New Markets Tax Credit Coalition Blog
As discussed on the NMTC Coalition membership call this afternoon, the Broad Tax Extenders Coalition is collecting signature for a sign-on letter that will be sent to Congress the week of November 10th. The letter–open to associations, coalitions, and nonprofits–will urge Congress to act during the Lame Duck session and extend the tax provisions that expired at the end of 2013.
To sign your organization on to the letter, please click the link below and fill out the appropriate information, listing your organization exactly how you would like it to be listed on the letter. Please note that only your organization’s name will be listed on the final letter. The other information collected is used for keeping a record of who signed a particular organization on to the letter.
Senate Finance Committee Chairman Ron Wyden (D-OR), today issued the following statement on the need to renew expired tax provisions to give certainty and relief to American workers and businesses:
“Today, American businesses of all sizes are making their required quarterly tax payments to the IRS and trying to chart their path forward for 2014 and beyond. At a time when entrepreneurs and innovators should be identifying investments to support their business strategies and pursuing growth opportunities, Congress’s failure to renew expired tax provisions is forcing these companies to make “no interest loans” to the federal government through higher taxes. It’s unacceptable that inaction by Congress is denying American business the clarity and certainty they need to plan for tomorrow.
This is a real issue that is impacting those at the heart of our country’s economic growth.
How? For example, because Congress has not renewed increased expensing limits under Section 179, industrious Oregon wine makers will be forced to pay more for a new wine press needed today to expand their business, or they may be forced to choose between new equipment and hiring new employees.
Also, with renewable energy incentives like the wind productive tax credit in question, hundreds of millions of dollars in job-creating investments are at risk, and the United States is falling further behind its economic competitors, like Germany and China, in transforming its energy markets.
Finally, congressional inaction also severely complicates the ability of underwater homeowners to reduce their mortgage debt without being socked with a big tax bill.
Today, with taxes due, continuing inaction on renewing expired tax provisions is diverting business investment, driving unnecessarily higher taxes, and slowing economic growth. We cannot let this uncertainty drag on.
The Finance Committee came together this spring to produce the EXPIRE Act in a cooperative, bipartisan way. It wasn’t easy, but it got done. Now is the time to revive the EXPIRE Act and renew these important tax provisions while we push ahead on comprehensive reform.”
Federal and state NMTC financing will improve financial stability of Head Start program serving over 1,000 children.
Portland, Ore. United States Senator Ron Wyden applauded the success of an $18 million investment in federal and state New Markets Tax Credits for Albina Head Start.
The investment—a partnership with National Community Fund, a Community Development Entity affiliated with United Fund Advisors, — will enable Albina Head Start to lower its debt burden and expand services to low-income families. The investment consists of $10 million in federal and $8 million in state New Markets Tax Credits.
A Comment on Reports by GAO and Senator Coburn
Today, two reports were released on the New Markets Tax Credit (NMTC), one by the Government Accountability Office (GAO) and another by Senator Tom Coburn (R-OK), respectively “Better Controls and Data are Needed to Ensure Effectiveness” and “Banking on the Poor.” In both his press release and report, which were released concurrently with the GAO report that he commissioned, Senator Coburn offered his long-standing criticism of the NMTC, claiming that businesses that receive financing are examples of the government choosing favorites.
WASHINGTON, D.C. –Two reports were released on the New Markets Tax Credit (NMTC), one by the Government Accountability Office (GAO) and another by Senator Tom Coburn (R-OK), respectively “Better Controls and Data are Needed to Ensure Effectiveness” and “Banking on the Poor.” In both his press release and report, which was released concurrently with the GAO report that he commissioned, Senator Coburn offered his long-standing criticism of the NMTC, claiming that the projects result in the government choosing favorites.
“Washington doesn’t pick the winners and losers when it comes to the NMTC. It is a market driven program based in a philosophy that communities know best, they just need access to capital,” said Bob Rapoza, spokesperson for the NMTC Coalition. “Through public-private partnerships, the Credit brings community revitalization projects to fruition that likely would not have gone forward if not for NMTC financing.”
The NMTC Coalition further substantiates this claim by pointing to a prior report in which the GAO found that 88 percent of investors would not have made their investments, but for the incentive of the Credit.
The Coburn report notes that the impetus for the New Markets Tax Credit is to help struggling communities. He contends it does not succeed in this, writing that “Most of the country, however, is considered a low-income community for purposes of the program.” However, data from the U.S. Department of Treasury indicates that the NMTC has delivered more than $60 billion in capital to businesses and revitalization projects nationwide in some of the poorest communities; these investments have generated over 550,000 jobs and of the 74,134 census tracts in America, only 30,099 (41%) qualify. Moreover, according to the NMTC Coalition’s survey of 2013 NMTC projects, 80 percent of investments went to severely distressed census tracts that far exceed the statutory requirements for investment.
