New Markets Tax Credit Financing: Subsidy for Health Care Facilities and Operations
Enacted 25 years ago, the federal New Markets Tax Credit (NMTC) Program has become a powerful financing tool for health care organizations. Beyond simply offering tax credits to investors, the NMTC Program can provide health care providers a 20% subsidy to finance facility construction/renovation, equipment purchases and operating costs (including wages). With several favorable developments converging in 2026, including the administration targeting health care as a federal priority, expanded eligibility criteria, and a record level of NMTC allocation, health care providers have a unique, time-sensitive opportunity to secure substantial subsidy for their projects.
What Is the NMTC Subsidy in Practical Terms?
For eligible health care providers, the NMTC Program can deliver a 20% net subsidy on eligible facility renovation and construction, equipment purchases, and operating expenses after taking into account NMTC-related transaction costs, including accounting, legal and other professional fees.
The subsidy is delivered through a forgivable loan to the health care provider, forgiven after a seven‑year compliance period assuming all NMTC Program criteria are met, effectively converting a portion of the project financing into a grant-like subsidy.
Providers can leverage this NMTC subsidy alongside traditional debt or bond financing, grants, subsidies, internal funds, and even up to 24 months of prior incurred capital or operating costs. This ability to treat prior expenditures as leverage is especially valuable, as it allows health care providers to turn dollars they have already spent on facilities or operations into a new source of subsidy.
Do We Qualify? Meeting Eligibility Criteria and Competing for Allocation
To receive a subsidy, health care projects must first meet NMTC eligibility criteria and then compete for limited allocation from Community Development Entities (CDEs). Projects qualify for NMTC Program benefits in one of two ways: (i) being located in a low-income community census tract, typically defined with high poverty rates (20% or above) or low median family incomes (80% or less of the statewide median family income), or (ii) designed to serve “Target Populations,” including low-income individuals, even if the physical location is not in a qualifying census tract, subject to additional program rules and documentation requirements.
Within the pool of eligible projects, CDEs prioritize those that align strongly with their mission and the NMTC Program’s community impact goals. For health care providers, projects in federally designated Medically Underserved Areas or Health Professional Shortage Areas, or in rural (i.e., non-metropolitan), deeply distressed, or highly distressed communities, or projects that demonstrate impact on access to care for low-income or uninsured patients or show strong community benefits (local hiring, workforce development, integrated social services, etc.) are especially attractive to CDEs.
Why 2026 is a Prime Opportunity for Health Care Providers to Obtain NMTC Benefits
Although the NMTC Program has been available for decades, several dynamics make 2026 especially favorable for health care projects:
- Health care is a stated federal priority in the current NMTC environment, meaning health care projects are more attractive to receive NMTC allocation.
- Eligibility criteria have expanded, including broader recognition of Medically Underserved Areas and Health Professional Shortage Areas, making it easier for many providers to qualify.
- Approximately $10 billion in NMTC allocation is available for deployment in 2026, double the amount available a typical year.
- Rural providers are especially well-positioned with additional federal preferences for allocating NMTC Program funds in rural communities.
Taken together, these factors create an unusually strong environment for health care providers to secure NMTC subsidy — but only for those who position themselves early.
What Should Health Care Providers Do Now?
Because NMTC allocation is competitive and time‑sensitive, early action is critical. Health care providers that expect to undertake capital projects (new facilities, expansions, renovations) or that have recently incurred significant capital or operating expenses should evaluate whether NMTC financing could provide a meaningful subsidy. The Foley & Lardner Community Finance & Tax Credit Practice team can help you quickly assess not only whether your project meets eligibility criteria, but also how competitive your project is likely to be in the current NMTC market.
For many providers, NMTCs can be the difference between delaying a project and moving forward, or between a smaller, constrained build and a facility that truly meets community needs. Given the program’s potential to materially lower capital costs and expand access to care in underserved areas, health care organizations that may qualify should not wait. Now is the time to evaluate your pipeline, identify NMTC-eligible projects, and position yourself to compete effectively for allocation.
