Senate Finance Committee Hearing Underscores Importance of New Markets Tax Credit Program

The New Markets Tax Credit (NMTC) program, a key economic development tool for low-income urban and rural communities, took center stage during a recent Senate Finance Committee hearing on "Tax Tools for Local Economic Development." Committee leadership and expert witnesses emphasized the program's substantial impact and called for its permanent extension.

Established in 2000, the NMTC program has been extended eight times with bipartisan support. The current authorization, set to expire in 2025, provides $5 billion in annual allocation authority. Committee Chairman Senator Ron Wyden (D-OR) stressed the program's proven effectiveness, stating, "New Markets is an example of an efficient, powerful tool in our tax code that works."

Julia Nelmark, President & CEO of Midwest Minnesota Community Development Corporation and Vice Chair of the New Markets Tax Credit Coalition, provided testimony on the program's impact. She highlighted that the NMTC has facilitated over $135 billion in financing to more than 8,500 businesses and community development projects, creating over 1.2 million jobs at a cost to the federal government of under $20,000 per job.

The NMTC's flexibility has allowed it to support a diverse range of projects, including healthcare facilities, manufacturing expansions, schools, and affordable housing developments. Ranking Member Senator Mike Crapo (R-ID) cited a specific example from his state, noting that the Desert Sage Health Center in Mountain Home, Idaho, recently opened a new 30,000 square foot primary care facility thanks to NMTC investment.

Senator Ben Cardin (D-MD), a longtime advocate for the program, emphasized the need to modernize and make permanent tax credits like the NMTC. He argued that the uncertainty surrounding their permanence creates unnecessary obstacles for developers. In response, Nelmark explained that permanency would reduce costs for Community Development Entities (CDEs) and investors, allowing for better planning and more direct investment in target communities.

The economic impact of the NMTC extends beyond job creation. Nelmark testified that in 2015, the program generated $15.2 billion in economic activity, resulting in $872 million in federal tax revenue. This not only offset the $759 million annual cost of the tax credits but provided a $113 million return to the government, demonstrating its cost-effectiveness.

The hearing also touched on the NMTC's role in supporting American manufacturing, with nearly 2,000 manufacturing and industrial businesses benefiting from the program to date. Additionally, the credit has financed over 3,700 community facilities, including federally qualified health centers, schools, and daycare centers.

As Congress faces a significant tax deadline at the end of next year, the hearing underscored the importance of building on proven policies like the NMTC. Senator Wyden voiced strong support for legislation introduced by Senator Cardin that would make the program permanent and expand its value, describing it as a "no-brainer."

With the current NMTC authorization set to expire in 2025, the hearing's focus on its impact and the bipartisan call for its permanence signals that the program may play a central role in upcoming tax policy discussions. As communities across the nation continue to seek investment and economic development opportunities, the future of the New Markets Tax Credit program remains a critical issue for policymakers and community leaders alike.