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).

Healthcare

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:

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).

Baltimore’s Lexington Market Groundbreaking

Today, officials in Baltimore attended a groundbreaking for the Lexington Market rejuvenation project. Cinnaire provided $11 million in NMTC financing to support the revitalization of the historic Baltimore market. The 238-year old structure will undergo a $40 million transformation to create a modern gathering place for all of Baltimore and a hub for community, culture, health, and wealth-building. Cinnaire Lending and Enterprise Community Loan Fund partnered to provide a $6.7 million loan to facilitate the NMTC financing.

Some highlights via Twitter:

New Markets Tax Credit Receives One-Year, $5 Billion Extension

Contact: Ayrianne Parks, [email protected], (202) 393-5225

Spending Bill Expected to be Signed Into Law Today Authorizes $1.5 Billion Increase in Allocation

WASHINGTON, D.C. (December 20, 2019) – The Fiscal Year 2020 appropriations bill , H.R. 1865, which will signed into law today by President Trump, includes a one-year, $5 billion extension of the New Markets Tax Credit (NMTC). The NMTC, which faced expiration on December 31, instead received a $1.5 billion increase in allocation that will go far to meet the demand for this important resource that revitalizes communities, creates jobs, increases economic opportunity and improves lives. 

The projected impact of $5 billion in New Markets Tax Credits includes an estimated 138 manufacturing and industrial projects, 55 mixed-use projects, 51 health care projects and 115 community facility projects. It will also generate an estimated 118,000 jobs.

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. Since then, the New Markets Tax Credit has financed more than 6,000 projects and created over one million jobs in all 50 states, the District of Columbia and Puerto Rico. The NMTC was provided a five-year authorization in The PATH Act. (P.L. 114-113) in December 2015.

“As we celebrate the 20th anniversary of the New Markets Tax Credit in 2020, this extension and additional allocation for the next year is vital for many of America’s urban neighborhoods and rural communities, providing access to billions of dollars for high-impact, community revitalization projects,” said Bob Rapoza, spokesperson for the NMTC Coalition. “No other the federal tax incentive is generally available to economically distressed rural and urban communities to promote economic revitalization. We appreciate our champions in Congress who worked to introduce the extension into the spending package, including Sens. Roy Blunt (R-MO) and Ben Cardin (D-MD) and Reps. Terri Sewell (D-AL), Tom Reed (R-NY), who introduced legislation last February to make the NMTC permanent.  We also are grateful to Ways and Means Committee Chairman Richard Neal (D-MA) who is a longtime supporter of NMTC.”

The NMTC works by providing a shallow federal tax credit of 39 percent, taken over seven years, for investments made in 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 median. In 2019, more than 80 percent of all NMTC investments were in communities exhibiting severe economic distress with extremely low-incomes, high unemployment, or high poverty.

“The NMTC, despite its impressive track record in revitalizing communities, has been set at $3.5 billion since 2007, resulting in a 30 percent decrease in buying power. The $5 billion authorization is not only an increase above the current rate for NMTC from $3.5 billion, but also an increase above inflation of over $500 million,” adds Rapoza. “This much needed increase will go far to meet the exceptionally high demand, with is four to five times the availability on average.”

The Coalition notes that communities have come to count on the NMTC as a source of low-cost capital for challenging projects that would not have been possible but-for the NMTC. Since its inception, the Credit has delivered well over $100 billion in flexible capital to farming towns and urban neighborhoods left outside the economic mainstream.

For examples of how the NMTC is making an impact in each state, see the NMTC Coalition’s State Impact Map or check out its Project Database.

About New Markets Tax Credit Program

The New Markets Tax Credit (NMTC) was enacted in 2000 in an effort 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 NMTC, more than $100 billion is hard at work in underserved communities in all 50 states, the District of Columbia, and Puerto Rico. For more information, visit www.NMTCCoalition.org.

Tax Policy Trends and Plans for 2020 Were Focus for Lawmakers, Community Development Leaders at Annual D.C. Policy Conference

Coalition gathers NMTC stakeholders, releases state statistics


WASHINGTON, Dec. 16, 2019 /PRNewswire/ — New Markets Tax Credit extension legislation, tax policy trends and plans for 2020 were the focus as the New Markets Tax Credit (NMTC) Coalition held its annual NMTC Policy Conference late last week in Washington, D.C. The two-day event featured several members of Congress as keynote speakers, included visits with Congressional offices on Capitol Hill and provided insights from the Treasury Department. Attendees also received updated state fact sheets on the NMTC’s efficacy.

NMTC Coalition President, Kermit Billups, kicked off the conference by welcoming speakers and guests alike. The experienced NMTC practitioner and Greenline Ventures Executive Vice President highlighted recent successes and looked to the future of the NMTC Coalition.

