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.
In case you missed it, here’s a recap of the New Markets Tax Credit Coalition’s 2015 Policy Conference, all via Twitter:
New NMTC Report and Video Demonstrate Impact of Expired Federal Tax Credit in Distressed Communities
WASHINGTON, D.C. – A new report on the New Markets Tax Credit (NMTC) indicates the federal tax credit was responsible for creating nearly 40,000 jobs last year, according to a significant survey of 2014 projects. The 2015 NMTC Progress Report, which the Coalition released today during its annual Policy Conference, details the impact of the NMTC in economically distressed communities in the previous calendar year. Also released was a video explaining how the NMTC works and including profiles from a handful of NMTC projects – ranging from a manufacturing facility in Alabama to a community facility in Los Angeles, a grain terminal in Washington, a health and recreation center in Ohio, and an after-school youth program in New York.
“These numbers and stories illustrate the flexibility of the New Markets Tax Credit, a unique community development tool for financing business and development activities and boosting the local economies of low income rural communities and urban neighborhoods across the country,” said Jose Villalobos, senior vice president of TELACU and president of the NMTC Coalition.
Like the ten previous annual reports produced by the Coalition, this year’s Progress Report offers updated investment and transaction information from NMTC Allocatee survey respondents for the previous calendar year (2014). It includes data from 67 Community Development Entities (CDEs), representing $16.8 billion in total NMTC allocations from 2003 through 2014. The report findings also demonstrate the importance of the NMTC to the manufacturing economy, which has been in steep decline over the last couple decades. In 2014, the program created nearly 10,000 manufacturing jobs. Other projects included community facilities and other important amenities such as healthcare facilities, social service facilities, and schools and vocational training facilities. More than 71 percent of these projects were located in severely distressed communities that far exceed the statutory requirements for poverty and income.
“One example from 2014, is the Crosstown Concourse project, located in a blighted neighborhood in Memphis, Tennessee,” said Bob Rapoza, spokesman for the NMTC Coalition. “This project will preserve the abandoned and dilapidated, 1 million square foot, historic Sears distribution facility and redevelop the space into a mixed-use facility, anchored by arts, education and healthcare tenants, creating an expected 500 full-time jobs in a neighborhood with an unemployment rate of 18 percent.”
Since its inception, NMTC has delivered some $70 billion to urban and rural communities left out of the economic mainstream. This unprecedented amount of private sector has created around 750,000 jobs, financed industrial and commercial facilities, health and community centers and small business loan funds.
The NMTC expired on December 31, 2014. Bipartisan bills to provide a permanent authorization for the NMTC have been introduced in both the House and Senate The New Markets Tax Credit Extension Act of 2015 (H.R. 855) and (S. 591).
“Survey respondents reported $3.5 billion in projects in the pipeline for next year, but without an extension of the program, these projects won’t be able to go forward,” Rapoza said. “For many rural and urban communities, the NMTC is the only opportunity available for credit-starved, small- and medium-sized businesses.”
In addition to the report and the video, the Policy Conference will draw CDEs, investors and stakeholders from across the country that are engaged with NMTC work in their communities for informative panels on the state of the NMTC and prospects for its future. The Conference provides a forum for attendees to hear directly from members of Congress, including Senator Roy Blunt (R-MO) and Chaka Fattah (D-PA), as well as CDFI Fund Director Annie Donovan, about how the NMTC is working to attract investment capital and generate economic activity in low income areas. Additionally, conference attendees will have the opportunity to hear from key Treasury Department officials, NMTC investors and leading law firms helping navigate the regulatory and legal factors faced by NMTC practitioners, and Congressional staffers will provide insight on the state of NMTC legislation in both chambers.
That evening, the Coalition will hold a reception on Capitol Hill, which will include remarks from Senator Ben Cardin (D-MD) and Congressmen Richard Neal (D-MA), as well as a viewing of the NMTC video with testimonials from communities, congressional and federal agency leaders. The event will take place in the Kennedy Caucus Room, room 325 of the Russell Senate Office Building.
For more information on both the conference and the reception, please visit the “Events” page on the NMTC Coalition’s website.
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 $70 billion is hard at work in underserved communities in all 50 states, the District of Columbia, and Puerto Rico.
Congressmen Mike Turner (R-OH) and Chaka Fattah (D-PA) are circulating a sign-on letter urging timely Congressional action on the New Markets Tax Credit. Last year, they also led a letter to Ways and Means urging an extension of the NMTC, and followed up on that letter with an Op-Ed in Roll Call urging their colleagues to take the time during the August recess to visit a NMTC-financed project. Below is a link to the current letter and Dear Colleague.
