Emergency NMTC Extension and Expansion Proposal

The NMTC has a 20-year track record of promoting revitalization in America’s economically distressed rural and urban communities. These communities – which were struggling with high poverty and unemployment before the recent economic collapse – now face severe challenges in securing capital, challenges that pre-dated the pandemic.

The NMTC expires at the end of this year. Congress should take action to address the crisis in these communities by passing legislation that permanently extends the NMTC, along the lines of the bipartisan New Markets Tax Credit Extension Act of 2019 (S.750/H.R. 1680), provides an emergency expansion of the NMTC and temporary policies (outlined below) to ensure communities can continue to access NMTC equity through a competitive investor market.

The NMTC ensures private-sector resources reach communities outside the economic mainstream, from remote rural areas of Alaska, to urban neighborhoods struggling with economic dislocation. Through September 2019, the NMTC delivered over $100 billion[1] in total project financing to over 6,000 businesses and projects in areas of deep distress. In 2018, 80 percent of NMTC activity was in areas of extreme poverty and unemployment that far exceed the statutory requirements for economic distress. The NMTC – and the organizations that use it to deploy capital to underserved communities – is well-suited to provide patient flexible capital to support the disaster relief and economic stabilization needed as the virus fades.

The NMTC Coalition recommends the following policies to help increase the flow of investment to low-income communities and ensure the NMTC investor market remains competitive and highly liquid:

Emergency Extension and Expansion of the NMTC

  1. Congress should permanently extend the NMTC along the lines of the NMTC Extension Act of 2019. The bill provides $5 billion in annual authority, an inflation adjustment in out years, and provides relief from AMT for NMTC investors;
  2. Congress should provide an emergency NMTC allocation of $1 billion to be added to the pending 2019 round (for a total of $4.5 billion). The CDFI Fund is currently evaluating the 2019 application round with awards scheduled for the summer. The CDFI Fund can administer the emergency round using existing applications and a supplemental questionnaire, a procedure they used when Congress provided an emergency NMTC authorization during the Great Recession as part of ARRA;
  3. Congress should help communities rebound by providing an additional NMTC allocation of $1.5 billion to be added to the 2020 round (for a total of $6.5 billion for 2020), and $1 billion to the 2021 round (for a total of $6 billion for 2021);
  4. Absent passage of the NMTC Extension Act of 2019, Congress should provide relief from the AMT consideration for NMTC investors. AMT relief would increase competition for NMTCs, bringing high-net-worth individuals into the NMTC investor pool, and driving more benefit to low-income communities for each federal dollar; and
  5. Congress should provide Community Development Entities with temporary relief from Treasury regulation § 1.1001-3 (Modifications of debt instruments), which would help them provide flexibility to borrowers to help them through the crisis.
  6. Congress should ensure communities have access investment capital by temporarily allowing investors to carryback credits for five years and exempting NMTC and other General Business Tax Credit investors from the 75 percent general business credit limitation (Sec. 38(c)(2)) through 2022. Uncertainty over potential near term tax liability can depress demand for the NMTC and drive down the equity price investors contribute in exchange for the credit. Allowing investors to carryback credits up to five years, and temporarily relaxing the 75 percent limitation would ensure demand remains high over the near term for NMTCs, maximizing the benefit to low-income communities. The same goes for other community development credits.

Community development entities (CDEs), investors, and NMTC practitioners have proven they can quickly deliver $7 billion in annual allocation to businesses and revitalization projects. In 2016, the CDFI Fund combined the 2015 and 2016 rounds and awarded $7 billion in allocation to over 100 organizations. It only took CDEs 18 months after signing their award agreements to deploy $7 billion to health clinics, manufacturing expansions, and small businesses. 

The NMTC investor market has weakened during the uncertainty and economic freefall instigated by the pandemic. While investments are continuing, and businesses are receiving financing, we have already seen evidence of pricing decreases in the equity market. The changes outlined above will help enhance market liquidity, improve equity pricing, increase the efficiency of the program, and facilitate financing businesses hard hit by the current health and economic crisis.

While the proposed emergency allocation would be generally available to help communities meet a wide variety of needs, it is important to note the NMTC’s track record in two particular areas of concern in the current environment: economic stabilization and healthcare financing.

[1] NMTC Coalition analysis of CDFI Fund data (2003-2016), its annual survey of CDEs (2017-2018), and OCC data (2018-2019).


Before COVID-19, almost 62 million people did not have regular access to primary health care.

The healthcare system in low-income communities is the least prepared to deal with the fallout from the Coronavirus – particularly in rural areas. As the disease stresses Intensive Care Units (ICUs), increasingly monopolizing the resources of hospitals and overwhelming primary care physicians with testing, the entire healthcare system could be stretched to its limit. The need extends beyond ventilators and upgraded ICUs to essential healthcare equipment and infrastructure. Without additional healthcare capacity, doctors will continue to be forced to delay treatments for further extended periods. When the pandemic begins to recede, health systems will be overwhelmed with demand for treatment, surgeries, and procedures postponed during the crisis. This is particularly the case in high-poverty areas already struggling with poor health outcomes and inadequate facilities.

Congress can act now to help distressed communities meet the oncoming tsunami of demand by providing additional resources to community development organizations through the NMTC.

NMTC Track Record on Federally Qualified Health Centers (FQHCs):: The NMTC is one of the most important sources of funding for the financing and equipping of FQHCs. To date, over $4 billion in NMTC investments have supported the financing of 387 FQHC projects serving over 8 million patients in low-income communities.

Healthcare Stores:

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Economic Stabilization

When economic calamity strikes, commercial credit markets freeze, philanthropy tightens, and state and local tax revenue collapses. All of these counter-cyclical forces combine to exacerbate recessions by creating a liquidity crisis. The communities hit hardest by the economic fallout from the pandemic are the minority and low-income communities targeted by NMTC.

During the early stages of the Great Recession, Congress took a variety of actions to help capital-starved communities access the resources they desperately needed. The legislation included an authorization of an additional $1.5 billion in NMTC allocation for 2009 and 2010 to help more communities gain access financing to keep businesses open and support critical components of the social safety-net, including health centers, homeless shelters, and other community facilities.

NMTC Track Record After the Great Recession: The NMTC delivered $23.6 billion in total financing to over 1,200 businesses and revitalization projects in hard hit communities between 2009 and 2011. Those investments directly created or retained 85,000 permanent jobs and 94,000 construction jobs at a time when the economy was in a freefall.

[1] NMTC Coalition analysis of CDFI Fund data (2003-2016), its annual survey of CDEs (2017-2018), and OCC data (2018-2019).

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