New Markets Tax Credit Coalition Blog
Congressional Leaders Propose Plans for Tax Credit that Leverages Private Investment in Economically Distressed Communities to Expand Businesses and Create Jobs
Both Houses of Congress are taking action to secure the future of the New Markets Tax Credit (NMTC), which expired on December 31, 2013. Yesterday, the Senate Finance Committee marked-up legislation to extend a number of expired tax provisions, including the NMTC. On the House side, Reps. Jim Gerlach (R-Pa.) and Richard Neal (D-Mass.) introduced a bipartisan bill to renew and make the NMTC permanent. The New Markets Tax Credit Extension Act of 2014 (H.R. 4365) would ensure that economically distressed communities and cities have access to this tool for economic growth and community revitalization.
“One of the unique attributes of the New Markets Tax Credit is its flexibility; the NMTC empowers local leaders to choose projects that provide a broad community benefit, in terms of job creation or added social services,” said José Villalobos, President of the NMTC Coalition and Senior Vice President of TELACU.
Overall, federal community development spending, measured as a share of Gross Domestic Product (GDP), has fallen by 75 percent over the last 30 years. A bipartisan effort since its inception, the NMTC began as collaboration between Democratic President Bill Clinton and Republican Speaker of the House Dennis Hastert to attract private capital investment in low income communities and continues to garner support from lawmakers on both sides of the aisle.
The NMTC made $31 billion in direct NMTC investments from 2003 to 2012 to businesses in low-income areas and leveraged a total of $60 billion. Additionally, more than 72 percent of all NMTC investments have been in communities exhibiting severe economic distress, including unemployment rates more than 1.5 times the national average, a poverty rate of 30 percent or more, or a median income at or below 60 percent of the area median.
“New Markets Tax Credits were significant in the revitalization of the Phalen Corridor area, where the Baldinger Bakery is located. This fourth generation, family-owned business was able to secure the private investment capital it needed to expand into a new commercial baking facility with the help of the New Markets Tax Credit,” said National League of Cities President Chris Coleman, Mayor of Saint Paul, Minn. “The expansion allowed the business to continue purchasing local goods and services that stimulated commerce in an economically distressed neighborhood. Nationwide, the New Markets Tax Credit has leveraged private investments in businesses and communities that, similar to the Baldinger Bakery venture, likely would have never received the vital capital they need to succeed.”
Reps. Pat Tiberi (R-Ohio), Charles Rangel (D-N.Y.), John Lewis (D-Ga.), Jim McDermott (D-Wash.), Earl Blumenauer (D-Ore.), Tom Reed (R-N.Y.) and Mike Kelly (R-Pa.) joined in co-sponsoring the legislation led by Congressmen Gerlach and Neal.
“The NMTC has been helping these communities take the steps necessary to move forward, and H.R. 4365 would ensure they have the resources to get back up and running,” said Bob Rapoza, spokesperson for the NMTC Coalition. “We applaud Reps. Gerlach and Neal for their commitment to our nation’s most economically vulnerable communities and cities, and hope their colleagues in Congress will follow their lead.”
On April 2, 2014, Representatives Jim Gerlach (R-PA) and Richard Neal (D-MA) introduced the New Markets Tax Credit Extension Act of 2014 (HR 4365). The bill would extend the NMTC indefinitely and provide an increase in allocation authority in 2014 with an adjustment for inflation in the off years. Like previous NMTC extension bills, it provides NMTC investors with AMT relief.
We encourage NMTC supporters to begin reaching out to your Representatives and requesting cosponsorship of HR 4365. We recommend that you target Members of the House Ways and Means Committee and Representatives who have supported the NMTC in some fashion in the past, whether by signing a letter or cosponsoring legislation.
Advocacy Action Steps:
Here are two ways you can help build support for the Gerlach/Neal bill:
1. Thank NMTC Supporters
As important as it is to build the House cosponsorship list, it is also important to let our House champions know that we appreciate their support. Reps Gerlach and Neal were joined by seven original cosponsors: Reps. Pat Tiberi (R-Ohio), Charles Rangel (D-N.Y.), John Lewis (D-Ga.), Jim McDermott (D-Wash.), Earl Blumenauer (D-Ore.), Tom Reed (R-N.Y.) and Mike Kelly (R-Pa.). Please take a moment to contact these offices and thank them for supporting the New Markets Tax Credit.