The deadline for signatures on the letter is close of business on Tuesday, June 16th. Please take a moment to contact your member of Congress and ask them to sign-on to this letter and voice their support for a NMTC extension. In particular, you may want to focus your advocacy efforts on the Members of Congress who signed last year’s NMTC support letter. You can find that list in the link below:
Businesses, investors and organizations sign letter urging Congress to extend the expired community and economic development tax credit before they leave Washington
Washington, D.C. – Building on two solidly bipartisan bills in the House and Senate, a letter signed by over 1,600 businesses, investors, and nonprofit and for-profit organizations calls on the Congress to take immediate action to extend the currently expired New Markets Tax Credit (NMTC). Senators Roy Blunt (R-MO) and Chuck Schumer (D-NY), and Congressmen Pat Tiberi (R-OH), Richard Neal (D-MA) and Tom Reed (R-NY) have introduced the New Markets Tax Credit Extension Act of 2015, S. 591 and H.R. 855, respectively, which make the NMTC permanent law. The Obama Administration also called for permanency in the President’s 2016 Budget. The pending legislation as well as the 2016 budget all propose a substantial increase in NMTC.
“The idea behind the New Markets Tax Credits is that there are good business opportunities in low-income communities, but the cost and availability of capital in these ‘new markets’ is an impediment to economic growth,” said Bob Rapoza, spokesperson for the NMTC Coalition. “Since its implementation, the NMTC has leveraged an unprecedented level of investment to low-income communities—generating more than $60 billion in total capital investment through public-private partnerships.”
The letter notes that the NMTC has financed commercial and industrial facilities, daycare and health centers, charter schools and small businesses. Further adding to its impact, these investments generated nearly 750,000 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 or with poverty rates of at least 30 percent.
The NMTC began as a bipartisan collaboration between Democratic President Bill Clinton and Republican Speaker of the House Dennis Hastert (R-IL)t to attract private capital investment in low-income communities, and continues to garner support from lawmakers on both sides of the aisle.
“The resounding support for the NMTC, from the House to the Senate and the White House, provides hope that lawmakers can find common ground that benefits the communities and people they represent, and the NMTC has a proven track record of doing just that,” said José Villalobos, President of the NMTC Coalition and Senior Vice President of TELACU.
For examples of how the NMTC is making an impact in each state, see the NMTC Coalition’s Project Profile Map.
Federal community development spending, as a share of GDP, has fallen by over 75 percent over the past 30+ years. Gap financing programs like CDGB have been cut significantly. As a consequence, it has become more and more difficult for communities like Baltimore, MD to financing improvements like community centers, healthcare clinics, and mixed-use facilities with affordable housing.
In light of these cuts, over the past decade, the New Markets Tax Credit has been one of the most important tools for community leaders looking to build new schools, rehabilitating long vacant buildings, and create jobs for residents of low income communities. Since 2003, the NMTC has delivered more than $2 billion in financing to 52 Baltimore businesses, community facilities, and service providers.
On Sunday, April 26, the Portland Press Herald ran the second article in its two-part series on the Maine New Markets Capital Tax Credit. The two articles question many of the aspects and investments of the state program, and also question the efficacy of the federal New Markets Tax Credit (NMTC) program. As the NMTC Coalition’s focus is exclusively on the federal credit, we will confine our comments to the efficacy of just the federal NMTC program.
First and foremost, there is a clear record of success when it comes to the federal New Markets Tax Credit. The federal NMTC is a tool that is available to economically distressed communities, promoting revitalization by encouraging the private sector to make investments in areas they otherwise would not, which has resulted in the creation of nearly 750,000 jobs between 2003 and 2013.
The Portland Press Herald article—by selectively citing elements from a 2014 report by the U.S. Government Accountability Office (GAO), as well as a flawed report by former Senator Tom Coburn— fails to capture an understanding of what is necessary to rebuild our low income communities and address the challenges of attracting investments in economically distressed areas where the private markets provides insufficient capital. The principal impediment to economic growth in many of our urban neighborhoods and rural communities is the lack of patient, flexible capital.
The NMTC is the principal federal tool for increasing the flow of private sector capital to distressed communities. In fact, a 2007 survey conducted by the GAO acknowledged that 88 percent of federal NMTC investors would not have made their investments, if not for the incentive of the Credit. The survey also found that 69 percent of investors had not previously made any investments in these communities, which illustrates that the federal NMTC is doing what was intended—encouraging private investments in distressed communities and neighborhoods to drive economic growth, and to create and retain jobs.