Keynote speakers included Comptroller of the Currency Joseph Otting and CDFI Fund Director Jodie Harris. Panelists included congressional staff, NMTC board and leadership, economic development experts and Treasury Department professionals. Panels held discussions on modernization of the Community Reinvestment Act, small business loan funds, and the latest insights from the Treasury Department. A legislative outlook panel was led by moderator Bob Rapoza, NMTC Coalition spokesman.

A key focus of the conference was the expiration of NMTC. At the end of the year, the Credit expires, and the Coalition has been working with Congress on the legislation to extend and expand the NMTC.  In November, nearly 1,000 organizations wrote to the Congressional leadership in support of extension legislation.

Attendees brought their message to the Hill for Congressional visits before settling into the Hart Senate Office Building where they were addressed by Senator Roy Blunt (R-MO), Senator Ben Cardin (D-MD) and Ways and Means Committee Chairman, Representative Richard Neal (D-MA) who discussed NMTC and the future of tax policy.

“We [Congress] have to buckle down and get things done,” said Sen. Blunt, noting that he is working with fellow NMTC bill cosponsor Sen. Cardin and members of the Senate Finance Committee on an extension for the NMTC in the year-end negotiations. He went on to discuss his firsthand experience seeing the NMTC at work. “I went to a grocery store opening in south St. Louis—it was the first grocery store in 50 years, and the NMTC provided the financing.”

“You can’t allow it to expire,” said Sen. Cardin, when addressing the group and noting the chilling impact already seen due to uncertainty over the extension of the NMTC. “Permanency allows you to be able to go out and put together these deals that are not easy to be put together. There is a real desire by both the Democratic and Republican leadership to make sure that an extender package, in fact, passes before the end of the year. We are going to keep fighting for as much as we can get,” he added.

“[The NMTC] has real, positive ramifications for the communities in which you make the investment,” said Chairman Neal as he talked about “why we need to preserve and expand the New Market Tax Credit initiative. I’ve been your champion and I’m going to continue to be your champion,” he added.

The NMTC Coalition also released updated state fact sheets with community testimonials, success stories and state statistics available here.

“Since it was established in 2000, the New Markets Tax Credit has financed more than 6,000 projects and created over one million jobs in all 50 states, the District of Columbia and Puerto Rico,” said Bob Rapoza. “The conference provided practitioners with opportunities to discuss ways to build upon its success, helping low-income rural and urban communities access the capital necessary to grow local economies, expand business opportunities, update worn infrastructure, and make needed services like healthcare, education and childcare available to individuals and families living in distressed areas.”

About New Markets Tax Credit Program

The New Markets Tax Credit (NMTC) was enacted in 2000 in an effort 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 NMTC, more than $95 billion is hard at work in underserved communities in all 50 states, the District of Columbia, and Puerto Rico. For more information, visit www.NMTCCoalition.org.

Contact: Ayrianne Parks
[email protected] 
(202) 393-5225

Two New Data Updates from the CDFI Fund

CDFI Fund Releases Applicant Demand from the 2019 NMTC Round

The Fund also announced it had received a total of 206 applications under the 2019 NMTC application round. The CDEs applying early this year were headquartered in 44 states, the District of Columbia, and Puerto Rico.

Applicants requested an aggregate total of $14.7 billion in NMTC allocation authority, over four times the $3.5 billion in authority available for the 2019 round.

CDFI Fund Releases NMTC Data Through FY 2017

The CDFI Fund has released another year of NMTC transaction data. The publicly available data now covers all transaction level activity through FY 2017.

The dataset includes information on the following data: Transaction ID, Project ID, 2010 Census Tract Metro/Non-Metro, 2000/2010, Origination Year, Community Development Entity (CDE) Name,  Project QLICI Amount, Estimated Total Project Cost, City, State, Zip Code, Purpose of Investment, QALICB Type, Multi-CDE, Multi-Tract QLICI. 

The latest year of data shows $3.7 billion in QLICIs made in 2017 generating $6.88 billion in total project financing. Total investment through 2017: $48.3 billion in QLICIs and $92.7 billion* in total project financing.

The Fund’s release also includes a summary report with breakdowns by industry classification code, year, and other factors.

*Note: This number represents NMTC investments reported through 2017. The Coalition’s dataset, which is used for many of the topline numbers in our fact sheets and reports, includes most NMTC data from 2018 and 2019, and the NMTC industry has eclipsed $100 billion in total project investment to date. We will be integrating this dataset into our own and updating our State Fact Sheets for our conference next month.

RSS
Facebook
Twitter
YouTube