The New Markets Tax Credit (NMTC) was enacted in 2000 as part of the bipartisan Community Renewal Tax Relief Act (P.L. 106-554), which then President Bill Clinton called “the most significant effort ever to help hardpressed communities lift themselves up through private investment and entrepreneurship”. After decades of using grants for general economic development, Clinton – and his partner across the aisle, Speaker of the House Dennis Hastert – chose to use the tax code as an economic development tool, following the cost-effective model of the Low Income Housing Tax Credit.
The findings in this report show that between 2003 and 2012, NMTC created nearly three-quarters of a million jobs, generated well over $100 billion in economic activity in long-distressed communities, and expanded the tax base of state and local governments. In short, the research found a significant return on NMTC investment to federal taxpayers.
There are six key findings in this report:
- From 2003 to 2012, NMTC investments generated nearly $118 billion in economic activity, creating 744,267 jobs in low-income rural and urban communities, including 457,487 construction jobs and 286,781 full-time equivalent jobs in nearly every industry sector of the economy;
- The NMTC targets about 40 percent of nation’s census tracts that meet the statutory requirements for economic distress. However, most NMTC financing goes to severely distressed communities that far exceed program requirements for poverty and income. From 2003 to 2012, seventy-six percent of NMTC projects were located in severely distressed communities;
- The federal tax revenue generated by NMTC investments more than pays for the cost of the program. For example, in 2012, the NMTC generated $15.2 billion in economic activity, and this activity generated $984 million in federal tax revenue, more than enough cover the $800 million annual cost of the program in 2012;
- By stabilizing and revitalizing local economies, the NMTC helps boost tax revenue for state and local governments. In 2012, NMTC investments nationwide generated $542 million in state and local tax revenue;
- Beyond creating jobs and generating economic activity, the NMTC helps enhance community revitalization efforts by financing community facilities and other important quality of life amenities. Between 2003 and 2012, more than 1,200 NMTC projects involved community amenities like healthcare facilities, schools, nonprofit service providers, and day care centers; and
- Over the years as the program has matured, NMTC financing has increasingly gone to rural communities, areas experiencing severe economic distress, and community facilities like healthcare clinics.