Following the rules of the NMTC program isn’t just about avoiding penalties—it’s how the program ensures funds benefit the communities they’re meant to help. For CDEs and their partners, meeting compliance standards is a non-negotiable part of receiving and maintaining tax credits.

Major Compliance Requirements:

  • 85% Investment Rule: CDEs must keep at least 85% of investor funds actively invested in qualifying projects over the full seven-year period.
  • Invest in the Right Businesses: These investments must support Qualified Active Low-Income Community Businesses (QALICBs), which operate in low-income areas and generate most of their income within those areas.
  • Annual Reporting: CDEs must file yearly reports explaining where the money went, how it’s being used, and what impact it’s having on the community.
  • Avoiding Recapture: If a CDE doesn’t follow the rules, the IRS can “recapture” the tax credits—meaning investors would have to pay back the credits along with interest.

What’s Changing in 2025?

  • Policy Shifts: Lawmakers may pass updates that affect how the program works—such as changing who qualifies or how much credit is available.
  • Upgraded Reporting Systems: The CDFI Fund, which manages the program, is improving its technology. CDEs need to stay current with new systems and reporting processes.
  • Increased Focus on Outcomes: There’s a growing emphasis on measurable community results. CDEs are expected to clearly document how their investments make a difference—whether through job creation, new services, or other benefits.

New Markets Tax Credit (NMTC) Program: What You Need to Know in 2025

The New Markets Tax Credit (NMTC) program continues to be a powerful tool for revitalizing underserved communities. By encouraging private investment in low-income areas, the program helps create jobs, support small businesses, and boost local economies. As we move through 2025, understanding how the program works—and how to stay in compliance—is essential for anyone involved.

What Is the NMTC Program?

The NMTC program offers investors a federal tax credit worth 39% of their investment, spread over seven years. To qualify, investors must place their money into Community Development Entities (CDEs), which then use that capital to fund businesses and real estate projects in low-income communities. These investments are called Qualified Low-Income Community Investments (QLICIs).

Final Thoughts

The NMTC program delivers both financial returns for investors and social impact for communities—but only when managed with care and accountability. Compliance isn’t just a box to check; it’s the key to maintaining eligibility and maximizing results.

For CDEs, investors, and businesses interested in participating, staying informed and working with experienced advisors can help avoid costly mistakes and unlock the full value of the program.

Contact us today – let KE Andrews manage your NMTC compliance.