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Incentives > New Market Tax Credit Program
New Market Tax Credit Program
The federal New Market Tax Credit Program (NMTC) is the largest current federally funded economic development incentive program. The program, authorized by the Community Renewal Tax Relief Act of 2000, is relatively new and, as a result, not widely known. The program is designed to channel $15 billion in new, private investment capital into businesses in economically distressed census tracts across the nation.
The New Market Tax Credit Program operates by providing investors with a 39% (of the amount invested) federal tax credit over a seven-year period for making qualified equity investments in Community Development Entities (CDEs). A CDE is a specialized financial institution that is designed to offer low-interest loans and investments to businesses located in eligible census tracts. Usually these loans are at below market rates and offer more flexible terms from a regular commercial bank. The tax credits go to the investors in the CDE, not to the owners of the businesses in which the CDE invests or makes loans.
Specific to the City of Williamsburg, census tracts #3702 and #3703 qualify for New Market Tax Credits. Within these tracts, most types of businesses, including not-for-profits, are eligible to participate in the program. There are a number of restrictions on the program, and some of the ineligible business types include country clubs, golf courses, gaming businesses, massage parlors, and tanning salons. At present, there is an initiative underway to bring a CDE to Williamsburg. Until the new Williamsburg CDE is established, however, program-eligible Williamsburg businesses may seek low-interest loans or investments from other CDEs already established throughout the state.