The Delta Grassroots Caucus (DGC) is a broad coalition of grassroots leaders in the eight-state Delta region. DGC is also a founding partner of the Economic Equality Caucus,
which advocates for economic equality across the USA.

Extend the New Markets Tax Credit to Spur Investment in the Delta

Posted on February 26, 2008 at 12:31 PM

The New Markets Tax Credit (NMTC) is a dynamic, bipartisan initiative that facilitates the flow of private sector investment in low-income areas, and it has an important role in revitalizing economically distressed communities in the Mississippi Delta region. It has already generated substantial economic development since its creation in 2000 and has great potential for expansion. Communities in the Delta are always among the first to feel the effects of the economic downturn, and we urge Congress and the Bush administration to extend the credit for 2009-10, increase its funding, and take the following actions:

Extend the Credit for 2009-10: In the event of further stimulus legislation, Congress should add $1 billion in Credit authority for 2008. This Credit authority should be made available to qualified allocation applications on hand at the Community Development Financial Institutions Fund of the Treasury Department. The Bush Administration FY 09 Revenue Estimate proposes an extension of the New Market Tax Credit through 2009 with $3.5 billion in additional Credit authority.

The New Markets Tax Credit was enacted in 2000 as part of the Community Renewal Tax Relief Act and has gained extensive bipartisan support. The original legislation provided for $15 billion in Credit volume for 2001-2007. In December 2005, Congress provided an additional $1 billion in Credits targeted to communities in Gulf States devastated by Hurricane Katrina. In December 2006, Congress passed the Tax Relief and Health Care Act of 2006, which extended the Credit through 2008 with an additional $3.5 billion in Credit authority.

Track Record The purpose of the New Markets Tax Credit is to facilitate the flow of private sector capital to low income communities. There is substantial evidence that the NMTC is an effective incentive to encourage private sector investment in low income areas. A recent GAO report indicated that 88 percent of investors surveyed would not have made the investment in the low income community without the Credit.

According to the Community Development Financial Institutions (CDFI) Fund, investor interest in the Credit is increasing. In the last 12 months alone, some $3 billion investments have been made through the Credit. To date, over $9.1 billion in investments in some of the poorest communities in the country have been made through the Credit.

Beyond raising equity investments and deploying funds derived from the Credit at a fast clip, a recent survey indicates that the Community Development Entities (CDEs) that administer the program are at work in communities with poverty rates higher than 30 percent and unemployment greater than 1.5 times the national average. This targeting is far beyond the requirements of the law or regulations governing the program.

Demand Surpasses Current Authorization There remains significant demand for the New Markets Tax Credit program. In the 2007 round, over 250 Community Development Entities (CDEs) applied for some $28 billion in New Markets Tax Credits. A total of 61 CDEs received allocations totaling $3.9 billion. The CDFI Fund has publicly stated that the Credit authority available for 2007 was not adequate to meet the requests of highly qualified allocation applications. With billions of dollars in qualified NMTC applications in hand, it is possible for the CDFI Fund to make additional allocations within 90 days of enactment.

Community Impact –NMTC investments support a wide variety of projects and demonstrate the capacity of the Credit to leverage private investment, create job and business opportunities, improve services and strengthen local economies.

–Across America, NMTC investments support a wide variety of projects, ranging from investments by faith-based Community Development Entities in new childcare facilities, to financing a manufacturer of truck bodies, to qualified investments in a new supermarket in low income neighborhoods, to capital for the creation of commercial and industrial facilities. All of these projects demonstrate the capacity of the Credit to leverage private investment, create job and business opportunities, improve services and strengthen local economies.

–According to the CDFI Fund’s most recent transaction data, through Fiscal Year 2005 the NMTC Program has generated financing for the construction or rehabilitation of over 43 million square feet of real estate, and has helped to create or retain 72,000 construction jobs and 20,000 full time equivalent jobs in businesses in low-income communities.