Financial Partners in Bismarck-Mandan Help Organizations Receive the New Markets Tax Credit

Bismarck-Mandan is experiencing rapid growth, but the New Market Tax Credit (NMTC) program can help all communities benefit from the increased interest in North Dakota. This financial tool is designed to support low-income, distressed, or under-resourced communities so they can receive sustainable support.

“Our focus is on jobs and impact,” says Roxi Pfliiger, Business Development/Commercial Loan Officer at Dakota Business Lending. “We want to create a path that helps people out of poverty and provides lasting opportunities for people in that area.”

Through this federal program, qualifying financial organizations sell tax credits to third-party investors, who then use the proceeds to fund projects. Investors benefit from tax incentives, while non-profit organizations, businesses, and community groups receive funds to turn their ideas into realities.  

If you have an idea that can elevate your community, the New Markets Tax Credit program could be a source of support. Learn more about the qualification and administration processes of this program. 

How to Qualify for New Markets Tax Credit Funding

Organizations that are interested in receiving the NMTC must meet four qualifying criteria. They will work with a Community Development Entity (CDE) to apply for the credits and navigate the application process. The proceeds from the NMTC can fund up to 20% of a project’s cost. This is a source of gap funding that contributes to your fundraising efforts, not a standalone source of funds.

Here are the four qualifications the project needs to meet to receive NMTC funding:

1. The project must occur in a “highly distressed” census tract.  Qualifying areas may have poverty rates greater than 30%, median income levels less than 60% statewide, or unemployment rates that are 1.5 times the national average.  
2. There must be a tangible community impact. This can range from creating long-term jobs with desirable salaries to offering community services that were otherwise unavailable. 
3. The project is ready to launch when the allocation is available. Due to the competitive nature of the program, the project should get on a pipeline as early as possible.  The organization must then have other sources of funding, detailed plans, and approvals from necessary stakeholders to move forward when the allocation is available.
4. It passes the “but for” test. This means the NMTC fills a funding gap that would not otherwise be closed. The project cannot move forward without (or but for) the NMTC funding.

There are additional guidelines and limits, like the 84-month compliance period that ensures the project benefits the community for at least seven years. The project also has to be larger than $7 million.

The math on how much money organizations can receive can also be challenging, along with the detailed application process. This is where the CDEs step in.

“We do a lot of education about the program and then provide tangible next steps to access the program,” says Tracy Hubbard, Community Development Finance Director at Bremer Bank. “For someone who has never done this before, we might give them a list of consultants who can help them. We also recommend working with a tax credit attorney.”  

Both Bremer Bank and Dakota Business Lending are CDEs that support Bismarck-Mandan and North Dakota as a whole. 

CDEs are Constantly Developing Project Pipelines

There are a lot of moving pieces with the NMTC, including financial institutions identifying key projects to fund and applying for a portion of the federal funding. Some CDEs focus their efforts on specific types of projects to build up communities. Bremer Bank, for example, has a healthcare, healthy foods, and community facilities focus with its pipeline projects. Dakota Business Lending guides its efforts toward projects that create living-wage jobs for people who don’t have college degrees.

“The NMTC is tied to our mission of cultivating thriving communities,” says Hubbard. “Our commitment is to see really great projects happen in the areas that need them.”

CDEs apply for NMTC funding and then allocate the funds they receive to various projects. One of the main NMTC criteria – that projects are ready to start immediately – allows CDEs to use the funds as effectively as possible. Most CDEs keep a long pipeline of projects so they can allocate funds once they come through.

“Demand for NMTC is high and allocation dollars are limited in availability, so contact us early in the process,” says Pfliiger. “This can get you into the pipeline as you work out other financing options and aspects of the project.”  

Many organizations start working with CDEs 18 to 24 months before they receive the allocations. This helps them strengthen their business plans and ensure they are in the best possible position to use the funds once they are available.

“I encourage projects to be in as many CDE pipelines as possible,” says Hubbard. “If you think you have a project, reach out to the CDEs.”

Even if this program isn’t right for you, many CDEs and business-focused financial institutions can recommend other options and opportunities for receiving the funds you need. 

NMTC Has Long-term Economic Impacts on Communities  

These tax credits are valuable because they focus on sustainable improvements and long-term investments in low-income communities. From job creation to the improvement of services, the allocation creates opportunities for communities to lower unemployment rates, increase tax revenue, and improve the overall quality of life.

“We are channeling investments in communities that need an extra lift,” says Hubbard. “A rising tide lifts all boats. We like to say that our projects are designed to lift the maximum number of boats.”

Dakota Business Lending also requires allocation recipients to set aside “Pay It Forward” funds, giving a portion of their money to another organization that is dear to them. This maximizes community impact even further by boosting another non-profit or group’s efforts.  

“We’re excited about the program and the projects we have deployed in North Dakota,” says Pfliiger. “We look for projects that are transformative and have seen some really good things.”

Learn About Other Support Programs in Bismarck-Mandan

The Bismarck-Mandan Chamber EDC continues to invest in local businesses and community groups that support residents in the region. In addition to developing valuable partnerships with Dakota Business Lending and Bremer Bank, the EDC works with other business development organizations throughout the year. Whether your organization needs financial assistance or affordable training opportunities, the EDC is here to help. Together, we can make North Dakota better.