Since its inception, the New Markets Tax Credit (NMTC) has leveraged an unprecedented level of investment to low income communities that has created jobs, improved services and jumpstarted local economies ordinarily left out of the economic mainstream —in short, it is a highly successful federal program.
Between 2003-2013, NMTC investments have delivered more than $70 billion in total capital investment to a wide variety of businesses and economic development projects located in economically distressed areas, including nearly $10 billion to finance manufacturing and industrial businesses. After several decades in decline and a sharp drop during the Great Recession, America’s manufacturing economy is finally growing again, and the NMTC is a big part of that.
According to the NMTC Coalition’s annual survey of NMTC projects, financing of manufacturing and industrial businesses with the NMTC has surged from 15 percent of NMTC projects in 2012 to 28 percent in 2014.
Those investments created nearly 10,000 jobs in 2014, 40 percent of which were in rural communities, where the manufacturing decline has hit particularly hard over the last several decades. The findings were presented in the 2015 NMTC Progress Report, which was released at the annual NMTC Policy Conference last month in Washington, D.C.
Beyond manufacturing, NMTC has generated billions in investments through public-private partnerships for capital-starved communities, growing businesses and creating approximately 750,000 jobs in areas with exceptionally high rates of poverty and unemployment.
With its record of success, it should come as no surprise that there is a good deal of support for the NMTC on both sides of the aisle in Congress, as well as from the Obama Administration—agreement that is not enjoyed by most government policies.
Senators Roy Blunt (R-MO) and Chuck Schumer (D-NY), and Congressmen Pat Tiberi (R-OH), Richard Neal (D-MA) and Tom Reed (R-NY) have introduced the New Markets Tax Credit Extension Act of 2015, S. 591 and H.R. 855, respectively, which make the NMTC permanent law.
The Obama Administration also called for permanency in the President’s 2016 Budget. Last month, a group of more than 1,600 businesses, investors, and nonprofit and for-profit organizations sent a letter to the House and Senate tax writing committees, calling on the Congress to take immediate action to extend the currently expired NMTC. Despite this support, the future of the NMTC is uncertain unless that call is heeded.
Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) are looking to address the nation’s tax code and create an efficient and fairer system. To take this on, they formed five Tax Reform Working Groups in April, each covering a specific jurisdiction and tasked with getting input from the public and stakeholders on how our country’s tax policies affect people, businesses and communities.
The NMTC Coalition provided comments to the working group covering community development and infrastructure, headed by Senators Dean Heller (R-NV) and Michael Bennet (D-CO), documenting the impact of the NMTC, describing how it fits within the federal community development landscape and recommending four specific changes to the program, including: permanent authorization; increased allocation authority; indexing the NMTC allocation to inflation; and relief for NMTC investors from the Alternative Minimum Tax— bringing NMTC investments into line with other investment tax credits.
All of these recommendations are contained in the bipartisan NMTC extension bills introduced in the House (H.R. 591) and Senate (S. 855). The bottom line is that good business opportunities exist in low-income communities, but the cost and availability of capital in these ‘new markets’ is an impediment to economic growth.
The New Markets Tax Credit is a flexible financial tool, addressing both the needs of small town communities and urban neighborhoods left outside the economic mainstream. Moreover, the NMTC more than pays for itself—every dollar of forgone federal revenue generates eight dollars of new investment in the poorest communities in America, creating jobs and business opportunity, and improving facilities and services.
These results make it clear that extending the NMTC and making it a permanent part of our nation’s tax code should be a priority for Congress.
Filed Under: Industrial automation