The road to economic recovery

During their first stop on the road trip Baucus and Camp visited Baldinger Bakery, a 125-year-old family business and beneficiary of the New Markets Tax Credit (NMTC). In 2010, the Baldingers were looking to upgrade and expand their St. Paul facility, but were unable to secure the financing needed.  Thanks to the Community Reinvestment Fund (CRF) in Minnesota and the St. Paul Port Authority, the Baldingers were able to secure NMTC financing, which allowed the company to create and retain jobs in a neighborhood with an unemployment rate more than twice the national average. This bakery is just one of nearly 3,500 businesses in distressed rural and urban communities that received NMTC financing from 2003 and 2011.

The NMTC is a flexible financial tool that provides a modest federal tax credit for investments made in businesses or economic development projects in communities with high poverty rates and high unemployment rates, stimulating investment in low-income communities that are traditionally overlooked by conventional capital markets. These investments, in turn, help promote economic growth by strengthening American businesses and creating jobs—without creating more complications for individual taxpayers. Virtually all investors are corporations or private financial institutions.  In addition, the decision-making and project underwriting are the responsibility of community development organizations with deep ties to the communities in which they work. Washington does not pick winners and losers. Overall, the NMTC has leveraged more than $55 billion nationwide in private investment to businesses, creating hundreds of thousands of jobs.

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Tax expenditures are often regarded as special interest loopholes, but the NMTC is a program that has the ability to effect positive economic change in neighborhoods and communities. From urban East Los Angeles where I am based, to Libby , Montana, a community of just 2,612 people—the NMTC revitalizes communities by increasing the flow of private sector capital to the most economically distressed areas. In fact, the NMTC has generated billions of dollars in private investments and created over half a million jobs since its implementation in 2003.

Having seen what a profound difference the NMTC has made in the economic vitality of low income communities across each of their respective home states, Sens. Jay Rockefeller (D-W.Va.) and Roy Blunt (R-Mo.) introduced bipartisan legislation to provide a permanent extension for the NMTC last month. The New Markets Tax Credit Act of 2013 (S. 1133) would extend the NMTC indefinitely by making it a permanent part of the Internal Revenue Code, and enhance the potential impact of the Credit by increasing the annual NMTC allocation.

With the July 26th deadline looming for senators to submit their letters to Finance Committee Chairman Baucus and Ranking Member Orrin Hatch (R-Utah) outlining what tax expenditures should be preserved, tax reform is rolling on. Congress should act swiftly to secure and strengthen the New Markets Tax Credit by extending it permanently, which would allow the Credit to achieve its full potential—helping to sustain and pave our nation’s road to economic recovery. Without it, we could be in for a bumpy ride.

Villalobos is the senior vice president of TELACU in Los Angeles, California, a community development corporation. He is also the president of the New Markets Tax Credit Coalition.