Under the federal NMTC, investors receive a modest return, while businesses and economic development projects receive substantial benefits from NMTC financing. The return on the federal credit is 39 percent over seven years, a little over six percent per year. Federal NMTC investments are in some of the poorest communities in the country and this return is at low end of the annual return for similar risk based capital, which is six to 13 percent annually.
Additionally, federal law requires Community Development Entities (CDEs) to invest at least 85 percent of Qualified Equity Investments (QEIs) into projects. According to the GAO’s survey for 2011-2012, fees and retentions only totaled 7.1 percent of total NMTC Qualified Equity Investments (QEIs). Most recently, an Urban Institute Report, which was cited in the 2014 GAO report that was mentioned in the news article, indicated that CDEs invested 97 percent of QEIs into businesses and projects. In other words, the two most recent GAO reports on NMTC indicate that investment rates are well above the requirements established in law and regulation.
Since the federal NMTC was implemented in 2003, $31 billion in direct NMTC investments were made in businesses, and these investments leveraged more than $60 billion in total capital investment in businesses located in communities with high rates of poverty and unemployment. The federal NMTC program has achieved significant, tangible results in terms of job creation and retention, access to affordable and healthy food, improved health care facilities, as well as jumpstarting the manufacturing sector.
Unlike state administered programs, the federal program is closely monitored by the CDFI Fund and IRS at the U.S. Department of the Treasury. Intense competition and consideration of prior CDE performance incentivizes efficiency. In the most recent competition for Credits, the CDFI Fund received more than $23 billion in applications for Credits, when only $3.5 billion was authorized for 2013. The allocation application includes questions related to prior performance of the applicant, including how past NMTC use has benefited low income businesses and distressed communities. The application requires applicants to quantify past loans and investments. If CDEs cannot demonstrate they have used NMTC financing wisely, they will not receive future allocations.
While the NMTC Coalition is unaware of the specifics surrounding the Maine deals, we support all efforts to ensure the federal program is being used efficiently and effectively, spurring the private investments needed to serve the economic and community development needs of low income communities.
Yesterday, April 15, was the deadline for the Senate Finance Committee Tax Reform Working Groups. The New Markets Tax Credit (NMTC) Coalition submitted comments to the Community Development and Infrastructure Tax Reform Working Group.
Coalition spokesperson Bob Rapoza notes that the NMTC has delivered an unprecedented level of investment to low income communities.
“Since the Credit was implemented, $31 billion in direct NMTC investments were made in businesses, creating approximately 750,000 jobs, and these investments leveraged over $60 billion in total capital investment in businesses located in communities with high rates of poverty and unemployment,” Rapoza said.
In its submission, the Coalition’s comments document the impact of the NMTC, describe how it fits within the federal community development landscape, and recommend several changes to the program. The group recommended NMTC permanence and increased allocation authority indexed to inflation. The Coalition also recommended relief for NMTC investors from the Alternative Minimum Tax—as has been done with other credits like the Low Income Housing Tax Credit—which would allow a greater pool of investors to participate in the program. All of these recommendations are contained in the bipartisan NMTC extension bills introduced in the House (H.R. 591) and Senate (S. 855).
The working groups are a part of a bipartisan effort by Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden to address the nation’s tax code and create a more efficient and fairer system. There are five working groups, covering the areas of the following jurisdictions: individual income tax, business income tax, savings and investment, international tax, and community development and infrastructure. Comments and input were solicited from the public and other stakeholders to provide guidance to the working groups and better evaluate how our country’s tax policies effect people, businesses and communities. The Infrastructure and Community Development Working Group is headed by Sens. Dean Heller (R-NV) and Michael Bennet (D-CO). Bob Rapoza represented the Coalition at a roundtable sponsored by the working group on April 7.
The NMTC was authorized in the Community Renewal Tax Relief Act of 2000 (PL 106-554) as part of a bipartisan effort to stimulate investment and economic growth in low income communities that lack access to the patient capital needed to support and grow businesses, create jobs, and sustain healthy local economies. The NMTC has proven its effectiveness time and again over the last decade. These results make it clear that this Credit should be a priority in any efforts to reform our nation’s tax code—the NMTC is a flexible financial tool, addressing both the needs of small town communities, as well as urban neighborhoods left outside the economic mainstream.
Read the full comments from the Coalition to the Community Development and Infrastructure Tax Reform Working Group.