WASHINGTON, DC-The New Market Tax Credit program is set to expire at the end of the year, along with the usual grab bag of business tax credits known as extenders. A group of Congresspeople are lobbying the House of Representatives to make the tax credit permanent as part of the push for comprehensive tax reform.
Briefly, the federal New Markets Tax Credit program, which is administered by the Treasury Department, encourages private-sector investment in economically distressed communities through tax incentives. Since the program’s inception, the Treasury has awarded more than $36.5 billion in allocations.
Some 70 House Republicans and Democrats are formally asking House Ways and Means Chairman Dave Camp (R-MI) and Ranking Member Sander Levin (D-MI) to permanently extend the program.
The letter in support of the NMTC highlights the importance of the credit.
“We know tax reform is an increasingly important priority, but this vital, job-creating program can’t wait for that debate to wrap up—and neither can the struggling communities relying on it to grow their economies and expand businesses,” said Bob Rapoza, New Markets Tax Credit Coalition spokesman, in a prepared statement.
A recent Treasury Department analysis found that the new businesses and jobs created as a result of NMTC-financed projects generate more than enough income tax revenue to pay for the cost of the credit. The first NMTC program was authorized by Congress in 2000.
“Over 72% of NMTC investments are made in communities exhibiting severe economic distress, with unemployment rates more than 1.5 times the national average, poverty rates of 30% or more and/or median incomes at or below 60% of the area median,” said Rapoza.
This show of support follows a bill introduced in June by Senators Roy Blunt (R-MO) and Jay Rockefeller (D-WV) to permanently extend the program called the New Markets Tax Credit Act of 2013. It was co-sponsored by U.S. Senators Ben Cardin (D-MD), Susan Collins (R-ME) and Maria Cantwell (D-WA).
The tax credit is valued in the commercial real estate community so while talk of making the credit permanent is welcome, some political observers don’t hold out much hope it will actually happen.
First of all, while there was legitimate hope that comprehensive tax reform would happen earlier this year it is not likely now, David Johnson, principal with Strategic Vision, tells GlobeSt.com.
“Congress people are looking at the polls and seeing the anti-incumbent fervor and they know that tax reform is always a sell.”
Comprehensive tax reform, Johnson says, is, if not dead now, will be when the super committee set up after the government shut down has trouble coming to a deal. “Already there are signs of that happening,” he says.
As for the extenders, he adds: “their fate is an open question this year.”