GAO Report Confirms Dearth Of Minority Participation in Department Of Treasury's New Market Tax Credits Program
Today the Government Accountability Office (GAO) released a report entitled, "New Market Tax Credits: Minority Entities Are Less Successful in Obtaining Awards Than Non-Minority Entities." After comparing minority-owned and non-minority Community Development Entities (CDE) and controlling for factors such as the CDE's asset size, the GAO report concludes that minority-owned CDEs are at a disadvantage when applying for New Market Tax Credits Program awards.
The New Market Tax Credits Program was authorized by the Community Renewal and Tax Relief Act of 2000 and, since then, has been allocated $20.5 billion through the Community Development Financial Institutions Fund. This program was intended to stimulate investments into CDEs that make loans and capital investments in underserved areas by providing these entities a 39 percent tax credit over seven years. CDEs may be large financial institutions, non-profit organizations, minority-owned banks or other entities.
Congressman Watt said, "The GAO report released today shows that minority-owned Community Development Entities, which are in a unique position to identify and respond to the needs of underdeveloped communities, face substantial barriers when applying to the New Market Tax Credits Program. I look forward to working with the Community Development Financial Institutions Fund Director and the Treasury Department to increase minority involvement in this important community program."
"The purpose of the New Market Tax Credit is to invest private sector capital in distressed communities for the purpose of economic development. More than $1 billion was included in the economic stimulus package this year to help fund Community Development Entities across the country. It is disappointing to learn from the GAO report today that minority-owned CDE's face a disadvantage when applying for these important credits. I intend express my concern with the Treasury Department that we need to level the playing field between minority-owned and non-minority CDE's and their access to New Market Tax Credit awards," said Congressman Richard E. Neal.
"It is paradoxical that a program designed to help create opportunities does poorly in the area of minority participation. It is imperative that the legislative branch and the executive branch work together to solve this problem," said House Financial Services Committee Chairman Barney Frank.
This GAO report was requested by House Financial Services Committee Chairman Barney Frank (D-MA), House Ways and Means Committee Chairman Charlie Rangel (D-NY), Rep. Richard Neal (D-MA) and Rep. Mel Watt (D-NC) on September 12, 2008 following a House Financial Services Committee, Oversight and Investigations Subcommittee Hearing entitled, "Preserving and Expanding Minority Banks." At this hearing, two minority-owned CDEs expressed concern that minority-owned banks may not be getting fair access to the NMTC program.