Search Penny Hill Press

Thursday, September 30, 2010

New Markets Tax Credit: An Introduction

Donald J. Marples
Specialist in Public Finance

The New Markets Tax Credit (NMTC) is a non-refundable tax credit intended to encourage private capital investment in eligible, impoverished, low-income communities. NMTCs are allocated by the Community Development Financial Institutions Fund (CDFI), a bureau within the United States Department of the Treasury, under a competitive application process. Investors who make qualified equity investments reduce their federal income tax liability by claiming the credit. The NMTC program, enacted in 2000, is currently authorized to allocate $26 billion through the end of 2009. To date, the CDFI has made 396 awards totaling $26 billion in NMTC’s allocation authority.

In the 111
th Congress, legislation is being considered to modify the NMTC program authorization. The American Recovery and Reinvestment Tax Act of 2009, P.L. 111-5, increased the NMTC allocation for 2008 and 2009, to $5 billion from $3.5 billion. Similarly, legislation in the 110th Congress focused primarily on extending the NMTC program authorization. This attention came to fruition with the enactment of P.L. 110-343, which extended the NMTC program authorization one year, through the end of 2009. Other legislation in the 111th Congress, H.R. 2628 and S. 1583, proposes to extend the NMTC for multi-year periods; H.R. 473 proposes to extend the NMTC to the insular areas; H.R. 4849 proposes to allow for the new markets tax credit to offset alternative minimum tax liability; and both the House- and Senate-passed versions of H.R. 4213 and the Baucus Job Creation and Tax Cuts Act would extend the NMTC for one year (through 2010) and $5 billion.

Date of Report: September 17, 2010
Number of Pages: 10
Order Number: RL34402
Price: $29.95

Follow us on TWITTER at or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.