New Markets Tax Credits don’t get the same attention as state and local incentives. They’re often considered too complicated or misunderstood entirely. That’s a missed opportunity. For the right project in the right place, NMTCs can deliver a capital injection worth up to 20 percent of project costs—not tax relief over time, but real dollars at closing.

NMTCs are a federal tax credit program administered by the CDFI Fund, an office of the U.S. Department of the Treasury. Created in 2001, the program’s mission is simple: drive private capital into underserved communities. To do this, investors are provided a 39 percent tax credit over seven years. That credit is typically sold to institutional investors—often national banks—who provide capital upfront to qualified projects. The result is a financing tool that makes challenging projects pencil out and enhances ROI in ways traditional debt or equity can’t match.

The program structure isn’t simple, but it doesn’t need to be. That’s what CDEs and brokers are for. As a project sponsor or corporate decision-maker, your job is to understand what qualifies, when to engage, and why it’s worth it.

Two criteria determine basic eligibility. The project must be located in a qualifying census tract—typically one with low income or high poverty—and it must receive a qualified equity investment (QEI) from a for-profit entity. Everything beyond that makes a project more competitive, not just eligible.

Community impact matters. NMTCs exist to support job creation, improve services, and bring critical infrastructure to areas that need it. Manufacturing, logistics, health care, food access, and technical training projects tend to rise to the top. They offer measurable, accessible jobs, often for individuals without college degrees. That accessibility is key. Projects that provide a range of positions with attainable skill requirements are generally better received than high-barrier jobs in isolated facilities.

Project size plays a role. Small projects struggle under the weight of transaction costs and legal complexity. Realistically, a deal under $5 million will have a tough time getting through. A sweet spot sits between $8 million and $50 million. Projects over $100 million can still work, but the relative value of NMTCs diminishes at that scale. CDEs—Community Development Entities—typically want to deploy between $5 million and $20 million of allocation per deal, so aligning project scope to those expectations improves the chances of success.

Timing is everything. NMTC allocations are awarded to CDEs by the Treasury in rounds. Once awarded, CDEs have a very short window to close deals and deploy capital. A typical CDE wants projects in hand, fully underwritten, and ready to close as soon as allocation announcements are made. That’s why the months leading up to an expected allocation round—like right now—are the most important for project sponsors. Projects that aren’t ready to close within 12 to 18 months of first engagement are unlikely to be prioritized.

The clock also works in reverse. NMTCs can finance costs incurred within a lookback period—no more than 24 months, but realistically 12 to 18 months is safer. That gives some flexibility to capture sunk costs, but it also means long-stalled developments may be out of reach.

Financing structure can complicate things. Traditional lenders must agree to take a second position in an NMTC deal. That can be a barrier for small and regional banks unfamiliar with the program. National banks—who often buy NMTCs themselves—tend to understand the structure and work well within it. Still, deals involving first-time lenders may require additional education or advisory support to avoid slowdowns or misunderstandings at closing.

For projects that qualify and are positioned correctly, the financial impact is substantial. A $10 million project might receive $10 million in NMTC allocation. At a market rate of 79 cents on the dollar—which fluctuates between 70 and 85 cents—an investor contributes $3.9 million in exchange for the tax credits. After closing costs and fees, the project may net $2.1 million in direct, upfront financing. That’s real capital available at closing. For privately held firms or projects in capital-constrained environments, that’s a transformative boost.

State-level NMTC programs can amplify the benefit. Several states, including Illinois, Nevada, and Mississippi, offer their own NMTC programs that closely mirror the federal structure. These programs can stack, increasing the total percentage of project costs covered. They often require the same geographic eligibility and impact thresholds but navigating them in tandem with the federal program can maximize financial benefit.

Site selection professionals considering NMTCs should understand the mapping. Not every location within a city or region qualifies. Census tracts vary block by block. Qualifying tracts can also carry additional status—severely distressed or deeply distressed—that boosts competitiveness. Mapping tools, like the one developed by Five Points, allow users to input a specific address to determine eligibility and level of distress. Generalizations about a part of town aren’t good enough. Site-level detail matters.

Working with an advisor or broker is strongly recommended. CDEs are overwhelmed with project proposals and limited in allocation. A qualified advisor increases a project’s credibility and closing likelihood. Advisors also manage underwriting, facilitate legal and lender alignment, and guide all parties through modeling, documentation, and compliance. Approaching a CDE directly—especially in a large double allocation round like the one coming this year—is unlikely to yield results.

Now is the time to prepare. A new $10 billion allocation round will be announced in the coming months. CDEs are lining up potential deals now to meet their threshold requirements. That process will move quickly once awards are announced. Projects that are ready—or nearly ready—stand the best chance of securing allocation.

NMTCs are not a silver bullet. They are not simple. But they are powerful. For projects in qualifying areas with measurable community impact, New Markets Tax Credits can provide millions in upfront capital that make a good deal even better. With the right team and the right timing, NMTCs are one of the most underutilized tools in the site selection toolbox.