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Grassley Wants Tax Credits To Be Used For Rural Investment

by Mike Godfrey,, Washington

16 August 2007

Sen. Chuck Grassley, ranking member of the Senate Finance Committee, along with Chairman, Sen. Max Baucus have urged the Treasury Department to ensure that rural communities receive their due share of investment under the New Markets Tax Credit (NMTC) program.

Passed into law as a part of the Community Renewal Tax Relief Act of 2000, the NMTC was enacted to encourage financial institutions to provide capital, credit, and financial services in under-served markets. One of the senators’ long-standing priorities has been to use financing instruments to foster the economic revitalization of low-income communities in rural areas.

However, data through fiscal year 2005 shows disproportionately less investment in rural areas. In a letter to the Treasury Department’s Community Development Financial Institutions (CDFI) Fund, Grassley and Baucus urged that new CDFI regulations ensure that a proportional share of NMTC dollars is delivered to rural communities.

"People might forget that ‘rural’ doesn’t mean unpopulated or without development," Grassley observed. "A lot of Americans live in rural areas. Like city dwellers, rural residents also need access to businesses and affordable housing. It’s also important to remember that one economic development project can lead to others and revitalize an entire community. Rural areas deserve a fair shot at revitalization."

Citing a report by the Government Accountability Office (GAO), the letter noted that to date, NMTC investment totals over $7.7 billion, but only 10.38% of the total NMTC proceeds were invested in rural low-income communities. To correct this, two years ago, the Committee included language to require a proportional allocation of Qualified Equity Investments (QEIs) to non-metropolitan counties, which ultimately passed into law as part of the Tax Relief and Health Care Act of 2006.

Now the Senators want the Treasury to ensure that at least 25% of NMTC proceeds are directed towards beneficiaries in non-urban areas.

"To achieve true proportionality in the NMTC program, it seems 25% should be treated as a floor, not a ceiling," they wrote.

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