New Markets Tax Credits Under OBBBA

OBBBA brings long-term certainty to a community development tool that has been shaping investments for over twenty years: the New Markets Tax Credit (NMTC) program.

The program has always been a powerful way to channel private investment into low-income communities, but its temporary status often left both investors and business owners wondering whether the opportunity would continue.

OBBBA makes NMTCs a permanent part of the tax code.

How the Program Worked Before

The NMTC program originally gave investors a strong incentive to put money into projects in distressed areas. They could claim a federal tax credit equal to 39% of their investment, spread over seven years: 5% annually for the first three years and 6% annually for the next four.

To qualify, investments had to flow through Community Development Entities (CDEs), which are certified by the Treasury’s CDFI Fund. These entities then provided loans, equity, or technical assistance to qualified active low-income community businesses (QALICBs). Eligible businesses and projects had to be located in census tracts with a poverty rate of at least 20% or a median family income at or below 80% of the area median.

While the program provided $5 billion annually in allocation authority, it was never permanent. Each round of extensions left stakeholders facing uncertainty about whether NMTCs would be available for their long-term projects.

What OBBBA Changed

OBBBA didn’t alter the mechanics of the credit itself. The 39% structure, eligibility criteria, and reliance on CDEs remain the same. What it did do, however, is monumental:

In short, the program looks and functions the same, but permanence makes it far more predictable and attractive.

Why This Matters for Business Owners

For businesses located in qualifying communities, this shift opens the door to more predictable financing opportunities. CDEs can now think long-term, which translates into a greater willingness to fund projects that may take years to develop.

Business owners stand to gain in several ways:

The catch? Competition remains high, and projects must be shovel-ready to attract NMTC support.

What To Do Next

If you think NMTC financing could benefit your business, the first step is figuring out whether you’re even in the right location.

The CDFI Fund’s CIMS Tool allows you to check your census tract eligibility quickly. From there, start building relationships with CDEs. These organizations decide where NMTC dollars flow, and having early conversations can give your project a leg up.

When approaching a CDE, make sure you have a strong business plan, clear community impact benefits, and financial projections that show sustainability.

Finally, think creatively. NMTCs can often be combined with other credits, such as renewable energy incentives or housing credits, to strengthen your financing package.

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The Bottom Line

By making New Markets Tax Credits permanent, OBBBA removed the uncertainty that has long shadowed the program.

For business owners, this means a more stable environment for seeking NMTC-backed financing and a better chance to attract investment into projects that improve local communities.