Lawmakers Call for Expanded NMTC Access for Native Communities

Chairman Neal Leads Bipartisan Call to Increase New Markets Tax Credit Access for Native Communities

September 28, 2020

WASHINGTON, DC — House Ways and Means Chairman Richard E. Neal (D-MA) led a group of bipartisan Ways and Means Committee members in calling on the Community Development Financial Institutions Fund (CDFI) to ensure Native Communities have fair access to the New Markets Tax Credit (NMTC). The NMTC has been a successful tool to generate jobs and business opportunities in America's most distressed rural and urban communities, yet the latest round of NMTC allocation did not provide any credits to entities that commit 100 percent of their activities to aiding Native communities.

Congressman Jason Smith (R-MO), Congressman Ron Kind (D-WI), Congressman Tom Reed (R-NY), Congresswoman Suzan K. DelBene (D-WA), Congressman David Schweikert (R-AZ), Congresswoman Gwen Moore (D-WI), Congresswoman Jackie Walorski (R-IN), Congressman Daniel T. Kildee (D-MI), and Congressman Ron Estes (R-KS) also signed the letter.

“There is still more to be done to improve this vital tax incentive: increase investment in Indian Country,” emphasized the lawmakers. “Earlier this year, the Ways & Means Committee's Subcommittee on Select Revenue Measures convened to hear testimony on the impact of the tax code on Native American tribes. Both Native American Members of Congress and tribal witnesses testified that the NMTC is crucial for their communities.”

“While there has been investment in Indian Country and in census tracts with native populations (approximately $3.9 billion through 2019), the latest two NMTC allocation rounds resulted in zero allocation for Community Development Entities (CDEs) that committed 100 percent of their activities to aiding Native communities,” the lawmakers continued. “Overall, the poverty experienced in these communities, combined with a lack of access to private capital, is evidence that more NMTC investment is needed.

The lawmakers requested “that the Fund examine its allocation application and review process to identify and revise any elements that may inadvertently limit investment in Indian Country or the participation of minority CDEs. As the Subcommittee hearing made clear, we in Congress need to ensure that our tax laws do not result in systemic disparities between Indian tribes and other taxpayers. The same review should be done on the regulatory level to ensure that programs like the NMTC do the most good as possible across all communities.”

The full letter is available HERE.

---

Jodie Harris
Director, Community Development Financial Institutions Fund
U.S. Department of the Treasury
1801 L Street, NW
6th Floor
Washington, DC 20036

Dear Director Harris:

We write regarding the New Markets Tax Credit (NMTC), which is an extremely successful tool for promoting community revitalization. We are especially pleased that the NMTC has proved successful in generating jobs and business opportunities in the most distressed rural and urban communities in America. As you know, over 75 percent of NMTC activity is in high-distress communities — those with poverty rates of above 20 percent, with median incomes at or below 60 percent of the area median, or with unemployment rates at least 1.5 times the national average. It is also important to note that over its history, more than half of NMTC investment ($28 billion) has gone to majority-minority census tracts.

Despite this success, there is still more to be done to improve this vital tax incentive: increase investment in Indian Country. Earlier this year, the Ways & Means Committee's Subcommittee on Select Revenue Measures convened to hear testimony on the impact of the tax code on Native American tribes. Both Native American Members of Congress and tribal witnesses testified that the NMTC is crucial for their communities. While there has been investment in Indian Country and in census tracts with native populations (approximately $3.9 billion through 2019), the latest two NMTC allocation rounds resulted in zero allocation for Community Development Entities (CDEs) that committed 100 percent of their activities to aiding Native communities. Overall, the poverty experienced in these communities, combined with a lack of access to private capital, is evidence that more NMTC investment is needed.

In 2009, the Government Accountability Office studied the issue of applications from minority-controlled CDEs. It found that from 2005 through 2008, minority-owned CDEs were successful in about 9 percent of the NMTC applications they submitted and received about 4 percent of the credits for which they applied. By comparison, non-minority CDEs were successful in about 27 percent of their applications and received about 15 percent of what they requested. Though the study was inconclusive as to why, it suggested that “when controlling for other CDE characteristics, minority status is associated with a lower probability of obtaining an allocation.”¹

For these reasons, we request that the Fund examine its allocation application and review process to identify and revise any elements that may inadvertently limit investment in Indian Country or the participation of minority CDEs. As the Subcommittee hearing made clear, we in Congress need to ensure that our tax laws do not result in systemic disparities between Indian tribes and other taxpayers. The same review should be done on the regulatory level to ensure that programs like the NMTC do the most good as possible across all communities.

In addition, in 2016 and 2017, the CDFI Fund conducted training targeted to minority- and Native-owned CDEs that helped increase the number of awards to minority applicants. As a result, minority CDEs' success appeared to improve, with approximately 14 percent of allocations going to minority CDEs in 2017-2019, up from roughly 8 percent in previous years. Again, it is clear that more needs to be done on this issue, and we urge you to conduct further trainings as soon as possible.

Thank you for your prompt attention to this request. We look forward to learning the results of your review and working productively with you to build on the NMTC's success going forward.

Sincerely,

Richard E. Neal
Chairman
Committee on Ways and Means

Jason Smith
Member of Congress

Ron Kind
Member of Congress

Tom Reed
Member of Congress

Suzan K. DelBene
Member of Congress

David Schweikert
Member of Congress

Gwen Moore
Member of Congress

Jackie Walorski
Member of Congress

Daniel T. Kildee
Member of Congress

Ron Estes
Member of Congress