without the need for complex manual calculations.
• Accuracy: Rely on up-to-date CDFI and ACS data for precise results.
• Accessibility: Our online tool is available 24/7, allowing you to check eligibility at your convenience.
• Clarity: Detailed reports provide transparency into the eligibility determination process, supporting your project’s credibility and planning efforts.

At True Mountain Capital, we’re committed to supporting community development and investment in underserved areas. Our NMTC Eligibility Tool is a powerful resource that simplifies the eligibility determination process and provides detailed, accurate results. We invite you to explore the tool today and see how it can help unlock the potential of NMTC incentives for your next project.  If you have an eligible project, please contact us at True Mountain Capital to help us guide you thru the NMTC funding process.

Thank you for choosing True Mountain Capital as your partner in community development. Together, we can make a difference.

By Jeff Cotton, CEO - True Mountain Capital

Introduction

The New Markets Tax Credit (NMTC) program is a powerful tool for spurring economic development in underserved communities. Understanding the application process is crucial for businesses and organizations aiming to leverage this opportunity. 

What is the NMTC?

Congress established the NMTC program in 2000 to encourage private investment into low-income communities. The New Markets Tax Credit (NMTC) Program is managed by the Community Development Financial Institutions Fund (CDFI Fund), which is part of the U.S. Department of the Treasury. Investors receive tax incentives in exchange for equity investments in Community Development Entities (CDEs), which then invest in qualified businesses and projects. 

The NMTC application process

1. Pre-Application Preparation

Before applying for the NMTC, ensure your project meets the eligibility criteria. You can use the True Mountain Capital NMTC Eligibility Tool to quickly determine this.  Gather essential documents, such as business plans, financial statements, and impact projections. Partnering with a firm like True Mountain Capital is crucial to understanding eligibility and navigating the application process.

1. Information Required for the NMTC Application

Business and Project Details: Describe your business, its mission, and the project for which you seek NMTC funding.

Financial Projections and Statements: Provide detailed financial forecasts, past financial performance, and funding needs.

Community Impact Analysis: Explain how your project will benefit the community, including job creation, services provided, and economic growth.

Governance and Management Information: Outline the qualifications and experience of your leadership team.

Compliance with NMTC Regulations: Demonstrate your understanding of and commitment to NMTC compliance requirements. 

1. The application submission

True Mountain Capital can provide an NMTC “intake” form which will completely itemize the items you need to provide. Complete this form meticulously, ensuring all the information is provided.

The Application Process 

The flow chart below shows the structure and financial entities involved in the NMTC application process.

• CDFI Fund: A subset of the U.S. Treasury that administers the NMTC program, annually awarding $5Bn of NMTC allocation authority to CDEs.
• CDE (Community Development Entity): An organization certified by the CDFI Fund that applies for NMTC allocation and deploys that allocation into NMTC-eligible projects. CDEs receive the Investor’s equity and the Leverage Loan
• Investor: An individual or entity that makes an upfront equity investment into a NMTC-eligible project, in exchange for a 7-year stream of New Markets Tax Credits.
• Leverage Lender: An entity, typically affiliated with the Sponsor, that provides debt (the “Leverage Loan”) into a fund where it can be pooled with an equity investment from the NMTC Investor and ultimately lent to a QALICB to improve property.
• Investment Fund: A special purpose vehicle that (a) pools the capital provided by the leverage lender and the NMTC Investor and (b) funds a Qualified Equity Investment into one or many CDEs.
• QALICB (Qualified Active Low-Income Community Business): A business in a low-income, severely distressed census tract that creates many jobs and/or provides goods and services to the surrounding Low-Income Community

Please note that the CDE and project developer are required to monitor and report the project outcomes to ensure compliance with NMTC program requirements.

The timeline for the NMTC Application and Approval.

The timeline from application submission to final decision can vary, but typically ranges from several months to over a year. Factors influencing the timeline include the application's completeness, the demand for NMTC allocations, and the project's specific details. 

Conclusion

Navigating the NMTC application process requires careful preparation and a thorough understanding of the requirements. By following these steps and working closely with a company like True Mountain Capital, businesses and organizations can successfully leverage NMTC funding to drive community development and economic growth.

Warm regards,

Jeff Cotton
President & CEO
True Mountain Capital, LLC
jcotton@truemountaincapital.com
(901) 347-7276

Let’s now look at reports by State for the NMTC (New Market Tax Credits) program to determine where the highest needs are.    NMTC program eligibility is based on demographic data from the 2020 American Community Survey published by the US Census.  This is a five-year survey covering the years 2016 to 2020.

The Community Development Financial Institutions (CDFI) fund has created a spreadsheet to analyze the ACS demographic data by census tract.    This spreadsheet can be obtained at the following link:

CDFI Fund Spreadsheet Download

This spreadsheet indicates that of the 85,395 census tracts in the country there at 35,167 tracts that qualify as a Low Income Community (LIC) for the NMTC program.   This is an overall eligibility rate of 41.18%.   Your project must be in one of these eligible tracts to be considered for NMTC funding.   You can determine what census tract your project is in using the free True Mountain Capital NMTC Eligibility Tool.

