New Markets Tax Credit Fact Sheet
The New Markets Tax Credit (NMTC) was extended for two years (2012-2013) on January 1, 2013, ensuring that credit-starved businesses in rural and urban communities across the country will continue to receive an important source of capital.
The NMTC was authorized in Community Renewal Tax Relief Act of 2000 (PL 106-554) 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 attracts capital to low income communities by providing private investors with a 39 percent federal tax credit for investments made in businesses or economic development projects 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 incomes are at or below 80 percent of the area median.
Since the Treasury Department awarded the first NMTC allocations in 2003, the NMTC has proven to be an effective, targeted and cost-efficient financing tool valued by businesses, communities and investors across the country.
While all NMTC investments are made in economically distressed rural and urban communities, more than 72 percent of all NMTC investments are made in communities with severe economic distress -communities with unemployment rates more than 1.5 times the national average, poverty rates of 30 percent or more, or median incomes at or below 60 percent of the area median.
According to Treasury Department data, between 2003 and 2010, the NMTC generated over $20 billion in private investment in communities with high poverty rates, low incomes and high unemployment rates. This $20 billion leveraged an additional $25 billion in capital from other public and private sources, financing almost 3,000 projects ranging from urban health care centers to rural factories and small business loan funds.
The NMTC Coalition’s NMTC Economic Impact Report (December 2012) found that between 2003 and 2010, NMTC investments generated well over 500,000 jobs in hard-hit urban and rural areas, including about 200,000 permanent jobs and 335,000 construction jobs.
The NMTC has proven to be a cost-effective tool for driving capital to underserved markets. In fact, the Coalition’s NMTC Economic Impact Report found that the federal tax revenue generated by NMTC investments more than covers the cost of the program to the federal government in terms foregone federal tax revenue.
According to the Joint Committee on Taxation, the NMTC costs the federal treasury 26 cents in lost revenue for every NMTC dollar invested in a low income community. Between 2003 and 2010, the cost to the federal government to generate more than $20 billion in NMTC investments was $5.2 billion. During that same period, the jobs and businesses financed with NMTC capital generated $5.3 billion in federal tax revenue.
In 2010 alone, NMTC investments in operational activities generated almost $1.1 billion in federal tax revenue, easily offsetting the estimated $720 million cost of the program for the federal government.
URGE CONGRESS TO ACT ON THE NMTC EXTENSION in 2012
The NMTC grew out of a bi-partisan collaboration between a Democratic President and a Republican Speaker of the House in 2000 and has continued to enjoy bi-partisan support from Members of Congress who have seen NMTC investments at work growing businesses, creating jobs, and generating economic activity in their communities.
In the 112th Congress, The NMTC Extension Act of 2011 was introduced by Representatives Jim Gerlach (R-PA) and Richard Neal (D-MA) with a companion bill introduced in the Senate by Senators Jay Rockefeller (D-WV) and Olympia Snowe (R-ME). Both bills enjoy strong bi-partisan as evidenced by the list of House and Senate co-sponsors below. The Family and Business Tax Cut Certainty Act (S 3521) voted out of the Senate Finance Committee in August would extend the NMTC through 2013 with $3.5 billion in allocation for 2012 and $3.5 billion in 2013. The House has not yet released its tax extender bill.
Failure to renew the Credit is a risky move at a time when the economy teeters precariously close to a real recovery. We urge Congress to extend the New Markets Tax Credit as soon as possible.