“Fiscal Cliff” Legislation Provides Two-Year Extension to Federal Tax Credit Program Proven to Fuel Private Investment in Economically Distressed Communities
WASHINGTON, D.C. – The New Markets Tax Credit Coalition (NMTCC) applauds the passage of legislation extending the New Markets Tax Credit (NMTC) for two years. By extending the NMTC, Congress ensures the continued delivery of billions in capital to businesses and revitalization projects in low income communities.
“The New Markets Tax Credit has shown that – at a modest cost to the federal government – it generates meaningful economic growth and job creation in economically distressed urban and rural communities throughout the country,” explained Jose Villalobos, New Markets Tax Credit Coalition Board of Directors Chairman and TELACU Senior Vice President. “I commend Congress for ensuring that private sector investment in these communities will continue.”
Passed by both chambers of Congress on Tuesday in response to the fiscal cliff, The American Taxpayer Relief Act of 2012 (H.R. 8) includes a provision extending the previously-expired NMTC through 2013. This will allow the Department of Treasury to make two more rounds of NMTC allocation awards, providing $7 billion in NMTC allocation authority at a ten-year cost of $1.8 billion in foregone federal revenue. If history is any guide, this $1.8 billion in federal investment will leverage more than $14 billion in total investment in in rural and urban areas struggling with high rates of unemployment and poverty, creating over 100,000 jobs.
The New Markets Tax Credit was enacted in 2000 in an effort to stimulate private investment and economic growth in low income communities that lack access to the patient capital needed to support and grow businesses and create jobs. It does so by offering a modest incentive on investments made in economically distressed communities with poverty rates of at least 20% or median incomes at or below 80% of the area median.
Between 2003 and 2010, NMTC investments were responsible for creating over 500,000 jobs in economically distressed communities across America and generating over $5.3 billion in federal tax revenue and over $3 billion in state and local taxes, according to a report on the aggregate economic impact of the NMTC released by the Coalition last month. The federal tax revenue generated by NMTC investments more than covers the cost of the program, as measured in terms of revenue lost by the federal government, providing a significant return on investment to the federal government.
Since the NMTC was enacted, it has generated billions of dollars in private investments in projects and communities that likely would never have received such injections of patient capital otherwise. According to a survey conducted by the U.S. Government Accountability Office (GAO), 88 percent of NMTC investors would not have made their investments if not for the incentive of the Credit.
The New Markets Tax Credit originally expired on Dec. 31st, 2011.
About New Markets Tax Credit Program
The New Markets Tax Credit was enacted in 2000 in an effort to stimulate private investment and economic growth in low income urban neighborhoods and rural communities that lack access to the patient capital needed to support and grow businesses, create jobs, and sustain healthy local economies. The NMTC is a 39% federal tax credit, taken over seven years, on investments made in economically distressed communities. Today due to NMTC, more than $45 billion is hard at work in underserved communities in all 50 states, the District of Columbia, and Puerto Rico.
About New Markets Tax Credit Coalition
The NMTC Coalition is a national membership organization of Community Development Entities and investors organized to conduct research on and advocacy for the New Markets Tax Credit. The Coalition hosts two annual conferences and regularly publishes the NMTC Bulletin. To learn more, please visit www.nmtccoalition.org.