Introduction of New Markets Tax Credit Bill

Floor Speech

INTRODUCTION OF NEW MARKETS TAX CREDIT BILL

* Mr. NEAL of Massachusetts. Madam Speaker, I rise to offer legislation to extend the New Markets Tax Credit program for an additional five years. I am pleased to be joined by Rep. RON LEWIS in offering this bill, along with several other cosponsors.

* The New Markets Tax Credit program has proved to be a remarkably successful way to revitalize communities. Current authority for the program, however, is due to expire at the end of next year. It is important that we extend this credit soon and that we provide for a long-term extension.

* The credit was first enacted in 2000 as part of the Community Renewal Tax Relief Act. From enactment through fiscal year 2005, the New Markets Tax Credit has generated financing for the construction or rehabilitation of over 43 million square feet of real estate, and has helped to create or retain 72,000 construction jobs and 20,000 full time equivalent jobs in low-income community businesses.

* The credit stimulates investment and economic growth in low-income urban neighborhoods and rural communities. Investors receive over seven years a 39 percent Federal tax credit for Qualified Equity Investments, with a 5 percent credit during the first three years and 6 percent during the next four years. These investments are made through vehicles known as Community Development Entities (CDEs), which raises capital from the tax credits and then makes loans to or investments in worthy businesses and projects in low-income areas. These CDEs must be domestic corporations or partnerships with a primary mission of providing investment capital to low-income persons or communities, must provide accountability to the communities or residents, and must be certified by the Treasury Secretary as an eligible entity.

* Eligible communities, which include both metropolitan and rural areas, are low-income communities with a high poverty rate or low median family income. In the 2006 extension of this credit, the Treasury Secretary was directed to prescribe regulations ensuring that there was a balance in allocations between metropolitan and nonmetropolitan counties. Further, the Treasury Secretary may also designate targeted populations as low-income communities if certain individuals or an identifiable group of individuals, including an Indian tribe, are low-income persons or lack adequate access to loans or equity investments. Some have recently argued that service-connected disabled veterans are such a group and I encourage the Treasury Secretary to look into this reasonable suggestion.

* Finally, the law requires that businesses, in order to be eligible for such investments, show that at least half of the total gross income of the business is derived from active operations in a low-income community, and that a substantial portion of the business property and the services performed by the employees are located in a low-income community.

* I believe that all of these rules ensure that the credit is appropriately targeted. A recent GAO report found that the program is very effective at increasing investment in low-income communities. To date, New Markets Tax Credit investments in low-income communities total over $7.7 billion. The tax credit has been used to support a wide variety of community and economic development initiatives including, among others, the financing of charter schools, health care facilities, manufacturing businesses, grocery-anchored retail centers, and numerous other commercial and mixed-use real estate projects.

* Now, despite this explanation, some of my colleagues may be wondering how these credits really work. Let me detail one local success story from my Congressional district, and encourage my colleagues to look into projects in their districts as well. Hot Mama's Foods is a Massachusetts-based food company, specializing in salsas, pestos, and other spreads. Recently, the company was able to secure a loan from the Massachusetts Development Finance Agency, a CDE, along with other financing in order to relocate to a USDA-certified food production facility in Springfield, which is in my district. That relocation and expansion meant the company could add an additional 10 jobs to its 50-person workforce and revitalize a neighborhood.

* These tax credits work. They help businesses expand and add valuable jobs. The credits need to be extended. I urge my colleagues to join us in sponsoring the New Markets Tax Credit Extension Act of 2007.

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