BY THE NUMBERS
Total NMTC allocations to Iowa since 2000 (potential project value)
Amount of allocation used for projects to date
Number of projects funded
Source: Iowa Business Growth Co.
The New Markets Tax Credit (NMTC) program led to the creation of nearly 48,000 U.S. jobs last year, about 2 percent of all new jobs created nationally, according to a new report from the New Markets Tax Credit Coalition, The program, created in 2000, provides a 39 percent federal tax credit for investments in economically disadvantaged areas.
In Greater Des Moines last year, investors in 27 homes that Habitat for Humanity built in low-income neighborhoods received nearly $4.5 million in tax credits. That project was part of a larger $12 million allocation to Habitat used to build 94 homes in 13 communities statewide.
The credits are typically sold to banks or individual investors, who purchase the credits at a discount. The investor gets a 39 percent tax credit over a seven-year period. For instance, for the Habitat project, U.S. Bank purchased the tax credits, which were worth $4.68 million in reduced tax liability (39 percent of $12 million) over a seven-year period, at the going rate of about 70 cents on the dollar, or about $3.3 million.
“One of the real draws was that this Habitat deal affected 13 communities, not just one,” said Dan Robeson, executive vice president of Iowa Business Growth Co. A certified development corporation, Iowa Business Growth administers the NMTC program for Iowa Community Development LC, a community development entity that receives the allocations.
The tax credits have also been used to sweeten economic development deals, such as Dubuque’s successful bid in 2009 to attract IBM Corp. to build a technology service center in that city. In March, an Iowa Premium Beef LLC project was allocated $20 million in tax credits for renovation of a meat processing plant in Tama.
The New Markets Tax Credit Coalition estimates that between 2003 and 2010, NMTC investments were responsible for creating more than 335,000 construction and more than 200,000 permanent jobs in economically distressed communities nationwide. The coalition wants Congress to permanently extend the tax credit program and to increase the annual credit authority to at least $4.8 billion in 2014, with an inflation adjustment in subsequent years. Last week, Sen. Jay Rockefeller, a West Virginia Democrat, and Sen. Roy Blunt, a Republican from Missouri, introduced a bipartisan bill for a permanent extension.
The coalition also wants to exempt NMTC investments from the alternative minimum tax so that increases in that tax won’t erode the value of the credit to investors.