During a Senate Finance Committee hearing on “Tax Tools for Local Economic Development,” key figures including Committee Chairman Senator Ron Wyden (D-OR), Ranking Member Senator Mike Crapo (R-ID), and Senator Ben Cardin (D-MD), along with Julia Nelmark, President & CEO of Midwest Minnesota Community Development Corporation, highlighted the substantial impact of the New Markets Tax Credit (NMTC) program.
Established as part of the Community Renewal Tax Relief Act of 2000, the NMTC program has been extended eight times by Congress. Its most recent authorization, under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, extends the program through 2025 with $5 billion in annual allocation authority. The program has garnered bipartisan support over the past two decades, reflecting its wide-reaching benefits.
In his remarks, Chairman Wyden emphasized the program's success in channeling private investment dollars into low-income communities, fostering thousands of projects across all 50 states. These projects include healthcare and manufacturing facilities, childcare centers, schools, retail developments, and affordable housing units. However, Wyden pointed out the program's temporary nature and the looming expiration at the end of 2025, advocating for its permanent extension.
Ranking Member Crapo echoed similar sentiments, highlighting the tangible results of the NMTC in fostering local economic development. He cited the example of the Desert Sage Health Center in Mountain Home, Idaho, a new primary care facility made possible by NMTC investment. Crapo also acknowledged ongoing bipartisan efforts to extend and expand various tax incentives, including the NMTC.
Senator Cardin, a long-time advocate for the NMTC, stressed the importance of modernizing tax credits and called for a permanent commitment from Congress to remove uncertainties that hinder developers. Julia Nelmark supported this view, explaining that permanency would reduce costs for Community Development Entities (CDEs) and investors, thereby channeling more funds directly to the communities in need.
Nelmark further elaborated on the NMTC's effectiveness, describing it as one of the most potent tools for community development. The program offers a 39% tax credit over seven years for investments into CDEs, which in turn finance a variety of projects such as manufacturing expansions, healthcare facilities, and business incubators. The program's flexibility makes it particularly beneficial for supporting diverse community needs.
Since its inception, the NMTC has delivered over $135 billion in financing to more than 8,500 businesses and community development projects, creating over 1.2 million jobs. Notably, in 2015 alone, the NMTC generated $15.2 billion in economic activity and $872 million in federal tax revenue, offsetting its annual cost and providing a 15% return to the government. The program has also facilitated the expansion of nearly 2,000 manufacturing and industrial businesses and financed over 3,700 community facilities.
In summary, while the NMTC has proven its efficacy in incentivizing investments in underserved communities, its temporary status remains a significant obstacle. Making the NMTC permanent would enhance its effectiveness and ensure continued support for economic development across the nation.
