New Markets Tax Credit Program

The New Markets Tax Credit (NMTC) Program was established in 2000 as part of the Community Renewal Tax Relief Act of 2000 and aims to foster revitalization efforts in low-income and impoverished communities across the United States. The NMTC Program provides tax credit incentives to investors for equity investments in a certified Community Development Entity (CDE) whose primary mission is to invest in low-income communities. The credit equals 39 percent of the investment paid out over seven years: 5 percent each year for three years; and 6 percent in the final four years. The NMTC program has been used in conjunction with local efforts to spearhead redevelopment efforts, including commercial real estate development, in many areas.

The
Issue

The New Markets Tax Credit (NMTC) Program was established in 2000 as part of the Community Renewal Tax Relief Act 2000, and aims to foster revitalization efforts in low-income and impoverished communities across the United States. The NMTC Program provides tax credit incentives to investors for equity investments in a certified Community Development Entity (CDE) whose primary mission is to invest in low-income communities. The credit equals 39 percent of the investment paid out over seven years: 5 percent each year for three years; and 6 percent in the final four years. The NMTC program has been used in conjunction with local efforts to spearhead redevelopment efforts, including commercial real estate development, in many areas.

Like 15-year leasehold improvement depreciation, Section 179D expensing, and accelerated (bonus) depreciation, the NMTC program was not a permanent part of the tax code, and its continuation depends on periodic and oftentimes uncertain renewals by Congress in so-called “tax extenders” legislation. Over the years, NAIOP has worked with a broad coalition of real estate and business groups in support of the New Markets Tax Credit program and has supported its inclusion in tax extenders legislation.

Status

The NMTC program was renewed for five years in December 2015 with enactment of the "Protecting Americans from Tax Hikes Act of 2015". As comprehensive tax reform discussions and negotiations unfold in 2017, NMTC will be one of many tax community development tax incentives that will be reviewed to determine whether they should continue.

Position

NAIOP supports continuation of the New Market Tax Credit program as a mechanism to foster economic revitalization and commercial real estate development in many of our nation’s urban areas.