The New Markets Tax Credit Program (NMTC) was designed to stimulate private investment and economic growth in low-income urban neighborhoods and rural communities by offering a seven-year, 39 percent federal tax credit for Qualified Equity Investments (QEIs) made through investment vehicles known as Community Development Entities (CDEs). CDEs use capital derived from the tax credits to make loans to or investments in businesses and projects in low-income areas.

Legislative History

The NMTC was enacted in December 2000 as part of the Community Renewal Tax Relief Act. The original authorizing legislation provided $15 billion in NMTC authority between 2000 and 2007. In December 2005 Congress provided an additional $1 billion in Credits targeted to communities in federally-designated “Gulf Opportunity Zones” devastated by Hurricane Katrina. In December 2006 Congress passed the Tax Relief and Health Care Act which extended the Credit through 2008 with an additional $3.5 billion in Credit authority. In July 2008 the Housing and Economic Recovery Act extended NMTC through 2009 and in February 2009 the American Recovery and Reinvestment Act (ARRA) was signed into law which provided an additional $3 billion in New Markets Tax Credit authority divided equally between 2008 allocation authority and 2009 making $5 billion in NMTC authority available for 2008 and 2009.

Proposal to Extend the Credit

The New Markets Tax Credit Extension Act of 2009 (H.R. 2628/ S. 1583) was introduced by Representatives Richard Neal (D-MA) and Patrick Tiberi (R-OH) in the House and by Senators John Rockefeller (D-WV) and Olympia Snowe (R-ME) in the Senate. This legislation extends the NMTC program for 5 years and with $5 billion in annual Credit allocations. The legislations would also authorize investor to use their NMTC investments to offset the Alternative Minimum Tax (AMT) as is currently the case with investments in Low Income Housing Tax Credits, Historic Tax Credits, and Renewable Energy Credits.

Program Accomplishments

All indications are that the NMTC is working. To date, the NMTC has raised more than $14 billion in QEIs for investment in low-income communities and nearly 300 CDEs are using the Credit to support a wide variety of community and economic development initiatives. These range from an investment by a faith-based CDE in a new childcare facility on the west side of Chicago, to the creation of the first new supermarket and shopping center in Southeast Washington, DC in many years, to the establishment of a new aerospace facility in rural Oklahoma, and to financing a solar manufacturing facility that will create 1,500 new ‘green’ jobs in a low income community outside of Albuquerque, New Mexico. According to the CDFI Fund, through 2007 NMTC investments have helped to support the development or rehabilitation of over 68 million square feet of real estate in low-income communities, creating 210,000 constructions jobs; and helped to create or maintain over 45,000 full time equivalent jobs at businesses operating in low-income communities across America.