Prepared by the Urban Institute for the CDFI Fund

June, 2007

In the early 2000s the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund began to administer the New Markets Tax Credit (NMTC) program, which targets debt and equity capital to businesses or organizations situated in low-income, economically distressed communities. It works through specialized Community Development Entities (CDEs) that compete for, and then offer federal tax credits in exchange for investments in projects ranging from commercial, industrial, retail, manufacturing, mixed-uses, to development of community facilities.

This is a report on an exploratory study that was the first step in a design process for evaluating the outcomes of the NMTC program on a more extensive scale. The study examined a sample of five NMTC projects that utilized tax credits allocated early in the program’s history. The report describes the projects and how they came about, the roles played by CDEs and investors, why NMTCs were used, and what community benefits were reasonably anticipated. The study’s substantive purpose was to describe the characteristics, evolution, financial arrangements, and anticipated community impacts of these projects. Its methodological purpose was to explore the strengths and limitations of using in-depth, semi-structured telephone interviews as a means for gathering process and outcome information about NMTC-supported projects.

The researchers gathered qualitative information using in-depth, semi-structured telephone interviews with key actors and stakeholders (including CDE officials, investors, investment recipients, attorneys, accountants or others) and also used administrative data previously collected by the CDFI Fund. Although akin to classic case study methodology, the intent was to assemble a body of information that could be categorized across projects (or project types) and potentially analyzed using standard descriptive or inferential statistics. A similar approach, based upon interviews with key project actors and stakeholders, will be used as one means for generating data for the more comprehensive evaluation of the NMTC program to be completed in 2011.

Analysis of Selected New Markets Tax Credit Projects (.pdf)