WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance, today announced that three organizations headquartered in Iowa will receive $215 million in allocation authority under the 2009 round of the federal New Markets Tax Credit Program – almost double last year’s allocation. In 2006, Grassley’s provision to ensure that a greater share of the tax credits go to rural areas than before became law.
“This program is a very good way to attract private sector investment in rural communities,” Grassley said. “An attractive loan is often just the incentive a company needs to invest in a business and create jobs. That’s especially true in this era of credit freezes and the worst economy since the Great Depression.”
The New Markets Tax Credit program is meant to stimulate economic and community development and job creation in areas with low economic growth. The program gives attractive tax credits to investors who invest in qualifying vehicles. The three Iowa firms have total allocation authority of $215 million this year, so they can solicit investments of up to $215 million, and the investors can take a tax credit over seven years that will total 39 percent of their investment. Last year’s allocation for Iowa firms under the New Markets Tax Credit program was $110 million, so this year’s allocation of $215 million is nearly double that.
Iowa Community Development LC of Johnston will receive $70 million in allocation authority this year to provide debt-financing products combined with forgivable loan products to businesses throughout Iowa for construction and rehabilitation projects, building acquisition, equipment purchases, operating and maintenance expenses, site development, and working capital. The company will target project sectors such as advanced manufacturing, life science, information technologies, retail, and value-added agriculture processing. The allocation will enable the company to make loans at below market rates, eliminate origination fees, and offer longer than standard interest-only payment periods and longer amortizations.
Midwest Renewable Capital of Grimes will receive $65 million in allocation authority this year to provide access to below market rate capital to renewable energy businesses and “green” real estate projects throughout the rural Midwest. The company will provide below-market interest rates, flexible credit standards, low to no origination fees, equity equivalent terms, and other nonstandard forms of financing. The company intends to leverage these tax credits with Renewable Energy Tax Credits, Historic Tax Credits, and State Venture Capital Tax Credits, and will also establish a unique, standardized “micro-loan” program to efficiently deliver new markets tax credit capital to small businesses.
Rural Development Partners LLC of Mason City will receive $80 million in allocation authority this year to focus on the needs of distressed areas of rural America. It provides loans and equity investments for agribusinesses, commercial forestry operations, and alternative energy companies. As an expansion of the company’s current activities, it will support the development of an investment fund to invest in small start-up or early stage businesses. The company will offer below market interest rates and flexible underwriting standards and terms. It will also seek new markets tax credit equity investment that can be used for critical “gap financing.” The company’s basic objective is to attract more equity for distressed rural regions of the U.S. that are underserved and lack capital availability for expansions or for high risk start-up operations.
As ranking member and former chairman of the Committee on Finance, with jurisdiction over all tax policy in the Senate, Grassley has worked to ensure that rural areas get their fair share of New Markets Tax Credit. Passed into law as a part of the Community Renewal Tax Relief Act of 2000, the New Markets Tax Credit program was enacted to encourage financial institutions to provide capital, credit, and financial services in underserved markets. In 2006, under the leadership of Sen. Grassley on the Finance Committee, Congress passed legislation, which became law, requiring that a proportional allocation of these benefits go to rural areas.