New Markets Initiatives Pass

On its final day of work, the 106th Congress passed two new programs to encourage community development and reinvestment: the New Markets Tax Credit and the New Markets Venture Capital Program.



The New Markets Tax Credit will provide 30 percent tax credits on a present-value basis to investors in economic development projects in low-income areas; community development venture capital funds would be a major beneficiary of this credit. Credits for up to $1 billion of investments will be available in 2001.



The New Markets Venture Capital Program, to be administered by the Small Business Administration (SBA), will provide $30 million in technical assistance grants and up to $100 million in guarantees for investment matching funds to community development venture capital funds.



The Community Renewal and New Markets Act combines Rep. Jim Talent's (R-Mo.) American Community Renewal Act (ACRA) with President Clinton's New Markets Initiative. The legislation will create 40 Renewal Communities with targeted, pro-growth tax benefits, regulatory relief, savings accounts, brownfield site clean-up, and home-ownership opportunities. At least 20 percent of the communities identified by the SBA must be located in rural areas.



Communities must apply for renewal community status which requires high poverty rates and a local commitment to reduce local regulations, zoning restrictions and tax rates. The selected Renewal Communities would receive a combination of tax, regulatory, and other targeted programs. The tax benefits of Renewal Communities would address the principal hurdles facing small businesses when they are just getting started -- raising capital and maintaining cash flow.



The text of the legislation, H.R. 5661 and H.R. 5662, can be found at: http://thomas.loc.gov/home/omni2000/omni2000.html