Big banks and wealthy investors are accused of benefiting from a tax credit program that is supposed to help poor communities, according to a new Senate report, Accounting Today reported. 


The report, from Sen. Tom Coburn, an Oklahoma Republican, describes how millions of dollars in New Markets Tax Credits are being diverted to benefit billionaires, major banks, Hollywood producers and fast-food chains.


The New Markets Tax Credit program, established by Congress in December 2000, permits individual and corporate taxpayers to receive a credit against federal income taxes for making equity investments in vehicles known as Community Development Entities. The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year period.


According to the report, the program results in hundreds of millions of dollars in lost revenue to the U.S. Treasury. A Government Accountability Office report this year found that private investors are claiming more than $1 billion in New Markets credits annually. According to the Joint Committee on Taxation the program is expected to result in $5.1 billion lost revenue from 2013 to 2017.


"The New Markets Tax Credit is a reverse Robin Hood scheme paid for with the taxes collected from working Americans to provide payouts to big banks and corporations in the hope that those it took the money from might benefit," Coburn said in a statement Monday. The report calls for eliminating the program.


A spokesman for a business group that lobbies for the credit, the New Markets Tax Credit Coalition, disputed the findings of both reports.


"Washington doesn't pick the winners and losers when it comes to the NMTC," said Bob Rapoza, spokesperson for the coalition. "It is a market driven program based in a philosophy that communities know best; they just need access to capital. Through public-private partnerships, the credit brings community revitalization projects to fruition that likely would not have gone forward if not for NMTC financing."


Rapoza referred to an earlier report in which the GAO found that 88 percent of investors would not have made their investments but for the incentive of the credit. Treasury Department data also indicates that the NMTC has delivered more than $60 billion in capital to businesses and revitalization projects nationwide in some of the poorest communities, he said.


In the most recent round of funding in June, the U.S. Treasury's Community Development Financial Institutions Fund allocated $3.5 billion in credits to 87 organizations, including $100 million to two community development organizations in Iowa. Johnston-based Iowa Community Development LC was allocated $45 million; and Midwest Renewable Capital LC in Grimes received $55 million in credits.


The report did not cite any projects in Iowa.