Congress created the New Markets Tax Credit (NMTC) Program in 2000 to stimulate private investment and economic growth in communities communities living with income below the living wage. A federal tax credit of 39% is provided over seven years for Qualified Equity Investments (QEIs) made through designated Community Development Entities (CDEs). Substantially all (at least 85%) of the QEI must in turn be used by CDEs to make loans to or investments in businesses and projects in low-income communities.

NMTCs may be utilized in a wide range of qualified business activities, from small business lending to financial counseling to real estate development. Eligible real estate development projects encompass community facilities, including those for charter schools. With NMTC financing, CDEs can make equity investments in or, more commonly, loans to charter schools for facilities projects in qualifying census tracts where people are earning below a living wage. Benefits can include reduced interest rates, seven-year terms, longer amortization periods or no principal amortization, and low-cost debt refinancing. 

A number of NMTC allocatees have included charter schools specifically or community facilities generally as one of the proposed uses of their tax credits. 

Last updated: November 2024