Organizing this data by state ranked by the total number of eligible count census tracts leads to the following Top 10 Report

As you can see ranking this way puts an emphasis on the largest states.   The ranking by the state percentage of eligible tracts which follows may be a better indicator of need.

Tracts that are classified as having “Severe Distress” have a greater probability of funding for the NMTC program.  These are tracts that have a designation of “Eligible with Severe Distress”, “Eligible with Severe Distress and Non-Metropolitan”, “Eligible and Non-Metropolitan” by True Mountain.   Looking at the Top 10 ranking by the % of Severe Distress leads to the following :

A spreadsheet which covers all 50 states with the underlying data can be found at:

State NMTC Report.xlsx (21.96 kb)

Please note that NMTC Eligibility is not a guarantee of funding.   Many other factors must be considered for success.   Feel free to contact us at True Mountain Capital for additional information.

At True Mountain Capital, we look at eligibility criteria beyond just meeting the minimum required for the New Markets Tax Credit (NMTC) program.  Census tracts that show significant economic distress or are in rural areas will have higher priority of funding.  Currently, the 2020 American Community Survey by the US Census is used to determine eligibility which considers data over the 5 year from 2016 to 2020.

Base Eligibility for New Markets Tax Credits

To be eligible for NMTC Allocation, a project must be located within, or provide the majority of its services in, a Qualified Census Tract, which is a census tract with:

1. Poverty Rate: The poverty rate of the census tract must be 20% or higher
2. Income Levels: The median family income (MFI) must be at or below 80% of the statewide median family income

Severe Distress Criteria

A census tract is considered to be "Severely Distressed" if it exhibits particularly acute signs of economic hardship. The criteria used to define severe distress are more stringent than those used for base eligibility under the NMTC eligibility guidelines. Here are the key criteria evaluated for severe distress:

1. Poverty Rate: The poverty rate of the census tract must be 30% or higher.
2. Income Levels: The median family income (MFI) must be at or below 60% of the area median income (AMI) or the statewide median, whichever is greater.
3. Unemployment Rate: The unemployment rate in the census tract must be at least 1.5 times the national average.

Tracts meeting any of these Severely Distressed criteria are considered highly challenged economically and are therefore prioritized for investment under the NMTC program to spur economic development and revitalization.

Eligibility for Non-Metropolitan Tracts:

Non-metropolitan tracts are census tracts located in regions that are not classified as part of Metropolitan Statistical Areas (MSAs). These areas are typically rural and might not have the high population densities seen in urban areas. Non-metropolitan status is a significant factor in evaluating eligibility for the New Markets Tax Credit (NMTC) program, as the program aims to encourage investment in both urban and rural underserved communities. 

By incorporating non-metropolitan tracts into the eligibility criteria, the NMTC program ensures a broader and more equitable distribution of development efforts, aiming to uplift communities that might otherwise be overlooked in economic development strategies. This approach helps to balance the focus between urban and rural development needs.

Areas of Higher Distress

If a project is in a census tract that is eligible but not in severe distress or non-metropolitan area, then other factors can be considered, to the extent the project directly addresses those other factors present in the Census Tract.  These include but are not limited to:

1. 25/70/1.25 Criteria- Census tracts with one of the following: (i) poverty rates greater than 25%; or (ii) if located within a non-Metropolitan Area, median family income that does not exceed 70% of statewide median family income, or, if located within a Metropolitan Area, median family income that does not exceed 70% of the greater of the statewide median family income or the Metropolitan Area median family income; or (iii) unemployment rates at least 1.25 times the national average
2. Small Business Administration (SBA) HUB Zones
3. Brownfield sites as designated by the (EPA) Environmental Protection Agency
4. Federally designated as Native American or Alaskan Native areas, Hawaiian Homelands
5. Areas designated as distressed by the Appalachian Regional Commission or Delta Regional Authority
6. Colonias areas as designated by the U.S. Department of Housing and Urban Development
7. Federally designated medically underserved areas
8. Federally designated Opportunity Zones and Enterprise zones
9. Census tracts identified as Food Deserts under the HFFI definition (USDAERS
10. Counties for which the Federal Emergency Management Agency (FEMA) has issued a “major disaster declaration” within the last 36 months.

True Mountain Capital Eligibility Categories.

Given the above, True Mountain Capital designates both census tracts and proposed projects in the following categories.

1. Eligible with Severe Distress
2. Eligible and Non-Metropolitan
3. Eligible with Severe Distress and Non-Metropolitan
4. Eligible Area of Higher Distress
5. Eligible
6. Not Eligible

These categories help to ensure that the NMTC program targets resources towards the communities that need them the most, promoting equitable economic development across various regions.  For guidance on the qualification factors for your project feel free to contact us at True Mountain Capital

The New Markets Tax Credit (NMTC) program, established by Congress in the year 2000, is a critical financial mechanism designed to stimulate investment and economic growth in low-income urban and rural communities. This initiative provides tax credit incentives to investors for equity investments in certified Community Development Entities (CDEs), which in turn invest in low-income communities. Here's a comprehensive guide on how this program works and how communities can qualify for it.

