Over one hurdle and onto the next: Making the new markets tax credit permanent
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In some ways, we’re right back where we started before Congress passed the largest tax reform package in nearly three decades last month.

The final version of H.R. 1, the Tax Cut and Jobs Act, preserved the five-year New Markets Tax Credit (NMTC) authorized in the December 2015 PATH Act. This was a significant victory achieved thanks in large part to advocates across the country and Congressional supporters.

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The tax reform debate was a pivotal moment for the NMTC. Its existence hung in the balance as the House and Senate each lobbed their version of the bill to the other chamber. The House bill sought to terminate the NMTC while the Senate’s version maintained the credit’s PATH Act authorization – an aspect that would survive the conference committee and end up in the final bill. Advocates for the Low Income Housing Tax Credit (LIHTC) endured a similar experience to the NMTC’s in 1995, when that credit was repealed in a budget reconciliation bill. The legislation was ultimately vetoed and LIHTC is now the federal government’s principal tool for financing affordable housing. 

While in the end Congressional leaders recognized the need for the NMTC as a tool for revitalizing some of the poorest communities in the country, it is hard to understand why the House took the approach it did in the first place. Simply by looking at the numbers, it’s clear just how impactful the New Markets Tax credit is. Between 2003 and 2015, the credit resulted in the creation of more than one million jobs – jobs in nearly every industry sector. 

During the same timeframe, the NMTC financed nearly 2,000 community services and facilities, including hospitals, schools, daycare centers and non-profit service providers – all in areas that weren’t able to provide access to residents before NMTC was invested. As a result of that financing, the NMTC has touched the lives of millions of individuals, from the 17 million patients served by NMTC-financed healthcare projects to the nearly 250,000 students and children attending NMTC-financed schools or receiving care in early childhood learning centers.

NMTC investments have generated an unparalleled $156 billion in economic activity in low-income rural and urban communities from 2003 to 2015 – no other federal tax credit can make that claim. Further, the NMTC more than covers the cost of the credit to the federal government and it has contributed substantially to boosting tax revenue for state and local governments, with NMTC investments generating $6.7 billion in state and local tax revenue from 2003 to 2015.

While the numbers speak for themselves, it’s important to recognize the qualitative impacts the NMTC has made throughout the years. From the first full-service grocery store in DC’s blighted Ward 7 in four decades to an environmentally sustainable recycling center for e-waste from electronics in Arkansas, a vocational training center for people with disabilities in Ohio, the reconstruction of a badly damaged fishing dock on tribal land in Washington, and an extensive broadband project in Alaska, the NMTC is helping better the lives of Americans in all corners of the United States and those capital-starved towns and communities in between. 

Despite the NMTC being extended through 2019 in the tax reform law, our mission hasn’t changed. The ultimate goal is still permanency for the New Markets Tax Credit. Similarly, the need for the NMTC hasn’t changed – not with the New Year and not with tax reform.

NMTC supporters – CDE’s, investors, public officials and business – all worked together to shine a spotlight on the success of the Credit in revitalizing communities. This campaign played a large role in raising the profile of the NMTC in Congress.

While the short-term result was maintaining the status quo, we are optimistic that it may have laid the groundwork for a successful campaign to provide a permanent extension of the Credit. We’re now entering the second year of the 115th Congress. Congress will have new goals, new priorities from the administration, and new deadlines that will require its attention. We’re hopeful the solid groundwork laid will bode well for the NMTC.

Even though we’re past the monumental hurdle of tax reform, there are new hurdles standing between a program critical to our country’s overlooked and struggling communities and that program’s permanency. More work – not less – lies ahead for the NMTC and all community development efforts as the dust continues to settle in the wake of tax reform. 

Bob Rapoza is founder and president of Rapoza Associates, a public interest lobbying and government relations firm located in Washington, D.C. He also serves as the spokesperson for the NMTC Coalition.