The CDFI Fund awarded $10 billion in New Markets Tax Credit allocation in the CY 2024-2025 round. Of the 142 organizations that received awards, 137 committed to invest at least 20% of their Qualified Low-Income Community Investments in areas meeting the CDFI Fund's "deep distress" criteria. That's 96% of allocatees making a binding commitment to direct capital to the most economically challenged census tracts in the country. If you're a project sponsor trying to understand where NMTC allocation is flowing — and whether your project is positioned to attract it — that number is the single most important data point from this round.
To understand why this matters, you need to understand how the CDFI Fund now thinks about geography. There are effectively three tiers. The first is basic eligibility: your project sits in a qualifying low-income community census tract, meeting the statutory threshold of a poverty rate of at least 20% or median family income at or below 80% of the area median. This is the floor. Every NMTC deal must meet it. But eligibility alone has become table stakes — necessary but far from sufficient.
The second tier is severe distress. The CDFI Fund has long used additional distress indicators — higher poverty rates, lower incomes, elevated unemployment, other overlapping factors — to differentiate among eligible tracts. Applicants that committed to directing allocation toward these more distressed areas scored better. Most experienced CDEs have targeted severely distressed tracts for years, and the scoring methodology has rewarded them for it.
The third tier — deep distress — is where the CY 2024-2025 round made the sharpest statement. Deep distress, as defined by the CDFI Fund, means a census tract with a poverty rate above 40%, median family income at or below 40% of the applicable benchmark, or an unemployment rate at least 2.5 times the national average. These are not marginal communities. These are places where conventional capital formation has largely failed and where the gap between project cost and supportable debt is often widest. The CDFI Fund scored applicants more favorably for committing higher percentages of QLICIs to deep distress areas, and the market responded. Nearly every successful applicant made the commitment.
What does this mean in practice? It means CDEs that won allocation in this round are now contractually obligated to find and close deals in deeply distressed tracts. They need qualifying projects. For project sponsors with sites in deep distress areas, this fundamentally changes the dynamic. You have leverage. CDEs are not doing you a favor by considering your project — they need your project to fulfill their deployment commitments to the CDFI Fund. If your deal is well-structured, has community impact, and sits in a deep distress tract, you should expect meaningful interest from multiple allocatees.
The flip side is equally important. If your project is in an eligible tract but does not meet deep distress or even severe distress criteria, you are competing for a shrinking share of available allocation. CDEs have limited bandwidth and finite allocation. They will prioritize the deals that satisfy their highest-scoring commitments first. Eligible-only projects aren't disqualified, but they are deprioritized. The practical reality is that a CDE with a 20% deep distress commitment and $100 million in allocation needs to close at least $20 million in deep distress deals. Those deals go to the front of the line.
The CY 2026 round is expected to continue or strengthen this emphasis. The CDFI Fund has been moving in this direction for several rounds, and the CY 2024-2025 results suggest the market has fully internalized the signal. If anything, competitive pressure among applicants may push deep distress commitments even higher in the next round, as CDEs try to differentiate their applications in an oversubscribed program.
The practitioner takeaway is straightforward: know your tract data before you approach a CDE. Pull the CDFI Fund's mapping tool. Check your census tract against deep distress thresholds. If your project qualifies, lead with that information — it is now among the strongest cards in your hand. If your tract meets severe distress but not deep distress criteria, understand where you stand in the priority stack and frame your project's impact story accordingly. And if you're in an eligible-only tract, be realistic about the competitive landscape and consider whether other subsidy sources might be a better fit.
The NMTC program has always been about directing capital to underserved communities. But within that broad mandate, the definition of "underserved" is getting sharper. The three-tier framework — eligible, severely distressed, deeply distressed — is not just an academic distinction. It is the operating reality that determines which projects get allocation and which don't. 137 out of 142 tells you exactly where the program is headed.