Dear Chairman Brady,
The New Markets Tax Credit (NMTC) Coalition and its members would like to congratulate you on your new position as Chairman of the Ways and Means Committee. We are excited to have the opportunity to work with you in your new role, and look forward to serving as a resource for your office as you contemplate reforming the tax code.
Before you begin your work on tax reform, we urge you to take action to ensure that expired provisions like the New Markets Tax Credit receive a multi-year extension. The NMTC was designed to increase the flow of capital to businesses and low income communities by providing a modest tax incentive to private investors. Since its implementation, the NMTC has leveraged an unprecedented level of investment to low-income communities—delivering more than $70 billion in total capital investment through public-private partnerships. Without an extension, hard hit urban and rural communities will be deprived of billions in financing for important projects.
Last spring, the NMTC Coalition organized a letter from 1,600 businesses, trade associations, local elected officials, and nonprofit organizations urging Congress to extend the NMTC. That letter includes several dozen signatures from organizations located in Texas, where the program has generated nearly $2 billion in total project financing, creating more than 20,000 jobs. For example, the NMTC helped the Houston Food Bank acquire and rehabilitate three buildings totaling more than 440,000 square feet. The new facility quadruples the size of the food bank’s former space.
Over the past 30 years, community development spending has fallen by more than 75% as a share of GDP. The NMTC is filling that gap and meeting the needs of low income communities at a lower cost to the federal government. Furthermore, instead of Washington picking winners and losers, the NMTC empowers local decision-making on important economic development projects. From business expansions to new healthcare and childcare facilities, the program was designed as a flexible incentive for economic development that meets evolving community needs.
This program has always received bipartisan support. We hope you will make a NMTC extension a priority for the Committee.
Congratulations again, and we look forward to working with you in the coming years.
Today the CDFI Fund released the 2015 NMTC Application. Below are a few of the changes we’d like to highlight:
Restrictions on the Use of QLICI Proceeds:
The NOAA includes new restrictions on the use of QLICI proceeds:
As a condition of eligibility for this Allocation Round, the Applicant will not be permitted the use of the proceeds of Qualified Equity Investments (QEIs) to make Qualified Low-Income Community Investments (QLICIs) in Qualified Active Low Income Community Businesses (QALICBs) where QLICI proceeds are used to repay or refinance any debt or equity provider or a party related to any debt or equity provider whose capital was used to fund the QEI except if: (i) the QLICI proceeds are used to repay documented reasonable expenditures that are directly attributable to the qualified business of the QALICB, and such past expenditures were incurred no more than 24 months prior to the QLICI closing date; or (ii) no more than five percent of the QLICI proceeds are used to repay or refinance prior investment in the QALICB. Refinance includes transferring cash or property directly to any debt or equity provider or indirectly to a party related to any debt or equity provider.
Question 13a on the application asks CDE applicants to answer “yes” or “no” whether they will comply with the above rules. If an applicant answers “no” then their application will be denied.
The Compliance and Monitoring FAQ provides more details and two examples:
42. What are the restrictions on the use of QLICI proceeds to directly or indirectly reimburse expenditures incurred by a QALICB or Project Sponsor (an entity that owns or Controls the QALICB) and to directly or indirectly fund a QEI?
Beginning with the CY 2015 round, only documented reasonable expenditures that are directly attributable to the qualified business of the QALICB can be paid or reimbursed from QLICI proceeds to directly or indirectly fund a QEI, provided that these expenditures have either been (i) incurred no more than 24 months prior to the date on which the QLICI transaction closes, or (ii) represent no more than 5 percent of the total QLICIs made by the CDE into the QALICB.
Reasonable expenditures are expenditures for a legitimate business purpose that occur during the normal course of operation, and must be similar in amount and scope when compared to expenditures by a similar entity for a similar project under similar circumstances. Such expenditures may be made directly by the Project Sponsor on behalf of the QALICB or be funded through a loan or equity investment made by the Project Sponsor to the QALICB.
Of note, the IRS has not issued guidance on what costs are reimbursable under §45D. Until such guidance is made public, the CDFI Fund supports the use of the above parameters for transactions involving the reimbursement of incurred cost. The following examples are offered for additional clarity.
