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About The New Markets Tax Credits Extension Act of 2021

Legislation to make the New Markets Tax Credit (NMTC) Program permanent is on the floor of both houses of Congress as S. 456 and H.R. 1321, better known as the New Markets Tax Credits Extension Act of 2021 (the “Act”). The New Markets Tax Credit program is scheduled to terminate in 2025 but amendments made by the Act, introduced on February 25, 2021, would extend it permanently and apply to all taxable years beginning after December 31, 2020.

Some quick facts about the NMTC program:

• *Through 2020, NMTC allocations totaling $60 billion have provided almost $110 billion in total project financing to over 7,000 projects.
• *In 2020, over 80 percent of NMTC projects were in communities experiencing severe economic distress.
• *In 2020, 24 percent of NMTC investments were in rural areas.
• *Through 2015, the NMTC created 1 million jobs costing the federal govt. less than $20,000 per job.

The New Markets Tax Credits Extension Act of 2021 expands recent Congressional legislation that extended the NMTC through 2025. In 2019, Congress increased the amount of credits available by 44 percent to $5 billion. The Act increases the efficiency of the NMTC program and delivers more capital to low-income communities (LICs). In sum, the Act:

• *Provides an indefinite extension of the NMTC;
• *Indexes future allocation levels to inflation; and
• *Attracts new investors by exempting the NMTC from the Alternative Minimum Tax (AMY).

The need to provide relief because of the COVID-19 pandemic helped steer congressional efforts to extend the NMTC program. “The COVID-19 pandemic has laid bare the historic disinvestments in our rural and underserved communities. Now more than ever, it is critically important that our communities have permanent access to the New Market Tax Credit as a tool to facilitate investments in local businesses and community development projects as we recover from our economic crisis,” said Rep. Terri Sewell in a press release. “The NMTC remains crucial to the creation of job growth and opportunity in Alabama’s 7th Congressional District, and I’m proud to introduce this bipartisan bill to ensure our most underserved communities are not left behind.”

The annual impact of the New Markets Tax Credits equates to $25 billion and includes an estimated 690 new manufacturing expansions and industrial projects; 275 mixed-use projects combining housing, commercial, and social services; 255 new or improved health clinics, hospitals, and medical offices; and 775 investments in daycare centers, Boys and Girls Clubs, and other community facilities. It is also expected to create an estimated 590,000 jobs.

“Following devastating impacts from COVID-19, the New Markets Tax Credit is absolutely vital for many of America’s urban neighborhoods and rural communities and will provide billions of dollars for high-impact, community revitalization projects,” said Bob Rapoza, spokesperson for the NMTC Coalition. “Over the years, the credit has been instrumental in financing plant and equipment for small manufacturing businesses and patient flexible capital to other small businesses, hospitals, healthcare centers, homeless shelters, and other transformative projects that improve communities, create jobs and economic opportunity. We appreciate the leadership of several members of Congress in championing this effort for communities across the U.S., including Reps. Terri Sewell (D-AL) and Tom Reed (R-NY)and  Sens. Ben Cardin (D-MD) and Roy Blunt (R-MO).”

In an open letter to the Senate Finance and Ways & Means Committees in May, the American Bankers Association (ABA) expressed its support for the legislation. An independent compliance review found that NMTC program participants significantly lower the cost of capital for borrowers in low-income communities and exceed statutory and regulatory requirements for the targeting of economic distress.

Let’s Work Together to Develop our Communities

If you want to learn more about NMTCs, contact Savage & Associates at 215.880.9441 in Philadelphia, or 202.817.3941 in Washington D.C. to arrange a consultation. Dionne Savage can assist you to gain access to the benefits provided by the New Markets Tax Credits, Low-Income Housing Tax Credits, C-PACE, Historic Tax Credits, and other vital economic development tools that benefit local communities throughout the United States. Visit our website at Savage & Associates 24 hours a day, seven days a week for more information.