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NMTC Coalition Corner: Legislative News and Advocacy Support from the New Markets Tax Credit Coalition


January 2014

The following was distributed as part of the New Markets Tax Credit Connection - Winter 2014 newsletter.

With Tax Reform Discussion Pushed to 2014, NMTC Supporters Continue to Advocate for Extension

In early November, House Ways and Means Committee Chairman Dave Camp (R-MI) indicated that the Committee would not mark up a tax reform package before the end of calendar year 2013. Tax reform discussions have also stalled in the Senate, with no significant action planned before next year.

During the legislative lull, NMTC Coalition members continued their push for a permanent extension of the Credit. The Coalition worked with Representatives Steve Stivers (R-OH) and Mike Michaud (D-ME) on a bipartisan letter urging Chairman Camp (R-MI) and Ranking Member Levin (D-MI) to take action on a NMTC extension. The letter received support from 70 members of the House hailing from both parties.

Urban Institute Report on the NMTC

The NMTC has worked as intended, delivering capital to underserved rural and urban communities and creating a variety of positive outcomes in those communities, according to a new report released by the Community Development Financial Institutions (CDFI) Fund.

The CDFI Fund contracted with the Urban Institute to conduct a formal evaluation of the first four years of the NMTC program, from 2003 to 2007. Looking at projects initiated before December 2007, the NMTC Program Evaluation study found that the Credit resulted in the provision of private capital, real estate development in low income areas, expansion of local tax bases, and job creation or retention. Additionally, NMTC projects increased community amenities, services, and facilities and provided much-needed support for small businesses and organizations.

What Does CohnReznick Think?
The Urban Institute Report, The New Markets Credit Program (NMTC) Evaluation – Final Report, offers a comprehensive and unbiased assessment of the NMTC Program over its first four years. It is not surprising to us that the report would confirm that the program, during that period of time, was successful in meeting many of its objectives which included:

Benefits to the community: Projects financed with NMTCs brought benefits to the community in terms of new or expanded amenities, services, or facilities. According to the report, 42 percent of NMTC projects involved retail amenities (e.g. stores, restaurants, banking facilities), 23 percent were human capital amenities (primarily healthcare facilities), 21 percent were quality of life amenities (parks, open space, etc.), and 19 percent were infrastructure amenities (parking lots, garages, public transportation services).

Job creation: The report showed that 71 percent of the NMTC projects created or retained at least one new permanent job. 60 percent of projects experienced an increase in employment levels of more than 33 percent, compared with pre-NMTC levels, due to jobs created or retained as a result of their respective NMTC projects. In terms of actual jobs created, the report said this: “Extrapolating from the project samples for which data were gathered to the universe of 2,031 early-year projects, it is estimated that the NMTC program created or retained 135,970 permanent jobs and 151,304 construction jobs.

While it is difficult to definitively determine the role NMTCs played in the “go/no go” development of many projects, the report suggested that NMTC allocations were, indeed, the stimulus for many projects. The report estimated that between 3 and 4 of every 10 early-year projects would likely not have proceeded without NMTCs and roughly 1 of every 10 projects would likely have proceeded without NMTCs, but probably in a different location or on a delayed schedule. 

Another key benefit of the NMTC Program, primarily for local governments, was an overall expansion of the tax base. Eighty percent of all early-year projects reportedly contributed to some form of increased city or county tax revenues from QALICBs, their tenants, or their employees. Increased payroll taxes were the most common tax revenue benefit, with participants from more than 70 percent of projects reporting an increase in payroll tax payments as a result of their projects.

Finally, the Urban Institute report suggested a need for future expansion of research associated with the NMTC Program, which CohnReznick believes could be valuable. This research may include:

  • Studies of area-wide and community outcomes to better define these outcomes and understand who benefits from community amenities, facilities, and services.
  • Follow-up studies of longer-term project outcomes, capacity-building effects, and the role, extent, and consequences of community involvement in NMTC projects.
  • Follow-up studies of the sustainability of NMTC investments—considering questions such as what happens to NMTC projects’ subsidized financing after the seven-year credit-claiming period? Does the subsidy end or do QALICBs obtain other subsidies (either through NMTCs or other programs)? How do QALICBs fare with conventional rates and terms? Do initial outcomes decrease or grow?
     

We encourage you to read the report in its entirety or you can read the summary report posted on the CDFI Fund website.

For more information on the New Markets Tax Credit Coalition, visit www.nmtccoalition.org.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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