Example 1: Project Expenditures within 24 Months
Within 24 months prior to the closing of the QLICI transaction, a Project Sponsor uses funds it has raised from various sources to obtain development permits, begin construction, acquire or install equipment, or acquire other property related to the project; all of which represent reasonable expenditures and for which the Project Sponsor has retained documentation (i.e. invoices, receipts, proof of payment, etc.) totaling $1,000,000 and are directly attributable to the qualified business of the QALICB.
Out of $10,000,000 in total QLICIs, up to $1,000,000 of the QLICI proceeds can be used to reimburse the Project Sponsor for these documented expenditures and to directly or indirectly fund a leverage loan. The remaining QLICI proceeds ($9,000,000) could be used for operating needs, working capital needs, equipment, additional construction expenditures, or other needs related to the project or business of the QALICB.
Example 2: Project Expenditures up to 5% of QLICI Proceeds
Same facts as Example 1, except an additional $700,000 of documented, reasonable expenditures incurred by the Project Sponsor were incurred greater than 24 months prior to the closing of the QLICI transaction.
The QALICB may use no more than 5% of QLICI proceeds to reimburse documented, reasonable expenditures that are directly attributable to the qualified business of the QALICB regardless of when those expenditures were incurred. In this scenario, if the total QLICIs to the QALICB was $10 million, the QALICB could use up to $500,000 to reimburse expenditures that were incurred prior to the QLICI closing.
In summary, the QALICB may elect to either reimburse reasonable expenditures incurred within 24 months of the QLICI closing date as in the first example ($1,000,000) or reimburse reasonable expenditures that represent up to 5% of the QLICI proceeds incurred prior to the QLICI closing date ($500,000). It may not do both. If the QALICB is using QLICI proceeds to reimburse or repay the Project Sponsor for documented, reasonable expenditures directly attributable to the qualified business of the QALICB that were incurred within the previous 24 months ($1,000,000), it may not use QLICI proceeds to repay or reimburse the Project Sponsor for any expenditures that occurred outside of 24 months.
43. How will the CDFI Fund monitor the restriction on the use of QLICI proceeds to directly or indirectly reimburse expenditures incurred by a QALICB or Project Sponsor required under the CY 2015 NMTC Application?
CDEs must include such covenants in financing agreements with QALICBs as may be necessary to reflect this restriction. The agreements containing such covenants must be available for inspection by the CDFI Fund. Second, the CDE should collect information as may be necessary and maintain documentation to trace the use of QLICI proceeds to use by the QALICB at the time of the initial QLICI is made and at least annually thereafter. Where the QALICB will repay or refinance a debt or equity provider or a party related to a debt or equity provider under the 24-month or five percent exception rules, the CDE should maintain documentation supporting that the reimbursements can be directly traced to actual expenditures. This documentation must be available for inspection by the CDFI Fund. Documentation to support compliance with this restriction must be retained for the period of the QLICI in the QALICB plus three years or the seven-year compliance period plus three years, whichever is shorter.
44. Can a QALICB use QLICI proceeds to pay a debt or equity provider to monetize an asset owned or controlled by the QALICB or an Affiliate of a QALICB, including but not limited to the accreted value of an asset?
No. The purpose of the NMTC Program is to attract additional investment into eligible communities. The use of QLICI proceeds to monetize existing assets does not represent new investment. Rather, transactions of this type represent a change in the form of the existing asset of the QALICB.
New Underserved States
Each year, the CDFI Fund names ten “underserved” states that have received the least NMTC allocation in proportion to their statewide population residing in low income communities. This year, Arkansas and Wyoming are new to the list, replacing Alabama and Nebraska on the 2014 list. From the Application Q&A:
Since the inception of the NMTC Program, QLICIs have been made in all 50 states, the District of Columbia, and Puerto Rico. However, the CDFI Fund has identified Puerto Rico along with the following 10 states as areas that have received fewer dollars of QLICIs in proportion to their statewide population residing in Low-Income Communities: Arkansas, Florida, Georgia, Idaho, Kansas, Nevada, Tennessee, Texas, West Virginia, and Wyoming. The above states are identified by obtaining the total dollars of QLICIs invested (2003-2013) in each state and dividing the total dollars of QLICIs by the population residing in LICs in that state.