2. Contact Your Representatives and Urge Cosponsorship of HR. 4365
Please also take a moment to contact your Representatives and urge them to cosponsor HR 4365. If your Representative was a cosponsor of HR 2655 last year, be sure to thank them for cosponsoring last Congress (see last Congress’s HR 2655 cosponsorship list).
Yesterday, House Ways and Means Chairman Dave Camp released a memo to members of the committee on their tax reform efforts, outlining his plans to move forward with hearings on tax extenders. Read the Chairmen’s memo:
On January 14, 2014, the CDFI Fund asked for comments on its NMTC allocation application.
The NMTC Coalition submitted comments to the Fund:
March 17, 2014
Mr. Robert Ibanez
NMTC Program Manager
Community Development Financial Institutions Fund
U.S. Department of Treasury
1500 Pennsylvania Avenue, NW Washington, DC 20220
Dear Mr. Ibanez:
I am writing on behalf of the New Markets Tax Credit Coalition (“the Coalition”) in response to the CDFI Fund’s January 14, 2014 request for comments on the New Markets Tax Credit (NMTC) application.
Formed in 1998, the Coalition is a national membership organization that advocates on behalf of the NMTC Program. The Coalition’s mission is to ensure that its members, including Community Development Entities (CDEs), investors, and other community development professionals, can effectively use the NMTC to encourage investment and advance economic revitalization efforts in low-income urban and rural communities across the country.
We appreciate the opportunity to comment on the NMTC application and specifically the questions and supporting documents provided as part of the 2013/2014 NMTC Allocation Application.
Below is a short statement from Rep. Neal commending the President for supporting the New Markets Tax Credit in his FY 2015 budget.
More than 1,400 Individuals and Organizations Send Letter to Congress in Support of the Credit
Washington, D.C. – Over 1,400 businesses, investors, nonprofit organizations and community leaders sent a letter to Capitol Hill today urging leaders of the House and Senate tax-writing committees to extend the New Markets Tax Credit (NMTC), a tool for creating jobs and stimulating economic growth in urban and rural communities across America. The letter comes on the heels of the Obama Administration’s renewed call for a permanent extension of NMTC and an expansion of the Credit in its Fiscal Year 2015 budget, which was released on Tuesday.
“Support for the New Markets Tax Credit remains strong on both sides of the aisle, which is a testament to its ability to revitalize the local economies of rural communities and urban neighborhoods around the country,” said Bob Rapoza, a spokesperson for the NMTC Coalition.
In June of 2013, Senators Jay Rockefeller (D-W.Va.) and Roy Blunt (R-Mo.) introduced the New Markets Tax Credit Act of 2013 (S. 1133), which would expand and codify the NMTC. Then, in early December, a bipartisan coalition of 70 Members from the House of Representatives—led by Steve Stivers (R-OH) and Mike Michaud (R-ME)—sent a letter to the House Ways and Means Committee indicating their support for NMTC provisions.
“The NMTC has provided financing to thousands of businesses, creating 550,000 jobs in communities with high rates of poverty or unemployment,” Rapoza added. “This letter is yet another signal to Congress that, unlike many of the contentious issues they tackle, this is a program with broad support.”
The letter noted:
The NMTC is an effective and economical tool for attracting private sector capital, creating jobs and business opportunities, and improving the local economies of some of the poorest urban and rural communities in America. Instead of Washington picking winners and losers, project underwriting lies with community development organizations with ties to the communities.
In contrast, House Ways and Means Chairman Dave Camp released his much-anticipated tax reform discussion draft last week, which omitted the NMTC. The media release accompanying the plan did note the Committee is interested in feedback on whether there are tax extenders that should be included, including the NMTC. However, if implemented as it is currently proposed, Camp’s draft would end the NMTC program, along with several other incentives for community development—depriving recovering communities of billions in patient, flexible capital annually.
“The Senate Finance Committee and House Ways and Means Committee should heed the call of thousands of businesses, local-elected officials, and organizations and work to extend the NMTC, a program with a track record of creating jobs and opportunity and sustaining local economies,” Rapoza said.
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 www.nmtccoalition.org.