$5 billion investment in economically distressed rural, urban, and minority communities
News release by the New Markets Tax Credit Coalition
Washington, D.C. | September 01, 2021 01:42 PM Eastern Daylight Time
The U.S. Department of the Treasury’s CDFI Fund announced the Calendar Year 2020 New Markets Tax Credit (NMTC) allocation awards today. The CDFI Fund awarded $5 billion to 100 Community Development Entities (CDEs) from 34 states and the District of Columbia.
“The federal New Markets Tax Credit is a unique and flexible community development tool with a successful track record, attracting investment capital and boosting economic activity in low-income areas,” said Bob Rapoza, spokesman for the NMTC Coalition. “In fact, the NMTC has leveraged an unprecedented level of investment to low-income communities—generating about $110 billion in total capital investment through public-private partnerships that created more than one million jobs.”
The CDFI Fund indicated 208 CDEs applied for allocations for a total demand of $15.1 billion in tax credits. However, with 100 successful applications (56%) receiving $5 billion, the availability of credits only meets a fraction of the true demand in communities across America.
Established in 2000 in the Community Renewal Tax Relief Act (P.L.106-554), the New Markets Tax Credit is a bipartisan effort to stimulate investment and economic growth in low-income urban neighborhoods and rural communities. The NMTC provides a shallow federal tax credit of 39 percent, taken over seven years, for investments in census tracts where the individual poverty rate is at least 20 percent or where the median family income does not exceed 80 percent of the area median.
In 2020, 85 percent of NMTC activity was in America’s poorest rural and urban communities, characterized by poverty of at least 30 percent and unemployment rates 1.5 times the national average. In addition, more than half of NMTC allocation goes to communities where a majority of residents are people of color. Of the $51 billion in NMTC allocation deployed through 2019, $27.8 billion went to majority-minority census tracts, creating 244,000 permanent jobs.
The economic consequences of the coronavirus pandemic have hit especially hard on low-income communities and the small businesses serving those communities. For that reason, it is important to note that some $3.8 billion (78%) of NMTC allocation will be deployed as loans and investments in operating businesses in rural, tribal, and urban low-income communities.
To date, the NMTC has financed more than 7,000 projects, including nearly 3,000 community services and facilities, such as hospitals, schools, daycare centers, and non-profit service providers – all in areas that were lacking access to quality facilities before the NMTC investments. As a result, more than 18 million patients have been treated in NMTC-financed healthcare projects, and over 200,000 children participate in youth enrichment programs or receive care in early childhood learning centers.
At the end of 2020, Congress extended the Credit through 2025 at $5 billion in annual credit authority, the largest ever NMTC extension. There is currently bipartisan legislation in Congress aimed at expanding the allocation level and investor base of the NMTC as well as making it permanent. The NMTC Extension Act of 2021, H.R.1321 in the House and S.456 in the Senate. There are presently 21 Senators signed on in support of S.456, which was introduced by Senators Ben Cardin (D-MD) and Roy Blunt (R-MO). H.R.1680 currently has 88 cosponsors and is led by Reps. Terri Sewell (D-AL) and Tom Reed (R-NY).
“The NMTC is a great deal for the federal government, leveraging eight dollars in other investments in communities for every dollar in credits. But, most importantly, the NMTC is a critical tool for our country’s small, overlooked rural towns and blighted urban neighborhoods that have been left outside of the economic mainstream for far too long. At least $2.7 billion – 75 percent – will be targeted to highly distressed communities, and one-fifth of the 2020 awards will be made in rural communities, with about $1.1 billion in NMTC investments going to revitalize non-metropolitan counties,” said Rapoza.
For examples of how the NMTC is making an impact in each state, see the NMTC Coalition’s NMTC at Work in Communities 2020 report or check out its Project Profile Database. The Coalition also released the 17th edition of its NMTC Progress Report on June 17, which documents the NMTC impact in Calendar Year 2020 and features a special section analyzing the effects of NMTC investments and pandemic response efforts.
About New Markets Tax Credit Program
The New Markets Tax Credit (NMTC) was enacted in 2000 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. Since its inception, the NMTC has generated more than one million jobs. Today due to the NMTC, $110 billion is hard at work in underserved communities in all 50 states, the District of Columbia, Guam, and Puerto Rico. For more information, visit www.NMTCCoalition.org.