Targeting of Native Areas:
Investing in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands, and Alaska Native Village Statistical Areas is now included in the list of “innovative uses” of a NMTC allocation in Question 18 in the Application. The Application Q&A explains how to determine whether a project is in any of these areas:
If the Applicant commits to investing in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands, and Alaska Native Village Statistical Areas, how can the Applicant identify whether potential NMTC investments are located in these areas?
Applicants should use the CIMS3 to geocode addresses and determine whether potential QALICBs are located in Federal Indian Reservations, Off-Reservation Trust Lands, Hawaiian Home Lands, and Alaska Native Village Statistical Areas. Please visit https://www.cims.cdfifund.gov/preparation/?config=config_nmtc.xml
Describing Structures with Multiple Financial Notes
The application includes new instructions for describing a financial product structured with multiple financial notes. From the application:
Question 14a/b: TIP: For each product, the Applicant should clearly discuss how the product is structured as well as benefits this structure provides to borrowers/investees. A financial product structured with multiple financial notes (e.g., an A and B note, or an A, B, and C note, etc.) must be described as one financial product. In this case, the rates and terms of the financial notes should be discussed on a blended basis. For additional guidance on calculating blended interest rates, see the Application Q&A. The individual financial notes should not be listed as separate products unless they will also be offered on a stand-alone basis. Applicants will not be scored as favorably if they do not follow these instructions.
From the Application Q&A:
How should an Applicant respond to Question 14 if it will offer multiple financial notes to a single QALICB?
Question 14 of the NMTC Allocation Application asks Applicants to describe up to three financial products that will be offered with capital raised from its NMTC Allocation. Each financial product described by the Applicant must be a stand-alone financial product. For each product, the Applicant should clearly discuss how the product is structured, as well as the benefits this structure provides to borrowers/investees. A single financial product may contain multiple financial notes offered together. For example, the Applicant will offer a financing package that includes a senior loan (A note) and a subordinate loan (B note) to QALICBs. This financing package should be described as a single financial product to the extent that the individual loans will not be offered individually.
Applicants that will offer multiple financial notes in a single financial product should describe the rates and terms of the financial notes on a blended basis where possible. To determine the blended interest rate for two or more financial notes, the Applicant should calculate the weighted interest rate for each financial note. See Question 37 below. To the extent different financial notes have different flexible features (e.g., the A-note has a 30-year term and the B-note has a seven year term), Applicants should clearly describe the flexible features of each financial note.
In Question 14(b), what does subordination mean as a flexible feature?
Subordinated debt is NOT a specific type of debt product for the purposes of this question. Per the TIP to Question 14(b) and Question 35 above, a financial product with multiple financial notes (e.g., an A and B note, or an A, B, and C note) must be described as one product. The Applicant may describe subordination as a flexible feature for the product(s) described in Question 14(b). For example, the Applicant is offering a product with an A and B note where the B note is subordinate to the A note. The Applicant may also discuss CDFI FUND | NMTC Program Allocation Application Questions and Answers 26 subordination in relation to the financing provided to the QALICB by other CDEs in multiCDE transactions or in relation to non-NMTC financing provided to the QALICB.
Earlier this month, Clearinghouse CDFI and Lake Mead Christian Academy celebrated the groundbreaking of their new Henderson, NV facility. Clearinghouse CDFI provided long-term financing for the school, that provides infant day-care services and schooling for grades K-12. The Lake Mead project is part of a recent surge in NMTC activity in Nevada, a state that – until recently – had been underserved by the program.
Lake Mead Christian Academy currently serves 610 students and carries a higher graduation rate than the overall state. Extracurricular activities and ministry services are also provided to the local community through the school.
Financing for this project was made possible thanks to Clearinghouse CDFI’s use of the New Markets Tax Credit program along with funds Clearinghouse CDFI recently received through the U.S. Treasury’s CDFI Bond Guarantee Program.
Growing NMTC use in Nevada
Between 2003 and 2014, only three NMTC projects were closed in Nevada. In response to this situation, and in order to ensure a more equitable distribution of NMTC across the country, the CDFI Fund several years ago began to give a small preference to applicants promising to target one or more of ten “underserved” states. This approach has succeeded. States like Nebraska, Kansas, and Nevada are finally seeing more NMTC investment. By the end of 2015, there may be as many as a dozen NMTC projects in Nevada.
