As healthcare organizations navigate the challenging current economic environment consisting of rising costs, access challenges, and infrastructure demands, the New Markets Tax Credit (NMTC) Program stands as a critical financing tool for those healthcare projects serving low-income communities. Recent legislative and regulatory developments over the past year have significantly enhanced the program’s value— and healthcare remains one of the top choices of NMTC lenders nationwide.
At Butler Snow LLP, attorneys Julia Fendler, Ann Hered and Thane Hodson routinely advise clients on complex financing structures, including NMTC transactions, many of which focus on aligning economic development incentives with community-focused healthcare initiatives. With experience guiding healthcare providers, developers, and lenders, they bring practical perspective to navigating an evolving NMTC landscape.
A Transformational Shift: NMTC Program Permanency
Last year, the NMTC program, historically subject to periodic extensions, achieved permanence under 2025 federal legislation, providing long-term certainty for healthcare providers planning capital-intensive projects such as hospitals, clinics, treatment facilities, skilled nursing facilities and behavioral health facilities. In addition to providing stability, this shift enables stakeholders to engage in more strategic, long-range planning, pursue multi-phase developments, and structure more complex financing arrangements with greater confidence that the program will remain available. This is particularly impactful for healthcare systems serving rural and underserved communities, where capital planning often requires extended timelines.
Increased Allocation and the “Double Round” Opportunity
In conjunction with permanency, the federal government authorized a double round, allocating $10 billion in credits, double the typical annual allocation. This expanded funding pool creates both heightened competition and expanded opportunity for healthcare projects. Larger allocation pools make it more feasible to finance capital-intensive developments, often involving multiple Community Development Entities (CDEs), the entities providing NMTC allocation, participating in a single transaction. Healthcare providers that are well-prepared and able to move quickly will be best positioned to take advantage of this influx of capital.
Healthcare as a Federal Priority
Recent Treasury guidance and allocation trends signal a clear policy emphasis on healthcare infrastructure—particularly in rural and underserved areas. Facilities such as rural hospitals, Federally Qualified Health Centers, and behavioral health centers are especially well-positioned, as they align closely with broader policy goals aimed at expanding access to care in Health Professional Shortage Areas and Medically Underserved Areas. This prioritization continues to drive NMTC investment toward projects that deliver meaningful, measurable community impact.
Expanded Eligibility and Flexibility for Healthcare Projects
In some cases in which census tract eligibility is not an option, projects may qualify based on the populations that they serve or by their employees, allowing more providers to benefit from the program. Additionally, increased flexibility in financing operating costs and certain prior expenditures further broadens the applicability of NMTC financing across a wider range of healthcare initiatives.
The Growing Financial Impact: Subsidy and Structure
From a transactional perspective, NMTC financing continues to offer a compelling economic benefit to the project, with projects typically realizing a net subsidy of approximately 18%-22% on eligible project costs through NMTC structures. Not for profit entities are even better positioned, as they are not typically subject to cancellation of indebtedness income.
NMTC financing offers below-market, interest-only financing. Those entities that are nonprofits receive an even greater benefit in avoiding cancellation of indebtedness income. When layered with bonds, grants, and conventional debt, NMTC financing can significantly reduce the overall cost of capital and make otherwise infeasible projects viable.
Strategic Considerations for Healthcare Stakeholders
In light of these developments, healthcare stakeholders should take a proactive and strategic approach to NMTC opportunities. Early engagement with Community Development Entities remains critical in a competitive allocation environment, while clearly demonstrating measurable community impact—such as improved access to care, job creation, or integrated services—can strengthen a project’s competitiveness. Thoughtful structuring that layers NMTC financing with other funding sources can further optimize outcomes, and organizations that act decisively within the current window of expanded funding and federal support will be best positioned to maximize the program’s benefits.
Conclusion
The past year has marked a pivotal evolution in the NMTC Program. With permanency, increased allocation, and a clear emphasis on healthcare infrastructure, the program is more accessible and impactful than ever.
For healthcare providers serving low-income communities, NMTC financing no longer has to be simply a niche tool—it can be a central component of strategic capital planning. As these opportunities continue to evolve, experienced legal counsel remains essential to navigating program requirements, structuring transactions, and maximizing available benefits.
