Update on the New Market Tax Credit Allocations

At the February 28th CDFI Fund Appropriations Hearing, Director Tony Brown updated Subcommittee members about the New Market Tax Credit awards.

He said, that in early March, 70 groups will receive allocations of credits.

The average amount is $38 million.  The largest award is $170 million.

The priority criteria was the level of commitment to raising equity  investment.

A major cause for concern was the Fund's statements in support of President Bush's request of $51 million of which $13 million is administrative.

Director Brown stated that the decrease in funding would not harm CDFIs because

1.  The New Market Tax Credit will provide $2.5 billion in capital to CDFIs this year.
2.  The award closing process takes so long, that $38 million is all the Fund staff will be able to manage.

NCCED is preparing a statement that the NMTC does not and cannot replace grant programs.  The NMTC is a shallow subsidy that will nearly always require some subsidy for projects in distressed communities.  Also, the nature of the NMTC, and its seven year monitoring requirements, make it much more likely to be used for real estate development and other physical improvements and not lending or investment which have more turnover and higher monitoring costs.  NCCED is also concerned that the President's proposed dividend tax exemption will result in less use of tax credits.

NCCED also supports $100 million in funding for the CDFI Fund.  The program was funded at $118 million in 2001 and has fallen to $71 million in 2003 even with impressive return on investment.

The testimony is at http://www.cdfifund.gov

NCCED will let you know as soon as the allocations are announced.

Linda Davenport, who operates the NMTC program, as well as investors and CDEs with allocations will particpate in three different sessions at NCCED's Policy Conference, March 31 - April 2.  See http://www.ncced.org for more information on the NMTC forums.