WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance, today announced that Iowa will receive at least $50 million in tax credits under the federal New Markets Tax Credit (NMTC) program. The $50 million in tax credits will go to Iowa Community Development, LC, of Johnston, for below-market loans and other financial incentives to encourage businesses to develop in under-served areas and create jobs. Another $60 million in tax credits will go to Rural Development Partners, LLC, of Mason City. That company invests in Iowa projects and others nationwide.
"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 an economic slowdown."
Grassley said he was pleased that nationwide, a greater percentage of New Markets Tax Credit dollars is going to rural areas this year than last year. This year, 26 percent ($895 million) of the total allocation will be invested in rural areas, compared with 18.4 percent ($720 million) last year. Last year, Grassley and Finance Chairman Max Baucus urged the Treasury Department to consider a more equitable share of the funding for rural areas.
"It’s good to see the Treasury Department recognize that ‘rural’ doesn’t mean unpopulated or without development," Grassley said. "A lot of Americans live in rural areas. Like city dwellers, rural residents also need access to businesses and affordable housing. It’s also important to remember that one economic development project can lead to others and revitalize an entire community. Rural areas deserve a fair shot at revitalization."
Passed into law as a part of the Community Renewal Tax Relief Act of 2000, the NMTC program was enacted to encourage financial institutions to provide capital, credit, and financial services in underserved markets. Grassley has worked to make sure the financing instruments foster the economic revitalization of low-income communities in rural areas.
For more information, please see:
http://www.cdfifund.gov/news_events/CDFI-2008-47-NewMarketAwardsAnnounced.asp
The text of the Grassley-Baucus letter encouraging a greater proportion of NMTC funds to rural areas is below.
August 3, 2007
Kimberly Reed, Director
Community Development Financial Institutions Fund
Department of Treasury
601 13th Street, NW, Suite 200
Washington, DC 20005
Dear Ms. Reed:
On May 22, 2007, the Community Development Financial Institutions (CDFI) Fund of the Department of Treasury solicited public comments to help the CDFI Fund develop a policy to implement the statutory requirement of the Tax Relief and Health Care Act of 2006 (P.L. 109-432) to ensure that, for purposes of the New Markets Tax Credit (NMTC) program, non-metropolitan counties receive a proportional allocation of Qualified Equity Investments (QEIs). While the comment period closed July 6, 2007, the CDFI Fund offered to receive our comments past this date. Please follow whatever procedures are appropriate to make this document available for public review.
Congress created the NMTC program in 2000 to create a new financing instrument for low-income rural and urban communities. A recent GAO report notes that, to date, NMTC investment totals over $7.7 billion. However, data collected from the CDFI through Fiscal Year 2005 shows only 10.38% of the total NMTC proceeds were invested in rural low-income communities. Therefore, two years ago, the Committee included language to require a proportional allocation of QEIs to non-metropolitan counties which ultimately passed into law as part of the Tax Relief and Health Care Act of 2006 (P.L. 109-432).
It was our intent to direct a greater share of NMTC financing to non-metropolitan communities such that the ultimate beneficiaries are individuals and businesses in rural areas. We recognize that the CDFI Fund does not allocate QEIs to geographic areas but rather allocates credits to CDEs which then issue qualified low-income community investments (QLICIs) in low-income communities. The rule established by the CDFI should ensure a proportional share of dollars as measured through QLICIs is delivered to non-metropolitan communities.
The CDFI solicited comments regarding the proper interpretation of the word proportional. The notice offered a potential definition that would ensure 25% of the allocatees predominantly serve non-metropolitan areas. To achieve true proportionality in the NMTC program, it seems 25% should be treated as a floor, not a ceiling. Congress has created set-asides in other programs, but declined to do so in the NMTC program.
We appreciate your prompt attention in this matter and look forward to working with you to ensure a proportional share of NMTC financing is delivered to rural areas. Please contact [staff] if you have any questions.
Sincerely,
Max Baucus Chuck Grassley
Chairman Ranking Member