H.R. 855, the New Markets Tax Credit Extension Act of 2015
On Tuesday, February 10, 2015, three members of the House Ways and Means Committee, including Congressmen Pat Tiberi (R-OH), Tom Reed (R-NY) and Richard Neal (D-MA), introduced a bill to secure the future of the New Markets Tax Credit (NMTC). New Markets Tax Credit Extension Act of 2015 would ensure that rural communities and urban neighborhoods left outside the economic mainstream have access to financing to grow their economies and create jobs.
- Read the NMTC Coalition’s press release
- Read Tiberi/Neal/Reed press release
- H.R 855 Fact Sheet
- Bill Text
Help build the H.R. 855 cosponsorship list:
- Introduced by Reps. Pat Tiberi (R-OH), Richard Neal (D-MA), and Tom Reed (R-NY).
- 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.
- Members who would like to cosponsor HR 855 can contact Whitney Daffner with Representative Tiberi or Brandon Casey with Representative 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 bi-partisan 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 low income 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 (QEI) made in a Community Development Entity (CDE) 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 taken to date will be recaptured with interest.
The Impact of New Markets Tax Credit Investments
Between 2003 and 2012, $31 billion in direct NMTC investments were made in businesses that created approximately 750,000 jobs, at a cost to the federal government of less than $20,000 per job and these NMTC investments leveraged over $63 billion in total capital investment in businesses located in communities with high rates of poverty and unemployment .
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.