What is the New Markets Tax Credit Program?

The NMTC program aims to address the lack of investment capital in economically distressed communities. It offers a 39% tax credit over seven years to investors (US Bank, Capital One, Chase, as examples) that make an equity investment in CDEs. The CDE’s, in turn, invest that equity along with capital provided by the Project Sponsor into projects to support businesses and property located in Low Income Census Tracts. 

The credit equals 5% of the amount invested for the first three years and 6% for the subsequent four years. This tax incentive encourages the flow of private capital into areas that traditional financial institutions often overlook.

How Does the Program Work?

The process begins with the Community Development Financial Institutions Fund (CDFI Fund), part of the U.S. Department of the Treasury, which administers the NMTC program. The CDFI Fund allocates an annual $5bn of tax credit allocation to qualified CDEs based on a competitive application process. These CDEs then seek projects located within low-income communities across the country. Investors receive tax credits in return for providing funding to the CDEs, which use these funds to finance business developments, real estate projects, and other community enhancements.

How Can You Qualify?

To benefit from the NMTC program, a project must reside in a community that  meets specific criteria:

1. Area's Income Levels: The community should be in a census tract with a poverty rate of at least 20% or median family income does not exceed 80% of the area median.  These levels are currently based on the US Census American Community Survey for the years 2015-2020.
2. Economic Distress Indicators: Communities might also qualify based on a census tract’s unemployment rate or other indicators of economic distress.
3. Designation as a Qualified Low-Income Community (LIC): This is the primary qualification for receiving investments through the NMTC program.

Steps to Take Advantage of NMTCs

1. Identify Eligible Areas: Applicants need to determine if they fall within the eligible census tracts by providing an address to a True Mountain Capital representative.
2. Develop Investment-ready Projects: Prepare project plans that are attractive to investors, demonstrating strong job creation and positive community impact that addresses the underlying issues affecting the surrounding area.
3. Advocacy and Partnerships: Engage local leaders and stakeholders to advocate for projects that qualify under the NMTC. Building partnerships can enhance the project's credibility and attract more investment.
4. Monitor and Report Outcomes: Once a project is funded, the CDE will require ongoing monitoring and reporting of financial and social impact help sustain investor confidence and can support future funding applications.

Please feel free to contact us at True Mountain Capital if you have eligible projects.   We can guide you through the complexities of the application process and present your project to prospective CDE’s.

Conclusion

The New Markets Tax Credit is a potent tool for community development, offering a substantial incentive for investors to invest in regions they might otherwise overlook. Understanding how to qualify and attract these investments is critical. By actively engaging in the NMTC process, communities can leverage this program to foster significant economic development and revitalization, turning areas of economic distress into hubs of opportunity.

By Jeff Cotton, CEO of True Mountain Capital

Dear Friends, Partners, and Future Collaborators,

Today marks a significant milestone for True Mountain Capital as we introduce ourselves to the New Markets Tax Credit (NMTC) marketplace.  Our intent with this blog is to communicate our companies’ goals as well as our commitment to fostering economic growth, sustainability, and resilience in underserved communities.

For those unfamiliar with the NMTC, it is a federal incentive program that attracts private investment to low-income urban neighborhoods and rural communities, providing a much-needed catalyst for revitalization. Since its inception in 2000, the NMTC has proven to be an invaluable tool for fostering economic development, generating $8 of private investment for every $1 of federal funding.  The NMTC program aligns perfectly with our mission at True Mountain Capital - to not only achieve outstanding financial returns but also to make a profound, positive impact on the world around us.

Our experience is what sets True Mountain Capital apart in the NMTC marketplace along with our unwavering commitment to integrity, transparency, and partnership.  True Mountain Capital's internal advisory team has over a decade of experience in the New Markets and Historic Tax Credit industry, with over $500 million in financing closed for approximately $750 million in project capitalization. We’ve also established technology leadership with our Summit™ software which is tailored to rapidly finding and managing projects thru the NMTC application process.

We believe in building long-term relationships with our stakeholders, based on mutual respect and shared values. Our goal is to be more than just a source of funding; we aim to be a valued partner in community development, working together with local leaders, businesses, and organizations to unlock potential and create lasting change.

As we embark on this journey, we invite you to join us. Whether you are an investor looking to make a meaningful impact, a community leader seeking innovative solutions, or simply someone passionate about driving positive change, we welcome your thoughts, ideas, and support. Together, we can turn the tide of economic disparity and build a brighter future for all.

Stay tuned for more updates, insights, and success stories from the field. The frontier of economic growth is wide open, and we are just getting started.

Thank you for your support and belief in our vision. Here’s to a future where every community can thrive.

Warm regards,

Jeff Cotton
President & CEO
True Mountain Capital, LLC
jcotton@truemountaincapital.com
(901) 347-7276