CDEs with investments in Nevada include Nevada-based Las Vegas Community Investment Fund, Clearinghouse CDFI, CRF USA, and Zions Bank. Other CDEs targeting Nevada with available allocation left include Dudley Ventures, Al Wainwright LLC, Citigroup, Enhanced Capital, Mid City Legacy LLC, Stonehenge Capital Company LLC, US Bank, Aries Capital, and Wells Fargo. These CDEs may have already closed projects in Nevada. If you represent one of these CDEs, please contact firstname.lastname@example.org and let us know so we can highlight them on this post.
2015 Nevada NMTC projects include:
Northern Nevada Hopes
Northern Nevada HOPES medical center to offer 38 jobs, serve 6,000 patients.
Eclipse Cinemas is the development of vacant land into a one-stop, downtown entertainment complex. Impact: 200 construction jobs & 81 full-time jobs created.
Washoe Travel Plaza
The development of the Washoe Travel Plaza will produce a sustainable source of revenue for this Nevada and California tribe. Impact: 125 jobs on Native American land
Historic Westside School
The groundbreaking for the rehabilitation of the Historic Westside School in Las Vegas was Jan. 17. The project received $14 million in NMTC financing from the Las Vegas Community Investment Corporation and U.S. Bancorp Community Development Corporation.
If you have projects in Nevada, please contact email@example.com so we can highlight them.
Rooms To Go, the nation’s leading independent furniture company, cut the ribbon for its huge new Super Center on Saturday, October 17th, in Dunn, NC. The newly built facility is approximately 1.45 million square feet on 120 acres and houses a state of the art Rooms To Go showroom, a Rooms To Go Kids/Teens showroom, a Rooms To Go Outlet Center and a huge distribution center housing tens of thousands of pieces of furniture.
The Dunn Super Center and Distribution Center will create approximately 400 new jobs for area residents. In addition to serving consumers in the new Dunn stores, the state of the art distribution center is over 1.3 million square feet under roof and will service Rooms To Go stores and customers throughout the Carolinas and the I-95 corridor. Rooms To Go has several market leading stores in the area including showrooms in Raleigh, Durham, Greensboro, Myrtle Beach, Wilmington and Fayetteville.
The rural project received $30 million in NMTC financing from CAHEC New Markets, SunTrust, and CityScape.
On Friday, October 16th, Educare of California at Silicon Valley (“ECSV”) and Opportunity Fund will celebrate the recent opening of a new Educare facility in San Jose’s Santee neighborhood. The new school, which is more than 7 years in the making, will provide year-round early childhood education and care to 160 children. The project would not have been possible without the support of several local foundations, U.S. Bank, and the expired federal New Markets Tax Credit (NMTC) program. This is the seventh Educare facility financed by the New Markets Tax Credit program nationwide, which has financed more than a thousand community facilities in low-income areas across the country. In fact, the NTMC is one of the most effective federal tools available to finance new or upgraded facilities for nonprofit service providers, schools, hospitals, nursing homes, daycare centers, job training centers, nursing homes, and other community facilities. If Congress does not act to extend the program, low income communities could lose out on more than an estimated $1.7 billion in desperately needed capital for these projects.
The NMTC Has Financed More than 1,000 Community Facilities
A Decade Financing Community Facilities
Between 2003 and 2012, the NMTC financed 1,403 daycare centers, schools, facilities for nonprofit service providers, community centers, healthcare clinics, and other important amenities. Below is a breakdown by category:Nonprofits in low income areas experience financial challenges in maintaining or constructing adequate facilities. Unlike for-profit entities, they often have thin cash flows and uncertain revenue sources, mostly generated from government contracts, private foundations, or individual giving. Their geographic location presents financing challenges, and some small nonprofits lack the skills and expertise internally that are needed to manage a large-scale facility construction project.The NMTC has been extraordinarily important to local communities, and the nonprofit sector in particular, filling the financing gap and making community facility renovation, expansion, and construction possible. Beyond filling the financing gap, CDEs often offer loans with flexible terms and conditions, below market interest rates, and other features not offered in the conventional lending market.
