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Permanency Urged For US New Markets Tax Credit

by Leroy Baker, Tax-News.com, Washington

08 February 2017


On February 7, the New Markets Tax Credit (NMTC) Coalition wrote to the US Congress urging that the tax credit should be made permanent.

The NMTC program, established by Congress in December 2000, is aimed at revitalizing low-income communities and increasing economic opportunity throughout the United States. At the end of 2015, the Protecting Americans from Tax Hikes Act extended the program for five years, from 2015 to 2019, with USD3.5bn in annual credit authority.

The program permits individual and corporate taxpayers to receive a 39 percent tax credit against federal income taxes, spread over seven years, for making equity investments in vehicles known as Community Development Entities. The Community Development Entities in turn use the capital raised to make business and real estate investments in low-income communities.

The letter points out that the NMTC has fulfilled its function, and has done so at a relatively low cost to the federal government, particularly when compared to traditional economic development grant programs.

It notes that, "between 2003 and 2014, USD38bn in direct NMTC investments were made in businesses and these investments leveraged over USD75bn in total capital investment to businesses and revitalization projects in communities with high rates of poverty and unemployment. Between 2003 and 2012, the NMTC generated about 750,000 jobs, at a cost to the federal government of less than USD20,000 per job."

In November last year, the US Department of the Treasury announced a further USD7bn in new NMTC. These allocations are projected to create 166,000 construction and full-time jobs, and provide USD2.8bn in total project financing.

Finally, the letter confirms that the NMTC "not only generates economic activity, but also provides a return on investment to the federal government. The federal tax revenue generated by NMTC investments more than pays for the cost of the program. For these reasons, we urge you support legislation that provides a permanent extension and expansion of the NMTC."

TAGS: tax | investment | business | law | equity investment | tax credits | legislation | United States | construction | Tax

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