And the Winner Is: 2013 New Markets Allocation Awards Reflect Further Shift Toward Financing Businesses

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The U.S. Treasury and the Community Development Financial Institutions Fund announced the award of $3.501 billion in federal new markets tax credit allocation authority to 87 community development entities (CDEs) on June 5.

The program’s 11th funding round was more competitive than the previous application cycle, and the new awards reflect a dramatic increase in the intent of the recipients to use new markets tax credit proceeds to finance operating businesses rather than real estate projects.  “The new markets tax credit program creates jobs and critical investments in low-income neighborhoods and rural communities across the nation,” said Amias Gerety, Treasury Acting Assistant Secretary for Financial Institutions. “Often the new markets tax credit is the most critical piece of the puzzle when trying to finance important economic development projects across the country. Its ability to attract private-sector capital into some of the most economically distressed and underserved communities is a hallmark of this important program.”

The calendar year 2013 funding awards will help the successful CDEs finance a wide variety of businesses and projects in low-income communities nationwide. Thirteen recipients are CDEs affiliated with firms or organizations that are members of the National Housing & Rehabilitation Association. (See pp. 40-41 for chart showing all allocation recipients.)

Applications for the latest funding round were submitted in 2013. The latest awards will be the last unless Congress passes legislation renewing the NMTC program, authorization for which lapsed at the end of 2013.

Trends in 2013 Awards

The 87 allocatees are headquartered in 32 different states and the District of Columbia.     Trends in the 2013 round awards include:

  • Slightly more awards in a narrower range of sizes. Eighty-seven CDEs received $3.501 billion in awards, ranging from $15 million to $60 million and averaging $40.2 million. In the 2012 round, for which awards were announced in 2013, 85 allocatees received $3.5 billion, ranging from $15 million to $80 million and averaging $41.2 million. This year there were 11 awards of $60 million. In the 2012 awards, 16 CDEs received allocations of $60 million or more.
  • Greater competition. Only 28.1% of the total 310 CDEs that requested an allocation received one, compared to 30.1% of the 282 applicants in the 2012 round. In the current round, applicants requested a total $25.9 billion (average request: $83.5 million), and the amount awarded was just 13.5% of the total requested. In the 2012 round, applicants requested a total $21.9 billion (average request: $77.1 million), and the amount awarded was 16% of the total requested.
  • Fewer first-timers. Only 5 allocatees (5.7%) were first award recipients, down from 12 (14.1%) in the 2012 round.
  • A larger share for business investment. The allocatees expect to use approximately $2.575 billion in NMTC proceeds (75% of the total) to make loans to or equity investments in operating businesses, up sharply from 58.7% in the 2012 round. They plan to use just 24.2% to make loans to or equity investments in real estate, compared to 40.7% in the prior round, and to use only 0.6% of their proceeds to provide capital to other CDEs, the same as in the 2012 round. Until the 2011 round, allocatees in each application cycle intended to invest the largest share of their NMTC proceeds in real estate projects.
  • Increased local focus by CDEs. Twenty-two percent of the allocatees will focus on a local service area (citywide or countywide), up from 18% in the previous round. Roughly the same percentage of allocatees as in the prior round, 47%, will have a national service area; 17% will have a multi-state service area (16% prior round); and 14% will have a statewide focus (18% previous round).
  • More investment in major urban areas. The allocatees expect to invest about $2.011 billion in NMTC proceeds in major urban areas, $680 million in minor urban areas, and $742 million in rural areas (non-metropolitan counties). In the 2012 round, the amounts were $1.859 billion for major urban areas, $824 million for minor urban areas, and $744 million for rural areas.

Categories of CDEs

CDEs that are minority-owned or -controlled entities continued to be a small share of the total allocatees in the latest round, at 8% (7 allocatees).

The breakdown of other awardees by type of CDE were: nonprofit organizations or subsidiaries of nonprofits, 49 (56.3%); certified community development financial institutions, 29 (33.3%); governmentally controlled entities or subsidiaries of such entities, 16 (18.4%); non-CDFI banks or banking holding companies, public traded institutions, or subsidiaries of such entities, 10 (11.5%); and real estate development companies or subsidiaries of such entities, 10 (11.5%).

To date, in 11 funding rounds since 2002, the CDFI Fund has made a total of 836 NMTC allocation awards totaling $40 billion.

            (For additional information on the latest allocatees and where and how they plan to use their new funding, go to

Next Application Round Close at Hand

The Community Development Financial Institutions Fund anticipates opening the next application round under the new markets tax credit program around the end of July 2014, even if Congress hasn’t passed renewal legislation by then.

If reauthorizing legislation isn’t enacted by such time, the notice of allocation availability (NOAA) will offer roughly $5 billion in allocation authority. This is the amount that would be provided by legislative changes proposed by the Obama Administration in its FY 2015 budget request.