Stacked Incentives: NMTC Eligibility and Opportunity Zones
New Markets Tax Credit (NMTC) eligibility and designated Qualified Opportunity Zones (OZ) are both federal tax incentive programs meant to encourage private capital investment in distressed areas throughout the country. NMTC has existed since 2000, while Opportunity Zones were introduced last year. Although the two programs work in different ways and apply in different areas, places where they overlap can be particularly valuable to those in community development.
As interest in the OZ program continued to build at the end of 2018 and into 2019, we started receiving a common request from subscribers working in community development finance – “How can we easily identify tracts that are both NMTC eligible AND also designated OZs?” So we created a new data layer in PolicyMap that does just that. The layer is available in the Federal Guidelines menu and is called “NMTC and QOZ Status”.
This data layer allows PolicyMap users to easily identify census tracts where there is overlap for the NMTC and OZ programs, as well as identify tracts that are eligible or designated for one incentive but not the other.
There’s a lot of potential for pairing NMTCs with OZ incentives. We’ll leave it to the tax experts to explain how an investment would need to be structured in order to meet the requirements for both programs. But in short, there is nothing in the OZ regulations that currently prohibits NMTC equity investments from also qualifying for OZ incentives. And the types of businesses that tend to be NMTC-eligible are also very likely to be eligible for OZ investment. There are likely to be lots of opportunities for pairing NMTC and OZ incentives into a “capital stack” when financing a project that is situated in one of the areas where the program designations overlap.
Practical Use Cases
So how can you use the NMTC and QOZ status layer? The simplest way is to search for an address in the Location Bar while the NMTC and QOZ layer is displayed on the map. PolicyMap will tell you whether the address is located in a tract that is NMTC-eligible and a designated OZ, or a tract that is designated for just one of the programs or neither program. In the example below, I typed the address 600 Shelby Ave, Nashville, TN 37206 into the location bar. This is a simple way to check program eligibility on a project-by-project basis.
Alternatively, if you have a list of project addresses and want to know which of those addresses are located in tracts that are NMTC-eligible and a designated OZ, you can load your spreadsheet of addresses using PolicyMap’s self-service Data Loader. Once your project list is loaded to PolicyMap, you can easily identify which locations fall inside NMTC and OZ tracts on the map.
You can also download your list of projects tagged with the program designation from the NMTC and QOZ status layer using the Points with Layer Data download feature. Below is a snapshot of the resulting file export for a sample list of projects in the Nashville area.
The map layer is available to all users, in the Federal Guidelines menu, under “Additional CDFI Fund Data”. The Data Loader and Download tools are available to subscribers.