NMTC Extension Bills

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NMTC Extension legislation

NMTC extension legislation was introduced in the House and Senate on February 15, 2017. Congressman Pat Tiberi (R-OH) and two colleagues on the House Ways and Means Committee, Congressmen Tom Reed (R-NY) and Richard Neal (D-MA), the Ranking Member on the committee, introduced the House bill (H.R. 1098) with a total of 21 original cosponsors, including 15 members of the Ways and Means Committee.

Senators Roy Blunt (R-MO) and Ben Cardin (D-MD) introduced the Senate bill (S. 384) along with two other colleagues.

Fact Sheet: The New Markets Tax Credit Extension Act of 2017 (S. 384/H.R. 1098)

BILL SUMMARY:

  • S. 384: Introduced in the Senate by Senators Blunt (R-MO) and Cardin (D-MD).
  • H.R. 1098: Introduced in the House by Representatives Tiberi (R-OH), Neal (D-MA), and Reed (R-NY) along with more than a dozen of their colleagues.
  • Provides an indefinite extension of the New Markets Tax Credit (NMTC).
  • Provides an increase in the annual NMTC allocation and indexes the allocation to inflation in future years.
  • Provides Alternative Minimum Tax (AMT) relief for NMTC investments thereby ensuring NMTC investors the same consideration under the AMT as is currently provided to investors in many other federal tax credits.
  • Senators wishing to cosponsor S. 384 may contact Tracy Henke (Tracy_Henke@blunt.senate.gov) with Senator Blunt or Beth Bell (Beth_Bell@cardin.senate.gov) with Senator Cardin.
  • Representatives wishing to cosponsor H.R. 1098 may contact Whitney Daffner (whitney.daffner@mail.house.gov) with Rep. Tiberi or Aruna Kalyanam (aruna.kalyanam@mail.house.gov) with Rep. Neal.

History of the New Markets Tax Credit and How it Works

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 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 program attracts capital to eligible communities by providing private investors with a federal tax credit for investments made in businesses or economic development projects located in some of the most distressed communities in the nation – census tracts where the individual poverty rate is at least 20 percent or where median family income does not exceed 80 percent of the area’s median income.

NMTC investors receive a tax credit equal to 39 percent of the total Qualified Equity Investment made in a Community Development Entity with the Credit realized over a seven-year period, amounting to 5 percent annually for the first three years and 6 percent in years four through seven. If an investor redeems the NMTC investment before the seven-year term has run its course, all Credits will be recaptured with interest.

The Impact of New Markets Tax Credit Investments

  • Between 2003 and 2015, $42 billion[1] in direct NMTC investments were made in businesses and these NMTC investments leveraged nearly $80 billion[2] in total capital investment to businesses and revitalization projects in communities with high rates of poverty and unemployment.
  • Between 2003 and 2012, the NMTC generated about 750,000 jobs[3], at a cost to the federal government of less than $20,000 per job.
  • By law, all NMTC investments must be made in economically distressed communities. However, 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.
  • The New Markets Tax Credit generates economic activity, providing a return on investment to the federal government. In 2012, NMTC-financed businesses generated $984 million in federal tax revenue which more than covered the estimated $800 million cost of the Credit in terms of lost tax revenue in 2012.

[1] CDFI Fund’s FY 2015 Agency Financial Report

[2] NMTC Coalition Estimate

[3] A Decade of the NMTC (2003-2012), NMTC Coalition (December 2014).

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