The Senator’s report profiled 19 projects to which it objected. Yet, analysis of the profiles of those communities indicate they are among the poorest in the country, with an average poverty rate of over 32 percent and an unemployment rate of 11.7 percent at the time the project was financed. In these high distress communities, the NMTC delivered $770 million in financing and created over 7,700 jobs.
“The hallmark of the credit is its flexibility, which allows for diversity in projects based on needs and opportunities identified by citizens and local leaders—the vast majority of which include child and health care facilities, grocery stores, and manufacturing facilities,” said Rapoza.
Like the report from Senator Coburn, the GAO report ignores the challenges of investing in low-income communities and the success that the NMTC has in spurring revitalization in urban neighborhoods, small towns and farming communities. Furthermore, GAO does not provide an accurate analysis of the operations of the NMTC. In one such case, the GAO overestimated an investor return by 400 percent through faulty analysis. In this case, GAO authors used incomplete information based on one example in a second-party report that they could not independently verify. Consequently, GAO implies the financial structures used in NMTC transactions allow investors to receive an unduly large return on their investments, claiming a 24 percent annual return to the investor, when actual NMTC investor returns align with market rates of 6 to 7 percent annually.
“Unfortunately, some conclusions are based on misinterpreted data and flawed calculations. The Coburn report builds on those errors to cast a sensationalized and inaccurate portrayal of the NMTC,” Rapoza adds.
While authorization for the New Markets Tax Credit (NMTC) expired on December 31, 2013, NMTC practitioners continue their efforts to provide low income communities and neighborhoods with access to flexible, patient capital, helping grow businesses and create jobs in places that need it the most. On Thursday, the impact of the Credit will be evident as Howard Park community residents and local leaders join together to celebrate the grand opening of ShopRite, a 67,000-square-foot grocery store in Baltimore, Maryland that received NMTC financing.
NMTC Coalition board member, The Reinvestment Fund (TRF), was a key player in bringing an end to the Howard Park neighborhood’s decade-long struggle for easier access to fresh produce and meats. TRF along with City First Bank and investor JP Morgan Chase provided $14.65 million in New Markets Tax Credit financing with additional project financing and support provided by Opportunity Finance Network (OFN). City First Bank, Chase and OFN are also Coalition members. This project will not only provide residents with access to fresh foods in a former food desert, it is also bringing 250 new jobs, a health center, and a revitalized commercial presence to the neighborhood.
“We are incredibly proud of the role we played to make this community’s big dream come true,” shared Don Hinkle-Brown, President and CEO of TRF.
A formal ribbon-cutting ceremony will take place at the store at 12:00 p.m. tomorrow. The Klein family, owners and operators of the ShopRite store, will be joined by Mayor Stephanie Rawlings-Blake and other community leaders, including Lieutenant Governor Anthony G. Brown and City Council President Jack Young who are scheduled to join in the opening event.
The ShopRite is just one example of the impact the NMTC is having in communities around the country. On June 10th, the NMTC Coalition released the tenth edition of its NMTC Progress Report, which includes 2013 survey data from 64 CDEs. Respondents reported $4.9 billion in total project financing, helping finance 280 businesses and create 54,643 jobs in economically distressed communities. While all of these investments were made in qualified low income communities, the Report notes that 80 percent of these investments were made in severely distressed communities, 56 percent of which had unemployment rates of at least 1.5 times the national average.
Since the first allocation of New Markets Tax Credits in 2003, $31 billion of NMTC investments have been made in economically distressed urban and rural community across the country. These investments leverage more than $30 billion from other sources. The result: creation of over 550,000 jobs, improved commercial and industrial facilities – such as the supermarket in Baltimore—better schools, improved healthcare facilities and revitalization of communities often left behind.
The future of NMTC is contingent upon congressional action, but there are just a few days remaining before Congress leaves for a five-week recess and the NMTC is not expected to be addressed before their departure. With the last awards authorized by Congress awarded in June, this flexible, financial tool is running out of time.
Legislation that would provide a permanent authorization for the NMTC is pending in both the House and Senate. The New Markets Tax Credit Extension Act of 2014 (H.R. 4365) and the New Markets Tax Credit Extension Act of 2013 (S. 1133), have garnered broad support from both Democrats and Republicans—a positive indication that there is support for renewing the NMTC this fall.
Great projects like the ShopRite demonstrate the effectiveness and impact of NMTC. It is now up to Congress to take action to ensure that this important revitalization tool is extended. With Members of Congress in their home states and districts, we ask you to urge your Members of Congress to visit a project and see the NMTC in action at home.