Just a few weeks ago, it seemed like addressing our nation’s tax code was all but impossible this year, but openings for meaningful change have emerged. In the House, Ways and Means Chairman Dave Camp (R-Mich.) will begin a review this month of the expired tax credits, determining which may warrant permanency. In response, committee members are introducing bills addressing individual tax provisions, including a bill that would permanently secure the New Markets Tax Credit (NMTC).
The bipartisan New Markets Tax Credit Extension Act of 2014 was introduced on April 2 by Reps. Jim Gerlach (R-Pa.) and Richard Neal (D-Mass.). Reps. Pat Tiberi (R-Ohio), Charles Rangel (D-N.Y.), John Lewis (D-Ga.), Jim McDermott (D-Wash.), Earl Blumenauer (D-Ore.), Tom Reed (R-N.Y.) and Mike Kelly (R-Pa.) joined in co-sponsoring the legislation.
A bipartisan effort since inception, the NMTC began as a collaboration between Democratic President Bill Clinton and Republican Speaker of the House Dennis Hastert to attract capital to low income communities. The NMTC provides private investors with a modest federal tax credit for investments made in businesses or economic development projects in census tracts where the poverty rate is at least 20 percent, or median family income does not exceed 80 percent of the area median. Since it was enacted, the NMTC has generated billions of dollars in private investments in revitalization projects and businesses that likely would never have received injections of patient capital otherwise. In fact, a survey conducted by the U.S. Government Accountability Office (GAO) found that 88 percent of NMTC investors would not have made their investments if not for the incentive of the Credit.
Over the last decade, the NMTC has created more than 550,000 jobs in economically distressed rural and urban communities across the country. One of the unique attributes of the New Markets Tax Credit is its flexibility; the Credit empowers local leaders to choose projects that provide a broad community benefit in terms of job creation or added social services.
In October, Reps. Steve Stivers (R-Ohio) and Mike Michaud (D-Maine) initiated a letter to Chairman Camp and his colleague on Ways and Means, Ranking Member Sandy Levin (D-Mich.), in support of the expiring NMTC. Signed by 70 Republican and Democratic members of the House, the letter highlights the importance of the NMTC and the modest tax incentive it provides to encourage private sector investment in communities left out of the economic mainstream. Sens. Jay Rockefeller (D-W.Va.) and Roy Blunt (R-Mo.) also introduced a NMTC bill in the Senate last June. Moreover, with tax extender legislation being voted on in the Senate Finance Committee this week, it appears there may be a real shot at renewing this important financial tool in both houses of Congress.
As discussions continue in the congressional tax-writing committees, people living, working to grow businesses and create jobs in hard-hit communities can breathe a little easier knowing there are champions in the House and Senate paving the way for the New Markets Tax Credit and, ultimately, the future prosperity of these underserved areas. We applaud Reps. Gerlach and Neal for their commitment, and hope their colleagues in Congress will follow their lead.
With three decades of community development policy experience, Rapoza serves as the national spokesperson for the New Markets Tax Credit Coalition, a national membership organization founded in 1998 to advocate on behalf of the NMTC program.