The federal New Market Tax Credit (NMTC) program, which incentivizes private investment in economically distressed communities, is considered a pivotal economic development tool. Enacted in 2000, the NMTC program has significantly impacted U.S. communities, financing over 10,800 businesses and creating or retaining nearly one million jobs to date. However, concerns regarding the program’s sustainability have surfaced anew, as the program is set to run out of funds after the 2025 allocation unless Congress intervenes.
Calls for the NMTC program to become a permanent fixture in the tax code have been gaining traction. Making the program permanent will enable long-term planning and improvements, benefiting more communities across the country. There is historical precedence for this kind of legislative action: the Low-Income Housing Tax Credit (LIHTC) program, authorized in 1986, achieved permanence within seven years, bolstering new investments and equity pricing while benefiting low-income households with new affordable housing units (Tax Foundation, Novoco).
Bipartisan support for making NMTC permanent is already evident. Both the House and Senate have advanced legislation to that end in 2023 with H.R. 2539 and S. 234. Senate Committee on Finance Chairman Ron Wyden (D-Ore.) emphasized that the NMTC program “should be at the top of the list” for future tax code discussions (Senate Committee on Finance).
Real-world examples underscore the NMTC program’s positive impact. For instance, in Los Angeles, US Bancorp Impact Finance recently supported the development of Go for Broke Plaza and First Street North Residences, which include 248 affordable housing units and 40,000 square feet of commercial space for local minority-owned businesses (Urbanize LA). Over $168 million in debt and equity financing were committed through NMTC and related structures.
The NMTC allocation process is competitive. In 2022, 197 entities applied for nearly $15 billion in allocation, triple the amount available, indicating strong demand but limited capacity (CDFI Fund News). Permanency could attract new investors and allow for more complex, multi-phase projects to receive funding, ultimately increasing economic opportunities in underserved communities.
Long-term program stability would enable project managers to make strategic hiring decisions and potentially allow early-career professionals to specialize in NMTC-related practices. For these reasons, securing the NMTC program’s place as a permanent component of the tax code appears not just beneficial but essential.
For more insights on this topic, see the original article by Stinson’s Karen M. Rippelmeyer published in Bloomberg Tax.