RL34402 – New Markets Tax Credit: An Introduction – 8/31/2016

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New Markets Tax Credit: An Introduction

SKU: RL34402-9/6/2016 Categories: , Tag:

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Author: Donald J. Marples, Section Research Manager; Sean Lowry, Analyst in Public Finance
Pages: 11

The New Markets Tax Credit (NMTC) was enacted by the Community Renewal Tax Relief Act of 2000 (P.L. 106-554) to provide an incentive to stimulate investment in low-income communities (LIC). The original allocation authority eligible for the NMTC program was $15 billion from 2001 to 2007.1 Congress, subsequently, has increased the total allocation authority to $61 billion and extended the program through 2019.2 Qualified investment groups apply to the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI) for an allocation of the New Markets Tax Credit. The investment group, known as a Community Development Entity (CDE), seeks taxpayers to make qualifying equity investments in the CDE. The CDE then makes equity investments in low-income communities and low-income community businesses, all of which must be qualified. After the CDE is awarded a tax credit allocation, the CDE is authorized to offer the tax credits to private equity investors in the CDE. Bills: H.R. 6049, H.R. 7060, H.R. 2075, H.R. 3907, S. 2886, S. 3098, S. 1239