Six Industry Groups to Facilitate New Markets Tax Credit Program

Program expected to yield $15B in new capital for underserved communities

Six national, community-based financial services organizations recently announced the formation of New Markets Advisors to help investors identify opportunities using the New Markets Tax Credit.

The largest federal tax credit of its kind in nearly 20 years, the New Markets Tax Credit gives investors such as banks, insurers, investment funds, corporations and individuals a credit against federal income tax for new investments in eligible businesses and commercial projects in low- and moderate- income areas. The tax credit program is expected to stimulate the investment of $15 billion in new capital to accelerate the pace of business development in these areas.

Among them, the New Markets Advisors member organizations have more than 35 years of combined experience leveraging private and public capital to drive economic development in America's untapped urban and rural markets. The organizations represent more than 1,000 community-based financial institutions, including national and local community development venture capital funds, banks, loan pools, credit unions, and intermediaries.

The New Markets Advisors are: Community Development Venture Capital Alliance (CDVCA), The Enterprise Foundation (Enterprise), Local Initiatives Support Corporation (LISC), National Community Capital Association (NCCA), National Community Investment Fund (NCIF) and National Congress for Community Economic Development (NCCED).

The New Markets Tax Credit program was created in late 2000 with strong bipartisan support. After 18 months of development, the U.S. Department of the Treasury's CDFI Fund is preparing to release the application for the first allocations of New Markets Tax Credits.

Almost any type of business, community facility, or commercial real-estate project in eligible census tracts could qualify for financing under the New Markets Tax Credit program. This federal tax credit totals 39 percent of an eligible investment spread over seven years, enhancing the economic yields for those who invest in these untapped markets. To qualify for these tax credits, investors must make equity investments in "community development entities" (CDEs) that have been certified by the CDFI Fund. As of May 6, 258 organizations have been certified as CDEs. To date, the vast majority of certified CDEs are represented by the six industry groups that make up New Markets Advisors.

Nearly 40 percent of all census tracts in the United States containing one-third of the population will qualify for projects financed through the New Markets Tax Credit program, including large portions of urban and rural areas. The CDFI Fund plans to distribute up to the $2.5 billion in tax credit allocations authorized in 2002 and is being told by the industry that the program likely will be oversubscribed in 2002, its first year.