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The tax credit effect:
How private capital is transforming America's underserved communities
The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters.
Produced by Reuters Plus for
Since its inception in 2000, the New Markets Tax Credit (NMTC) program has channeled investment to some of America's lowest-income neighborhoods by leveraging federal tax credits to generate more than $143 billion in capital investment.
The NMTC offers investors both measurable social impact and attractive financial returns, a rare combination of incentives. Over 25 years, the program has helped create or retain 1.2 million jobs in communities in all 50 states and generated about $8 of private investment for every $1 of federal funding, according to the Treasury Department's Community Development Financial Institutions (CDFI) Fund. As a result, the NMTC can lay claim to being one of the most efficient economic development tools for low-income communities.
Access to private capital is critical for low-income communities because it fuels the development that public funding alone cannot sustain.
John Chamberlain, Managing Director and Head of Tax Credit Finance at Capital One
Since the inception of the NMTC program, Capital One has been a leader, investing $5.5 billion in capital and supporting more than 400 projects to transform the lives of thousands of people with limited opportunities. "Access to private capital is critical for low-income communities because it fuels the development that public funding alone cannot sustain," said John Chamberlain, Managing Director and Head of Tax Credit Finance at Capital One. "Private investment brings scale, speed, and innovation, enabling projects like hospitals, schools, community centers, and manufacturing facilities to move forward." Thanks to private capital from NMTC investments, underserved communities have been able to bridge funding gaps that may have stalled their progress before.
Measurable social impact
Atlanta's Westside neighborhood is one such community. With a proud history as a cradle of historically Black colleges and universities (HBCUs) and the Civil Rights Movement, it was once home to Martin Luther King Jr. and his family. Today, zip code 30314 faces elevated public-safety challenges, with a poverty rate of 32.8% and high unemployment. City of Refuge, a nonprofit based in Westside, has used New Markets Tax Credits to design and construct a 38,000-square-foot Transformation Center, where it will help its participants build job skills and access services that support long-term economic stability and mobility. The three-story facility includes a social entrepreneurship hub, a credit union, a small market, a healthcare clinic, and 25 affordable housing units. Tax credit financing closed a multimillion-dollar gap in the project's fundraising budget, enabling the Transformation Center's grand opening in January.
Experience has shown us that NMTC projects are catalysts for long-term growth, attracting businesses to low-income communities and improving infrastructure in ways that ripple through local economies.
John Chamberlain, Managing Director and Head of Tax Credit Finance at Capital One
In Kenosha, Wisconsin, a historic former Chrysler engine manufacturing plant has been converted into a $23.5 million, 64,000-square-foot innovation center using NMTC investments. The site was once home to the oldest continually operating auto plant in the U.S. until it closed in 2010 after 108 years. The Kenosha Innovation Center now serves as a collaborative hub for start-ups and entrepreneurs, focused on creativity and future job creation. "Experience has shown us that NMTC projects are catalysts for long-term growth, attracting new businesses to low-income communities and improving infrastructure in ways that ripple through local economies," Chamberlain said.
NMTC financing has been used to convert a former dairy farm, built in 1860, into an economic engine and community anchor in Hardwick, Vermont, The Yellow Barn Business Accelerator has become a retail food destination that enables local farmers to store and showcase their products. Such projects "generate multiplier effects," Chamberlain said, creating jobs during construction phases, permanent positions after project completion, and increased local economic activity that "revitalizes surrounding neighborhoods." Tax credit financing is also an effective way to improve healthcare and well-being in communities, a crucial pathway to long-term economic growth. For example:
Multiplier effects
In the Tampa Bay area, a $60 million nonprofit headquarters for a large food bank includes a community kitchen and a disaster relief training program to teach volunteers how to assist during community emergencies.
The Urban Peak Youth Shelter in Denver provides housing and support services for 600 at-risk young people each year and has created 30 new jobs.
The Eagle Valley Behavioral Health campus in Edwards, Colorado, is a more-than-$60 million project supported by NMTC investment that will provide mental health services and support 116 jobs in an area identified as lacking health professionals.
NMTC-supported projects provide essential social services, create jobs, and often attract additional private investment in their surrounding communities. Medical centers increase healthcare access and attract pharmacies and clinics. Workforce development programs supply skilled labor to local businesses. Improved education and childcare facilities strengthen the social fabric of depressed communities, fostering upward mobility. "We're seeing tangible, lasting change in communities as a result of NMTC investment," Chamberlain said.
For tax credit investors who are looking to make an impact in their community, the NMTC is an attractive proposition. It also generates competitive investor returns. Analysis by CBO Financial, a firm of community development finance consultants, compared NMTC favorably with other tax credit programs in terms of risk-adjusted financial performance. It found that NMTC delivers "attractive risk-adjusted performance" with "relatively low risk" and returns of 8–12%. At the same time, these investments are meeting critical community needs. "This alignment of purpose and performance is rare," Chamberlain said, "and it's why NMTCs have become a cornerstone for those seeking to integrate community development principles into their corporate investment strategies." The NMTC program was made permanent in the passage of the One Big Beautiful Bill Act (OBBBA) by Congress in July, "a major milestone" that brought even greater stability to the program, increasing investor confidence in its reliability and scalability, Chamberlain said. "This permanence provides more certainty for investors, communities, and other stakeholders, ensuring NMTCs remain a reliable engine for revitalization for decades to come." In an uncertain economic climate, the NMTC provides "predictability, impact, and stable returns."
Stable returns
This alignment of purpose and performance is rare[...]and it’s why NMTCs have become a cornerstone for those seeking to integrate community development principles into their corporate investment strategies.
John Chamberlain, Managing Director and Head of Tax Credit Finance at Capital One
Building for the long term
Following this legislation, the New Markets Tax Credit Coalition, which was founded in 1998 to advocate for the program, projects $100 billion in capital being delivered to underserved regions of the U.S. in the next decade, supporting 4,000 businesses, supplying 17,000 affordable homes, and creating 435,000 jobs, including 70,000 in rural manufacturing. Having personally been involved in the NMTC program since 2004, Chamberlain said it has "grown in scale and sophistication" to become a key, federally backed instrument that can "deliver jobs, healthcare, education, and essential services where they are needed most." Private investors have benefited, and so too have millions more in low-income communities throughout America.
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