Opportunity Fund and Educare Celebrate Opening of New School in San Jose
The project would not have been possible without the federal New Markets Tax Credit Program
Educare is a national initiative to close the “achievement gap” facing many low-income children, through early childhood education, family services, research, and teacher training. The new San Jose facility is the flagship Educare School in California, located in a San Jose school district with a minority population of more than 90 percent and an unemployment rate nearly twice the national average.
ECSV is a collaborative project among 16 public institutions and private groups who provided financial support, including FIRST 5 Santa Clara County, the Franklin-McKinley School District, East Side Union School District, the Santa Clara County Office of Education, the Health Trust, the Silicon Valley Leadership Group, and the David and Lucile Packard Foundation.
Despite the generous support of private foundations, the project faced a funding gap, so in the summer of 2014, U.S. Bank and Opportunity Fund turned to the NMTC to provide financing for construction of the new $14.8 million, 28,000 square-foot facility.
"Opportunity Fund was thrilled to support the construction of Educare’s beautiful new facility, which will provide early childhood education to 160 of the community’s most vulnerable children,” said Jeff Wells, Director of Opportunity Fund's New Markets Tax Credits program.
Opportunity Fund and US Bank
This is the fifth Educare site that U.S. Bank subsidiary U.S. Bancorp Community Development Corporation has financed. Opportunity Fund has financed more than 900,000 square feet of new or rehabilitated non-profit community facility spaces. Those facilities serve more than 500,000 low-income clients. (Learn more).Opportunity Fund is just one CDE among nearly 100 receiving allocation awards in the last round of NMTC allocation in June. Without a Congressional re-authorization, before the end of the year, organizations like Opportunity Fund and countless others will be unable to finance these projects in areas underserved by conventional lenders.
NMTC-Financed Community Facility Case Studies
Status of the NMTC
The NMTC expired at the end of 2014, but it can still be extended. The New Markets Tax Credit Extension Act of 2015 (HR 855), introduced by Reps. Tiberi (R-OH), Neal (D-MA), and Reed (R-NY), would extend the NMTC indefinitely and increase the allocation level. Senators Blunt (R-MO), Schumer (D-NY), Daines (R-MT), and Cardin (D-MD) introduced S. 591, which is nearly identical to its House counterpart.
Ten years ago, Hurricane Katrina devastated many New Orleans, Alabama, and Mississippi communities that were already reeling from decades of poverty, unemployment, and economic stagnation. In the wake of Katrina, Congress passed the The Gulf Opportunity Zone (GO Zone) Act of 2005, P.L. 109-135, which provided tax relief to The GO Zone, comprised of those counties or parishes that were deemed eligible by FEMA for “individual assistance” or “individual and public” assistance in after the storm. The GO ZONE encompasses 91 counties or parishes, including: eleven counties in Alabama; 31 parishes in Louisiana; and 49 counties in Mississippi. In light of both the devastation of Katrina and the extensive poverty that pre-dated the storm, the legislation included a temporary $1 billion expansion of the federal government's largest community revitalization initiative: the New Markets Tax Credit. NMTC allocation was awarded to CDEs targeting the GOZONE in 2 competitive rounds: 2006 and 2007, generating an estimated $2 billion total economic activity and 23,000 jobs in high poverty disaster affected areas of the gulf coast.
Disaster recovery is difficult work, and the work continues today, as many have documented in the media over the past week. Instead of reinventing the wheel and providing billions to new or untested programs, Congress chose to enact an emergency expansion of the NMTC, providing resources to an existing network of community development organizations (Community Development Entities or CDEs) with deep ties to the GOZONE region and the ability to deploy capital quickly to businesses, community facilities, and economic revitalization projects in low income areas.
While the emergency allocation was only temporary, the work continues today in the GO ZONE as CDEs continue to target investment to some of the hardest hit areas of the Gulf Coast. Below are some of the success stories in the ongoing effort to revitalize the GO ZONE.
NMTC Finances Rebuild of St. Bernard Parish Hospital
In 2005, Hurricane Katrina devastated St. Bernard Parish, a community located southeast of New Orleans. The storm damaged virtually every building in the parish, including its hospital. The NMTC helped build a new hospital, creating 225 jobs.
