The One Big Beautiful Bill Act and New Markets Tax Credit

Interviewer: The tax press, perhaps understandably, has focused on the changes and restrictions to clean energy and environmental credits adopted under OBBBA, while barely mentioning changes to the New Markets Tax Credit―notably making the credit permanent.

Roberts: Right. Little fanfare for a credit that has been around for 25 years. It is now a permanent feature of the IRC. Let me add that OBBBA did not, as was originally considered, exempt the NMTC from the alternative minimum tax.

Interviewer: Without repeating verbatim what was presented in our summer webinars, which our readers can link to at the end of this discussion, can you briefly explain what the NMTC is?

Roberts: Think of it as the final 15 to 20% of a project’s capital stack structured as a below-market-interest loan with the potential to be partially or even fully forgiven. Investors place capital with a certified community development entity (CDE) that then finances a business project in a low-income census tract. Over seven years, the investors in the project claim a federal tax credit worth 39% of their qualified equity investment, and the business itself realizes the benefits of the below-market-interest rate of the loan and, potentially, its forgiveness.

Interviewer: So now this program is permanent?

Roberts: Exactly. Like the low-income-housing and research and development credits, NMTC no longer depends on year-to-year extensions. That permanence came with genuine bipartisan support.

Interviewer: What are the benefits of the NMTC being made permanent?

Munoz: From a direct perspective, the primary beneficiaries will be the developers and businesses utilizing this tool to lower their project’s cost of capital. This consistency of funding means they can underwrite multiyear pipelines. Permanence should also nudge credit‐pricing upward as more banks consider NMTCs as a dependable CRA investment—a win for projects that need every dollar of subsidy.

From an indirect perspective, this news benefits the communities it has always been designed to help. This benefit ripples through these critical areas in the form of quality, attainable jobs, and accessibility to more goods, including fresh foods and services like health care or education.

Interviewer: The amount of NMTC authority is capped annually at $5 billion. But did I correctly hear that there may be more available this year?

Munoz: You did. Treasury combined the 2024 and 2025 rounds, so $10 billion in allocation authority will soon be announced. Note that a proposal to inflation-index the $5 billion cap was dropped in legislative conference.

Interviewer: These projects in distressed areas―are they concentrated in any one area?

Roberts: Not really. Roughly 30% of 2024 allocations went to rural tracts, but credits have financed everything from grocery stores in the Mississippi Delta to advanced-manufacturing plants in Cleveland. The project allocation geography is truly national.

Interviewer: Is there an application process for projects? How quickly are they notified if they are eligible?

Munoz: Great question. Projects themselves don’t apply to Treasury—a CDE does. Here’s the general cadence:

1. Application window – For the current CY 2024/25 round, CDEs had to file by January 29, 2025 (CDFI Fund). Each application contained a pipeline of projects generally consistent with the strategy outlined within each application. This demonstrates the CDE has the wherewithal to accomplish its intended impacts.
2. Award announcement – Treasury typically publishes awards 8 to 10 months later; for Round 20 (CY 2023) that was September 2024. (PwC)
3. Project engagement – Once a CDE wins an allocation, it seeks specific projects to achieve its application’s goals. It often revisits those projects from its application, then seeks alternative options. Most projects have an indication from a CDE whether they’re “in” within a few weeks of the award.

For new projects in qualifying areas, with measurable community impacts, partnering with an experienced CDE during the drafting of their application is the most successful path to a CDE commitment. Our NMTC team maintains a deep bench of CDE relationships, allowing them to tailor outreach and communications to most efficiently showcase projects and secure this limited funding. Ryan professionals have successfully closed more than 50 transactions that have received more than $1 billion of NMTC allocation.

Interviewer: For companies that have not participated in making these investments―aside from the financial incentive―what are some of the benefits of the NMTC?

Munoz: Since 2000, the program’s $81 billion in allocations has leveraged $143 billion in project financing, supported one million-plus jobs, expanded 2,000 manufacturing operations, and helped build or upgrade nearly 3,800 community facilities like YMCAs and Boys & Girls Clubs.

Interviewer: Before ending this discussion, can you give our readers one or two takeaways regarding the NMTC post-OBBBA?

Munoz: Number one: certainty around program permanence will fuel scale. Permanence and a five-year carry-forward will be the primary upward drivers of tax credit pricing, resulting in increased subsidy to qualifying projects. Second, 2025 is a buyer’s market for projects. With $10 billion up for grabs, companies expecting to produce measurable community impacts should engage experienced NMTC professionals now to strategically position their projects to CDEs.

Interviewer: Thank you both for your time today.

Please see the following links for on-demand access to Ryan’s OBBBA webinars:

• Decoding the “One, Big, Beautiful Bill”: What Businesses Need to Know Now
• Best Practices in Optimizing Income Tax Deductions in the One, Big, Beautiful Bill
• Best Practices in Optimizing Credits and Incentives in the One, Big, Beautiful Bill

Contact Ryan’s tax experts below to unlock the benefits of the New Markets Tax Credit and drive impactful community projects forward.

Contacts:

Sharon Roberts
Principal
Ryan
sharon.roberts@ryan.com

Melissa Munoz
Principal
Ryan
melissa.munoz@ryan.com