More than 200 Applications Received for Calendar Year 2020 NMTC Allocation Round

Published by Brad Elphick on Friday, December 11, 2020 - 12:00am

As we await the fate of the new markets tax credit (NMTC), which is set to expire Dec. 31 (with the calendar year 2020 round still to be allocated), newly released statistics from the Community Development Financial Institutions (CDFI) Fund shows allocation demand far surpasses available authority.

The 16th NMTC allocation round, which closed Nov. 16, attracted 208 applications from community development entities (CDEs) that requested $15.1 billion in NMTC allocation authority. The requested authority is more than three times the $5 billion in available authority. That demand for NMTCs exceeds supply shows the importance of the incentive, especially as the country deals with the economic fallout from the ongoing coronavirus pandemic.

Compared to calendar year (CY) 2019, an additional $1.5 billion in allocation authority was made available in the CY 2020 notice of allocation authority as a result of the one-year program extension signed by the president in December 2019. The CDFI Fund is expected to announce awardees for the 2020 round in summer 2021.

Below is a look at how this round’s demand compares to the historical NMTC applications and allocations:

Blog Table: NMTC Application Demand
Click to Enlarge

 

There was a slight increase in applications submitted over last year, though the 2020 round provides $5 billion in allocation authority compared to $3.5 billion in 2019. This could mean a greater percentage of applicants may receive awards when announcements are made next year. Compared to other rounds when $5 billion in authority was available, this seems a logical assumption to make–both the sixth and seventh rounds had $5 billion in allocating authority and 102 and 99 awards were made for each of those rounds, respectively. If a similar number of awards are announced next year, nearly 50% of applicants could expect to receive an award. A little more than 50% of applicants in the $7 billion 2015-2016 NMTC round received awards, the largest percentage to date. That round also had the greatest amount of allocations to award; it should be noted the awards that round covered CYs 2015 and 2016.

The 2020 NMTC allocation round is the final round authorized by Congress. One could surmise that the possible year-end expiration of the NMTC may have added a degree of uncertainty among CDEs and played a role in the comparatively small number of applications for the 2020 round. Permanence, or even a multiyear extension, could inspire confidence and result in an increase in applications in future rounds.

As Congress deliberates year-end legislation, community development advocates are calling for extension, if not permanence, of the NMTC as part of any bills passed in the next week. In addition to passing a budget that funds the federal government, COVID-19 relief is a priority as many Americans and businesses struggle. Congress passed a seven-day CR, to Dec. 18, to allow more time to negotiate 2021 omnibus appropriations and pandemic relief, which still needs to be signed by the president to avert a shutdown.

While a number of bills were introduced to make the NMTC permanent, an extension of the NMTC–one of 30 provisions set to expire Dec. 31–rests on the passage of other bills to which tax extenders can be attached. The larger the vehicle, such as an omnibus spending bill that includes COVID-19-related relief and other tax provisions, the more likely an extension of the NMTC can be attached.

The demand illustrated by the number of NMTC applications received and the allocations requested shows demand continues to outstrip available authority. Extending and expanding the NMTC would ensure funds are available to support low-income communities in this time when many are struggling as a result of COVID-19 and its related economic downturn.