NMTC Helps the Houston Food Bank Meet Demand after Katrina
After Hurricane Katrina, many New Orleans residents were forced to relocate to Houston. The result was a huge surge in demand at the Houston Food Bank, an innovative nonprofit serving the Greater Houston area. With the help of NMTC financing, the food bank was expanded significantly. Watch:
The NMTC helped AMCREF support GO Zone businesses
AMCREF Community Capital (AMCREF) received $72 million in allocation for disaster affected communities. For example, the AMCREF financed the Gulf Coast Agricultural and Seafood co-op. Located in a highly distressed low income community in Bayou LaBatre, Alabama, the Co-Op was formed by 23 local shrimp and crab companies having difficulty disposing of their seafood processing waste after their previous facility was destroyed by Hurricane Katrina.
Smith NMTC Habitat for Humanity Builds
Smith NMTC Associates, LLC created and refined the NMTC model for Habitat for Humanity builds and since 2008 has helped facilitated the creation more than 200 affordable, single-family homes in the Go Zone and more than 3,000 nationwide. Below is a map of the builds facilitated by Smith NMTC in the Go Zone (click the map to learn more):
NMTC Helps Rebuild Historic 9th Ward School
Capital One, AMCREF, and Dudley Ventures, used the NMTC to relocate and rebuild the Holy Cross School, a 127 year-old non-Archdiocesan parochial school whose former facilities in New Orleans’ Lower 9th Ward were severely damaged by Hurricane Katrina.
NMTC Financed Hundreds of Habitat for Humanity Homes in Katrina Damaged Areas
A few examples:
Five Gulf Coast Habitat for Humanity affiliates built nearly 300 houses in communities affected by Hurricane Katrina with the help of the New Markets Tax Credit. U.S. Bancorp Community Development Corporation, Habitat for Humanity International CDE, and Smith NMTC partnered to make it happen.
National New Markets Fund and Capital One partner to finance 85+ Habitat for Humanity homes in Jackson, MS. Like many parts of Metro Jackson and Mississippi's Gulf Coast region, the area where the new homes will be built was impacted severely by Hurricane Camille in 1969 and again by Hurricane Katrina in 2005. As a result, it suffered from inadequate and unsafe housing.
NMTC financing supported Bay-Waveland Habitat for Humanity build dozens of homes
Looking Forward: Bipartisan Disaster Relief Legislation Introduced in House/Senate
Given the many successes of the NMTC after Katrina, bipartisan legislation has been introduced in both houses of Congress to expand the NMTC and other tax incentives for use areas affected by recent disasters, including Hurricane Sandy.Learn more:Senate legislation: National Disaster Relief Tax Act of 2015 (S. 1795), introduced by Senator David Vitter (R-LA) along with cosponsors Senators Chuck Schumer (D-N.Y.), Bill Cassidy (R-La.), Shelley Moore Capito (R-W.V.), Joe Manchin (D-W.V), Michael Bennet (D-Co.), Cory Booker (D-N.J.), Kirsten Gillibrand (D-N.Y.) and Bob Menendez (D-N.J.).
House legislation: National Disaster Relief Tax Act of 2015 (H.R. 3110), introduced by Congressman Tom Reed (R-NY) along with Bill Pascrell (D-NJ) and more than a dozen other cosponsors.
Senate Finance Committee Includes Extension and Inflation Adjustment for NMTC
WASHINGTON, D.C. –The Senate Finance Committee takes up tax extenders today, including action on the New Markets Tax Credit (NMTC). Signaling strong bipartisan support for this proven community development tool, Chairman Orrin Hatch (R-UT) released a modified Chairman’s mark this morning, which includes an amendment offered by Senator Cardin (D-MD) to increase the total NMTC allocation from $3.5 billion to $3.94 billion for 2015 and 2016.
“The New Markets Tax Credit is a tested and proven economic development tool. However, inflation has reduced the NMTC by 12 percent from 2008 to 2015,” said Bob Rapoza, spokesman for the NMTC Coalition. “The amendment provides what amounts to an inflation adjustment—the first increase in a number of years. We are pleased the Finance Committee has proposed action to extend and increase this critically important resource for job creation and local economic growth.”
U.S. Department of Treasury data indicates the NMTC has generated over $70 billion in capital investment—an unprecedented level of investment in economically distressed communities. This investment has resulted resulting in the creation nearly 750,000 jobs, expanding opportunities for credit-starved businesses and revitalization projects in communities with high poverty and unemployment rates since 2003.
