HEDC New Markets, Inc. (an affiliate of the National Development Council) -- The Commons in Durango, CO
Introduction
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 (QEI) made through investment vehicles known as Community Development Entities (CDE). 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 (P.L. 106-554). The original authorizing legislation provided $15 billion in New Markets Tax Credit authority between 2000 and 2007. Over the years, Congress has regularly extended the program. The 111th Congress extended the Credit for 2010 and 2011 at $3.5 billion in annual Credit authority.
The New Markets Extension Act of 2011 (S. 996 and H.R. 2655)
In the 112th Congress, Senators Jay Rockefeller (D-WV) and Olympia Snowe (R-ME) introduced the New Markets Tax Credit Extension Bill of 2011 and Representatives Jim Gerlach (R-PA) and Richard Neal (D-MA) introduced an identical companion bill in the House.
The New Markets Tax Credit Extension Act of 2011 (S. 996 and H.R. 2655) would extend the NMTC program for 5 years, through 2016, with $5 billion in annual Credit allocations. The legislation would also provide NMTC investors an exemption from the Alternative Minimum Tax (AMT). This exemption is currently available to other, similar tax credits including Low Income Housing Tax Credits, Historic Tax Credits, and Renewable Energy Credits.
Congressional Action Needed to Support the New Markets Tax Credit Extension Act of 2011
On December 31, 2011 authority for New Markets expires and it is essential that Congress approves legislation to extend the Credit The NMTC has proven to be a cost effective tool that has stimulated investment and economic growth in low-income communities that have created jobs.
Support the NMTC extension campaign by getting your Members of Congress – Senators and Representatives – to co-sponsor the New Markets Tax Credit Extension Act of 2011.
In the House: Please contact your Representatives and ask them to co-sponsor HR 2655. In order to join, offices should contact Lori Prater with Rep. Gerlach (lori.prater@mail.house.gov, 202-225-4315) or Kara Getz with Rep. Neal (kara.getz@mail.house.gov, 202-225-0547).
In the Senate: Please contact your Senators and ask for their support by signing on to S. 996. Offices should contact Mark Libell with Senator Rockefeller (202-224-6472) or Scott McCandless with Senator Snowe (202-224-7884) to join as a co-sponsor.
The NMTC Coalition also has state fact sheets on the NMTC and ‘NMTC By the Numbers’ that you can access and share with Members of Congress and their staff.
NMTC Program Accomplishments
All indications are that the NMTC is working. In December, 2010 to mark the 10th anniversary of enactment of legislation, the New Markets Tax Credit Coalition analyzed data from the Treasury Department on the success of the New Markets Tax Credit. The analysis was based on activity from 2003-2009 and included financing for some 3,000 businesses and projects. Among the key findings of the analysis:
- NMTC Investments totaled $15.5 billion and total costs for projects financed by NMTC came to $49.5 billion;
- The preponderance of activity – over 89% — is in extremely distressed communities. Over 61% of investments are in communities with unemployment rates at least 1.5 times the national average, 57% are in communities with poverty rates exceeding 30% and 60% of the investments are in places where median incomes are at or below 60% of area median.
- Between 2003 and 2009 NMTC leveraged over $10 in private investment for every $1 of cost to the government.
- More than 70% of Real Estate businesses are one of three industry types: Community Facilities such as community schools or health centers;Industrial/Manufacturing/Commercial such as a manufacturer of laser alignment tools or a seafood processing plant; or Mixed-Use such as ground level retail with office or housing above; and
- Based on federal Recovery Act standards, the $50 billion generated by NMTC projects retained or created an estimated 500,000 jobs.
Find our 10th anniversary report here.
On June 7, the Coalition released its 2011 Progress Report that includes results from a survey of Community Development Entities and their 2010 activity using the Credit. Survey results show, just as in past years, that activity under New Markets is in communities that need it the most. Ninety-six percent of NMTC investments in 2010 were located in communities with at least one factor of higher economic distress than required by law, including:
• 50 percent ($1.53 billion) to census tracts with unemployment rates at least 1.5 times the national average;
• 45 percent ($1.38 billion) to census tracts with lower median incomes than required; and
• 44 percent ($1.33 billion) to census tracts with poverty rates at or greater than 30 percent.
Download the 2011 Progress Report here.
NMTC investments range from a new childcare facility on the west side of Chicago financed by a faith-based CDE, to the creation of the first new supermarket and shopping center in Southeast Washington, DC in a generation, to the establishment of a new aerospace facility in rural Oklahoma, to financing a solar manufacturing facility that created 1,500 new ‘green’ jobs in a low income community outside of Albuquerque, New Mexico.
To learn more about NMTC in your state visit our 50 projects, 50 states and state profiles