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