New Market Tax Credits

Capital and Asset Management

In 2000, Congress established the New Markets Tax Credit (NMTC) Program to spur investments into projects located in low-income communities. Since the NMTC Program's inception, the CDFI Fund has delivered $70 billion in tax credit authority to community development enterprises (CDE) through a competitive application process. This amount has created around 750,000 jobs and financed industrial and commercial facilities, health and community centers, and small business loan funds. Despite the considerable amount of tax credits needed throughout the country and the potential of the program to significantly increase economic growth in Indian Country, tribal communities and tribally focused CDEs have been left behind. In fact, over the last three funding cycles, one tax credit allocation was given to a Native CDE. Reasons for the exclusion given during a recent Senate Committee on Indian Affairs Oversight Hearing included the competitive nature of the program and the lack of NMTC application reviewers who are well-versed in the complexities of Indian Country. To initiate change, NAFOA has encouraged individuals who meet these requirements to respond to the CDFI Fund's call for NMTC application reviewers.

To further enhance the likelihood that tax credits will be deployed in Indian Country, NAFOA has encouraged the administration to revise a CDE’s service area to include Indian Country. Currently, CDEs are only permitted to invest their NMTC allocation in their prescribed service areas. These service areas are typically state based, often including states that are geographically contiguous. However, as CDEs develop expertise in investing in Indian Country, there are natural economies of scale to using NMTC in other tribal areas, which may be located in other states. Furthermore, as tribes possess a government-to-government relationship with the federal government, they ought to be treated equal to states. CDEs should have an option to select a service area designated for tribes and be free to use allocations in any tribal project nationally in efforts to adequately serve their target populations and strengthen the capacity of the NMTC program. This change can be accomplished through the regulatory process and does not require legislation.

In a recent budget meeting with the Senate Committee on Indian Affairs, NAFOA submitted language to reserve $250 million from the $5 billion NMTC program. The reserve would fund tribal government development projects or projects that partner with tribal governments for community, infrastructure, and economic development.

Current Status and Action:

The Department of the Treasury has taken some steps toward improving the program. For example, there is now a designated place on the NMTC application for all NMTC applicants to check if a project is benefiting a tribal community. This is an important step in data collection and in demonstrating the importance of all CDEs serving Native communities when applying for a NMTC allocation. NAFOA will continue to work on Indian Country receiving designated allocations in every funding cycle and build upon this positive step toward serving Indian Country.

> External Link

IRS New Markets Tax Credits Publication