Omission in Camp Tax Draft Could Cost Communities and Jobs
Tax Reform Discussion Draft Excludes New Markets Tax Credit
- Contact: Bob Rapoza
- (202) 393-5225
Washington, D.C. – The Chairman of the House Ways and Means Committee, Dave Camp (R-MI), released his tax reform discussion draft to the public today, while Members of the Committee were briefed on the draft yesterday. The proposal by Chairman Camp lowers individual and corporate tax rates, but does not include the New Markets Tax Credit (NMTC), a flexible and proven financial tool that leverages private sector investment capital to revitalize economically depressed rural and urban communities.
“The draft does not include incentives for private sector investment in business and community development projects in low income communities,” said Bob Rapoza, spokesperson for the NMTC Coalition. “The New Markets Tax Credit, which expired December 31st, has served as an engine for private investment in communities left outside of the economic mainstream, but its extension was not included in the draft.”
In the decade since the New Markets Tax Credit was first implemented, the Credit has created more than 550,000 jobs and leveraged over $60 billion in capital for economically distressed rural and urban communities across the country. It is the only, generally available credit against federal income taxes that is designed to attract private sector investment in targeted low income communities. Additionally, a survey conducted by the U.S. Government Accountability Office found that 88 percent of NMTC investors would not have made their investments if not for this incentive.
All NMTC investments are made in low income communities and over 72 percent of the investments made to date are in communities exhibiting severe economic distress, with unemployment rates more than 1.5 times the national average, poverty rates of 30 percent or more and/or median incomes at or below 60 percent of the area median. Moreover, for every dollar of revenue forgone through the NMTC, eight dollars of investment flows to economically distressed communities lacking access to traditional capital streams. There is also substantial evidence that the cost of the Credit is fully offset by the federal income tax revenue generated by businesses and jobs benefiting from New Markets investments, according to research cited in theNew Markets Tax Credit Economic Impact Report released in December 2012.
“Federal investment in communities and, consequently, our country’s future, have drastically declined. In fact, there has been a 75 percent reduction in federal investments for community development programs over the last 30 years, as measured as a share of GDP. This makes the private-public partnerships fostered by the NMTC even more important, as access to capital continues to dwindle for hard-hit communities and neighborhoods,” adds Rapoza.
NMTC has garnered strong support, with over 1,200 businesses, investors, nonprofit organizations and community leaders calling on Congress to extend, make permanent and strengthen the Credit in September 2013. A bipartisan coalition of 70 Members of the House of Representatives, led by Steve Stivers (R-OH) and Mike Michaud (R-ME), also sent a letter to the House Ways and Means Committee in early December, indicating their support for NMTC provisions including an expansion of credit authority and an indefinite authorization. The Obama Administration also called for a permanent extension of NMTC and an expansion of the Credit in its Fiscal Year 2014 budget.
“New Markets has strong bipartisan support in Congress, because of its record of achievement in driving private sector investment to distressed communities to finance businesses, create jobs and jump start flagging local economies. Not only that, our research indicates that the Credit pays for itself through increased economic activity it generates,” said Rapoza. “Chairman Camp’s draft is another step toward tax reform and we hope members of the Ways and Means Committee will consider the merits of the NMTC and the necessity of its inclusion” added Rapoza.
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 percent federal tax credit, taken over seven years, on investments made in economically distressed communities. Today due to NMTC, more than $60 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 nmtccoalition.org.