The New Markets Tax Credit

In an era of declining federal resources dedicated to economic development, the New Markets Tax Credit stands out as a success story and a particular boon for metropolitan areas, which have received the majority of credits to date. Despite its complexity and initial doubts about whether it could be effectively implemented, it has shown signs of providing an important extra boost to many types of development in underserved urban and rural communities. As the program has developed, participants have become bolder and more creative in their uses of the Credit, and pushed more of the Credit’s limited subsidy into severely distressed communities, and into community facilities and local businesses.

Like any social and economic program run through the tax code, it is possible to think of ways to target the NMTC more accurately or simplify the application process. But almost all such “fixes” would either substantially increase the cost of the Credit or risk decreasing the breadth of its support. Instead, cities and local officials can use targeted incentives, locally integrated programs, and clearly stated goals to help ensure that NMTC projects meet their own priorities. Doing so will not only meet city goals today but also point the way to the Credit’s continuation, expansion, and improvement.

For the full text of this paper, please see the attached PDF version below.