Nearly 200 Applications Received for CY 2021 NMTC Allocation Round, Requesting Nearly Three Times the $5 Billion Allocation Authority Available

Published by Brad Elphick on Tuesday, March 1, 2022 - 12:00AM

Calendar year (CY) 2021 of the new markets tax credit (NMTC) marks the second year of the incentive’s five-year extension at $5 billion annually.

And yesterday, the Community Development Financial Institution (CDFI) Fund released data demonstrating the continued demand for the credit that still exceeds supply even after the increase in allocation. The CDFI Fund received 199 applications under the CY 2021 round (Round 18) of the NMTC incentive. Round 18 applicants are headquartered in 43 states, the District of Columbia, Guam and Puerto Rico. These community development entities requested $14.7 billion in total NMTC allocation authority, nearly triple the $5 billion available under Round 18. This demand highlights the importance of the incentive, especially as the economy continues to recover from the COVID-19 pandemic.

Below is a look at how Round 18 demand compares to the historical NMTC applications and allocations:

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The Round 18 numbers show continued, steady demand for the credit. CY 2021 data is similar to that of CY 2020 (Round 17) data. In Round 17, the first round under the five-year extension of the NMTC with $5 billion in allocation authority, the CDFI Fund received 208 applications requesting $15.1 billion in allocation authority, showing demand outpaced supply by more than three times. This is almost identical to Round 18 demand. In Round 17, 100 applicants received a NMTC award. Based upon comments made previously by CDFI Fund staff, Round 17 will likely be a good predictor of what Round 18 may look like.  Demand for NMTCs remains consistent. Applicants have requested between $14.7 billion and $19.9 billion in allocation authority every year since Round 12 in 2014.

While the incentive is just in year two of the five-year extension of the NMTC that was enacted in legislation at the end of 2020, there is still strong support for expansion and even permanence. The version of the Build Back Better Act (BBBA) the Ways and Means Committee-approved in September 2021 included proposals to make the NMTC a permanent part of the tax code initially set at $5 billion annually; index the annual allocation authority by inflation; allow investors to take the NMTC against alternative minimum tax (AMT) liability; provide $3 billion in stimulus authority to address the pandemic; and create new separate annual NMTC pools of authority for tribal areas and U.S. territories. While the BBBA version the full House passed in November and Senate draft released in December retained only the $175 million annual separate pool of NMTC authority for tribal areas, Senate NMTC champions continue to be optimistic that NMTC permanence along with annual inflation adjustments and AMT relief could be added to a revised version of BBBA when the Senate takes up the legislation. The NMTC is an important tool that is playing a significant role in rebuilding communities in the wake of the pandemic.

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