There is currently legislation pending in the House and Senate to make the NMTC permanent, increasing annual credit authority and exempting NMTC investments from the Alternative Minimum Tax, bringing the Credit into parity with other similar tax credits. These bills are as follows:
- S. 591, introduced by Senators Blunt (R-MO) and Schumer (D-NY); and
- H.R. 855, by Representatives Tiberi (R-OH), Neal (D-MA), and Reed (R-NY).
Support from other legislators and decision-makers include a call for permanency in the President’s 2016 Budget, a bipartisan letter signed by 55 Members of the House of Representatives that was sent to the Committee on Ways and Means last month, and a resolution in support of the NMTC that was adopted at the 83rd Annual Meeting of the US Conference of Mayors.
This past May, a letter signed by more than 1,600 businesses, investors, and nonprofit and for-profit organizations from across the country was also sent to Congress, calling for immediate action to extend the currently expired NMTC. Examples of projects and state-specific data can be found on the Coalition’s website.
A letter in support of the federal New Markets Tax Credit, signed by a bipartisan group of 55 Members of the House of Representatives, was sent to the Committee on Ways and Means today. The letter, led by Congressmen Mike Turner (R-OH) and Chaka Fattah (D-PA), urges Committee Chairman Paul Ryan (R-WI) and Ranking Member Sander Levin (D-MI) to take action to extend the NMTC, which notes the credit expired at the end of 2014.
“The New Markets Tax Credit has generated an unprecedented level of investment in some of the poorest communities and neighborhoods in America,” said Bob Rapoza, spokesman for the NMTC Coalition. “What’s more, the federal credit has led to the creation nearly 750,000 jobs since inception.”
The letter’s authors note, “Since 2003, the NMTC generated over $60 billion in capital investment for credit-starved businesses and revitalization project in communities with High poverty and unemployment rates.”
This letter comes on the heels of several other efforts to secure the NMTC, including a resolution in support of the NMTC that was adopted at the 83rd Annual Meeting of the US Conference of Mayors. The resolution was offered by Mayor Francis Slay of St. Louis, MO, who was also joined by ten other mayors, including: Eric Garcetti, Mayor of Los Angeles; Rahm Emanuel, Mayor of Chicago; Martin J. Walsh, Mayor Boston; Stephanie Rawlings-Blake, Mayor of Baltimore; Michael A. Nutter, Mayor of Philadelphia; Carolyn G. Goodman, Mayor of Las Vegas; Charlie Hales, Mayor of Portland (OR); Greg Stanton, Mayor of Phoenix; Paul Soglin, Mayor of Madison; Marilyn Strickland, Mayor of Tacoma; and Michael F. Brennan, Mayor of Portland (ME). The resolution also endorses the two bipartisan NMTC extension bills currently pending before Congress:
- S. 591, introduced by Senators Blunt (R-MO) and Schumer (D-NY); and
- H.R. 855, by Representatives Tiberi (R-OH), Neal (D-MA), and Reed (R-NY).
The Obama Administration also called for permanency in the President’s 2016 Budget.
“There’s a reason leaders from across the country are calling for action on the federal New Markets Tax Credit—and that’s because this is a program making a difference in rural and urban communities” Rapoza adds. “It is a critically important economic development tool—we hope the Committee will take up legislation on the New Markets Tax Credit before communities lose access to this resource for job creation and local economic growth.”
The 83rd Annual Meeting of the US Conference of Mayors begins today in San Francisco, CA, and the fate of the New Markets Tax Credit (NMTC) – a critical tool for both urban areas and small towns – is on the minds of many of the conference attendees. The program expired last December, and without an extension, low income communities will lose billions in annual investment for businesses, community facilities, and revitalization projects.
Each year, the Conference of Mayors debates and passes resolutions endorsing effective programs and policies. This year, Mayor Francis Slay of St. Louis, MO introduced a resolution in support of the NMTC. The resolution also endorses the two bipartisan NMTC extension bills currently pending before Congress:
- S. 591, introduced by Senators Blunt (R-MO) and Schumer (D-NY); and
- H.R. 855, by Representatives Tiberi (R-OH), Neal (D-MA), and Reed (R-NY).
