NMTC Potential Benefits
The net NMTC benefit that can be generated for a specific project is a function of several different factors including:
- Amount invested to receive the tax credits
- Fee structure of the various CDEs involved in the transaction
- Complexity of combining other cash financing sources leveraged through the NMTC transaction structure
- Transaction closing costs
A general rule of thumb is that NMTCs can generate net proceeds that are equal to almost 20% of the capital stack of a project financing. For example, if a CDE decided to sub-allocate $10 million to an individual project, it would result in a net benefit of approximately $2 million in subsidy for the project.