We’ve taken some time to sit down with Michael Morrell, New Markets Tax Credit Loan Officer at Sunrise Banks, to discuss the ins and outs of the New Markets Tax Credit Program.
What is the New Markets Tax Credit program?
Morrell: New Markets Tax Credits are federal income tax credits used to encourage private investment in low-income communities. The focus of the program is to drive positive community impacts such as job creation, providing commercial goods and services, providing community services, eliminating food deserts and environmentally sustainable outcomes. The program is facilitated by the Community Development Financial Institution (CDFI) Fund who gives the credits to Community Development Entities (CDEs) to encourage investment in qualifying projects. Typically, these credits are sold to a 3rd party investor in exchange for a portion of the capital which the CDE uses to fund community development. Put simply, NMTC allocations allow CDEs like Sunrise to drive community development in high-distress areas.
How does the CDFI decide the size and the recipients of the NMTC allocations?
Morrell: CDEs go through an application process in which they request an amount from the CDFI based on their pipeline and estimated upcoming projects. The CDEs have to demonstrate the demand for the credits in the communities that they serve as well as stability and a history of strong community involvement. The CDFI uses this application data to determine how much, if any, each CDE gets.
What sort of projects has Sunrise used NMTC allocations for in the past?
Morrell: We’ve helped to fund many projects in the Twin Cities including the Twin Cities Habitat for Humanity headquarters, the new Midway YMCA, Seward Co-op’s new Friendship Store, Izzy’s Ice Cream’s manufacturing center, 800 West Broadway and a new clinic for Open Cities Health Center. These are all projects in low-income areas that are helping to drive job growth as well as fuel positive community impacts.
Based on the current allocations, what is 2017 looking like for Sunrise Banks?
Morrell: It’s looking great, we received $70M in allocations this year which is the largest allocation that we’ve received as well as the largest allocation in the state of Minnesota. This large allocation gives us a great opportunity to drive capital to high-distress areas and have a huge positive effect on the Twin Cities community.