Mayor Slay introduced the resolution along with ten other mayors from every corner of the country: Eric Garcetti, Mayor of Los Angeles; Rahm Emanuel, Mayor of Chicago; Martin J. Walsh, Mayor Boston; Stephanie Rawlings-Blake, Mayor of Baltimore; Michael A. Nutter, Mayor of Philadelphia; Carolyn G. Goodman, Mayor of Las Vegas; Charlie Hales, Mayor of Portland (OR); Greg Stanton, Mayor of Phoenix; Paul Soglin, Mayor of Madison; Marilyn Strickland, Mayor of Tacoma; and Michael F. Brennan, Mayor of Portland (ME).
The slideshow below gives a small flavor of some of the important NMTC investments in the above mayors’ home cities:
The resolution cites data from the NMTC Coalition’s Economic Impact Report, showing the tremendous efficiency of the NMTC in creating jobs at a low cost to the federal government:
WHEREAS, the New Markets Tax Credit, between 2003 and 2012, generated $31 billion nationwide in direct investments to businesses, which created approximately 750,000 jobs, at a cost to the federal government of less than $20,000 per job, and these New Markets Tax Credit investments leveraged over $60 billion in total capital investment in businesses located in communities with high rates of poverty and unemployment;
It also urges support for a permanent extension of the NMTC, which expired last year:
NOW, THEREFORE, BE IT RESOLVED, that The United States Conference of Mayors does hereby support the “New Markets Tax Credit Extension Act” (S. 591 and H.R. 855), which would make certain the New Markets Tax Credit continues to be available as a financial tool for economically distressed communities, spurring investment and revitalizing areas that need it the most.
Today, at 3:30pm Pacific Time, the Metro Economies Committee will convene to discuss the resolution. Rosie Rios, Treasurer of the United States, will give remarks entitled “Using New Market Tax Credits and Other Federal Tools to Promote Economic Growth in Local Communities”. The Department of Treasury administers the NMTC program through the CDFI Fund.
WASHINGTON, D.C. – The U.S. Department of the Treasury’s CDFI Fund announced the Calendar Year 2014 New Markets Tax Credit (NMTC) allocation awards today. In the announcement, CDFI Fund Director Annie Donovan noted, “The investments made possible by today’s awards will have significant impact nationwide.” The 12th round to date, the CDFI Fund awarded $3.512 billion to 76 Community Development Entities (CDEs) from around the country.
“The federal New Markets Tax Credit is a unique and flexible community development tool with a successful track record, attracting investment capital and boosting economic activity in low-income areas,” said Bob Rapoza, spokesman for the NMTC Coalition. “In fact, the NMTC has leveraged an unprecedented level of investment to low-income communities—generating about $70 billion in total capital investment through public-private partnerships.”
Between 2003 and 2013, the federal NMTC has financed commercial and industrial facilities, daycare and health centers, charter schools and small businesses. Further adding to its impact, these investments generated hundreds of thousands of jobs in both rural and urban communities. U.S. Department of the Treasury data also indicates 75 percent of NMTC activity is in severely distressed communities with unemployment rates at least 1.5 times the national average, poverty rates of at least 30 percent, or median incomes less than 60 percent of the area median income.
The CDFI Fund indicated 263 CDEs applied for allocations for a total demand of nearly $20 billion in credits. Only 76 applications were successful (28.9 percent), receiving $3.512 billion—an amount that only meets a fraction of the demand.
“While the federal New Markets Tax Credit has achieved a great deal in some of the country’s poorest communities, the availability of the credit is extremely insufficient,” said Jose Villalobos, senior vice president of TELACU and president of the NMTC Coalition. What’s more, the future of the credit is unknown, with current authorization for the credit expired.”
The NMTC expired on December 31, 2014 after Congress passed a retroactive, one-year extension. Bipartisan bills to provide a permanent authorization for the NMTC have been introduced in both the House and Senate, respectively; The New Markets Tax Credit Extension Act of 2015 (H.R. 855) and the New Markets Tax Credit Extension Act of 2015 (S. 591).
To find out more about how the NMTC works in distressed urban neighborhoods and rural communities, watch the new video released by the by the Coalition on June 9th.
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, some $70 billion is hard at work in underserved communities in all 50 states, the District of Columbia, and Puerto Rico.