New Markets Tax Credits

Empowerment Reinvestment Fund LLC (ERF) is the subsidiary of TruFund that is a certified Community Development Entity (CDE) qualified to receive New Markets Tax Credit (NMTC) allocations. ERF has previously been awarded $185 million in NMTC allocations from the CDFI Fund since 2003. This highly competitive award is a part of the now $44 billion NMTC Program, enacted by Congress in 2000 to encourage economic development investment in low-income communities nationwide.

Geographic market

ERF finances projects nationwide, but focuses most of its efforts in markets where TruFund maintains offices or has historical relationships.

Eligible Businesses

Federal guidelines require that investments meet two criteria: first, they must be located in low-income communities, defined as having a median income below 80% of the median income in the surrounding area. Second, projects must show that they provide substantial services to their communities or that they are located within that community.

ERF will target non- and for-profit borrowers that engage in transactions in four key areas, which include: (1) large-scale job development projects; (2) projects that support small business development; (3) projects that enhance the capacity of minority-serving institutions and community facilities; as well as (4) anchor real estate projects that act as catalysts for community development in low-income neighborhoods.

In all cases, ERF seeks to leverage other TruFund resources into these projects.

Protection for ERF Investors

ERF follows the same extensive due diligence procedures developed for TruFund’s other loan funds. The financial components of each transaction and the financial history of each participant are carefully reviewed to ensure that the interests of the investors are protected.

Benefits to Investors

Low-interest, high-return: In return for a qualifying investment, investors will receive a 39% tax credit over seven years for each dollar invested plus negotiated economic return.

  • Investors may claim a tax credit of 5% of the total value of the investment during each of the first three years and of 6% on the total value of investment for each of the final four years of the credit period, for a total of 39%.
  • Investors will receive an additional return on their investment, usually in the form of interest on indebtedness, as well as the return of principal at the end of the seven-year investment period.
  • Alternatively, investors may choose to purchase only the tax credits or to finance the entire project.

Benefits to the Community

All loan documents contain community covenants that require all parties in the project to work together to leverage other resources and to develop programs to enhance its community impact.