Tax News

CCH (cch.taxgroup.com) reports:

  Two House subcommittees looked into the issue of whether minority firms are fully participating in the New Market Tax Credit (NMTC) program, which is set to expire at the end of 2009. Donna J. Gambrell, director of the Treasury Department's Community Development Financial Institutions Fund, explained the program on June 18 before a joint hearing of the House Ways and Means Select Revenue Measures Subcommittee and the House Financial Services Subcommittee on Domestic Monetary Policy and Technology. "I believe the new markets tax credit is an efficient way to target investment into the neediest communities around the country," said Select Revenue Measures Subcommittee Chairman Richard E. Neal, D. Mass., who noted that lawmakers want to ensure that community organizations, many of which are smaller or minority-owned, have a fair shot at competing for these tax credits. The hearing concluded early without questioning by lawmakers, who had to return to the House floor for pending votes.

  Under the NMTC program, taxpayers receive a credit against federal income taxes for making qualified equity investments (QEIs) in designated community development entities (CDEs), Gambrell explained. Substantially all of these QEI dollars must be used by the CDE to provide investments in businesses and real estate developments in low-income communities. "To date, investors have invested $13.7 billion into CDEs, or over 70 percent of the NMTC allocation authority that was awarded to CDEs through 2008," Gambrell said in her written testimony. "In fact, since September of 2008, investors have invested close to $2 billion into CDEs, demonstrating the resiliency of this program in even the most difficult of economic times." She noted that in 2007, more than $4.1 billion was invested in census tracts where non-white populations exceeded 50 percent of the total population.

  The hearing was called as a result of a Government Accountability Office (GAO) study which concluded that minority-owned CDEs have not received allocation awards in proportion to their representation in the application pool (TAXDAY, 2009/06/02, M.3). Gambrell said the discrepancy is not attributable to biases in the application review or selection process. Instead, the capacity of each applicant, based on its merit, rather than ownership structure, is what determines whether NMTCs will be awarded. In addition, Gambrell suggested that many non-profit organizations that have significant minority executive control fall within the CDFI Fund's definition of a minority-owned entity, but failed to check the appropriate box on their applications.

  By Stephen K. Cooper, CCH News Staff

Ways and Means Select Revenue Measures Subcommittee Press Release: Chairman Neal on the New Markets Tax Credit Program

GAO Testimony: New Markets Tax Credit --Minority Entities Are Less Successful in Obtaining Awards Than Non-Minority Entities