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What is this?
How projects get approved for TDA
Application and approval process
What does this mean for the proposed resort project?
What can be done about this? And what is RRGU doing about this?
The New Market Tax Credits (NMTC) Program is a federal program that incentivizes community development and economic growth through the use of tax credits that attract private investment to distressed communities. The NMTC Program has supported a wide range of businesses including manufacturing, food, retail, housing, health, technology, energy, education, and childcare. The idea is that communities benefit from the jobs associated with these investments, as well as greater access to community facilities and commercial goods and services.
The NMTC Program attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years.
Basically loans for investment into qualified projects in low-income census-tract areas can be subsidized in-part in the form of federal tax credits over seven years.
Only CDE’s can apply for NMTCs. The CDE is allocated a certain amount of NMTCs and is then responsible for selecting which projects receive the benefit of the investment.
Any project hoping to receive NMTC must partner with an existing CDE and hope that the group will assign part of its awarded NMTC allocation to the project. The CDE can use a project’s details when applying but a project can be awarded NMTC by a CDE without already being in the pipeline. Once the CDE receives the allocation of credits, it is up to their discretion to decide how they are distributed among projects.
The competition among projects for NMTCs is also very competitive. To attract a CDE, a project will need to demonstrate how it will benefit the low-income community of which it will be a part. Those projects that can demonstrate substantial community impacts are nearly always favored.
CDEs apply to the government once per year, usually. The CDE application process for NMTCs is very competitive with only a fraction of total CDE applicants being successful each year. Many CDEs write into their applications specific projects in which they are looking to invest.
Once approved, a CDE will receive a portion of its requested allocation of NMTCs which the group will then decide how to distribute, at their discretion, among a variety of projects which they favor. CDEs are awarded the allocation of NMTC from the federal government and they ultimately decide which project receive the benefits.
If a resort development wanted to seek New Market Tax Credits (NMTC) they could not apply themselves. Instead, resort developers would need to work with many different CDEs and have those groups designate the resort as recipients of some of their allocation of NMTCs. Any CDE can allocate to the project some of their available NMTCs, and in the Stantec report Incentives section the author suggests “casting a wide net” to potentially build a larger sum by collecting NMTCs through many sources rather than just a few.
In the RRED RFQ from 1/6/21, they estimate $20,000,000 as a value of NMTC the project could potentially receive from a variety of CDE groups.
Unfortunately, the allocation of NMTC is at the discretion of the CDE which received the initial allocation. If a CDE sees this as a worthy project they can choose to allocate as much or as little of their available NMTCs to the project as they please. The best thing we can do is spread our message about how we thing this resort is wrong for this area.
However, even if one or several CDEs can be convinced to oppose the development and not allocate any credits to the project there are still many more out there that may be willing. And again, distribution of the credits are at the discretion of the CDE after they have received their allocation from the federal government.
The best thing we can do at RRGU is to continue to highlight the negative characteristics of the project in the hopes that as many CDEs as possible just ultimately choose against assigning some of their NMTC to the project.
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