All But a Small Percentage of Congressional Districts have QLICI Projects through FY 2020

Published by Brad Elphick, Peter Lawrence on Friday, January 27, 2023 - 12:00am

Novogradac’s New Markets Tax Credit (NMTC) Mapping Tool, which was created to display NMTC eligibility of census tracts, has been updated to include NMTC project qualified low-income community investment (QLICI) data from the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund’s public data release. This latest release includes the total number of QLICIs in each state and congressional district from fiscal year (FY) 2003 through FY 2020. FY 2021 data is expected to be available in December. Archived QLICI maps are also available online detailing investments through FY 2019.

The NMTC is an important tool to attract private capital to revitalize low-income communities, including rural and underserved communities. Through FY 2020, there were 17 application rounds of the NMTC  and subsequently, the CDFI Fund made 1,354 awards for a total allocation of $66 billion in NMTC authority to community development entities (CDEs), which are typically CDFIs. Additionally, in calendar year 2021, the NMTC program provided $5 billion in allocation authority to 107 CDEs. A survey of CDEs found that in 2021, participants completed 277 projects that generated more than 52,000 jobs. The projects, 86% of which were located in severely distressed communities–those with a poverty rate above 30%, median incomes below 60% of the area median income or unemployment rates 1.5 times the national average–totaled $6.1 billion in investment and received $3.2 billion in NMTC allocation. Historically, for every $1 invested by the federal government, the NMTC program generates more than $8 of private investment, according to Treasury.

Total QLICIs in Each State

Since the NMTC was established, there has been nearly $59 billion in QLICIs across the county through FY 2020. The table below shows the total QLICI funding in each state, rounded to the nearest thousand.

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California, New York and Ohio Continue to Top List of States with the Most QLICI Dollar Amounts

The chart below shows the 10 states with the highest QLICI dollar amounts since the beginning of the NMTC through FY 2020.

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A Number of States and Territories have Underserved Low-Income Communities

There are QLICI projects in all 50 states, the District of Columbia, Puerto Rico and Guam. However, this activity has not been equally distributed. A number of states with the largest amount of QLICI dollars are also among the states with lowest investment per low-income population. These states are displayed below; the CDFI Fund also includes Puerto Rico and the other island territories of American Samoa, Guam, Northern Mariana Islands and the U.S. Virgin Islands among the areas receiving lower levels of NMTC investment. The CDFI Fund determined these underserved states by comparing the total dollars of QLICI invested based on the population of those residing in low-income communities in each state. The low-income communities were determined using 2011-2015 American Community Survey (ACS) NMTC eligibility data.

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Though Every State has QLICIs, Not all Congressional Districts Have Seen Investment

The CDFI Fund reports that 28 congressional districts located in 13 states do not have a QLICI. Of these 13 states, four have only one congressional district without a QLICI, six have two congressional districts without a QLICI, two have three congressional districts without a QLICI, and one state has six congressional districts without a QLICI.

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The Need for NMTC Permanence

QLICIs are a crucial source for private capital investment in small businesses located and operating in low-income communities. The NMTC was most recently extended for five years at $5 billion in annual allocation authority by the Consolidated Appropriations Act of 2021. The current extension runs through 2025; if the NMTC were to be made permanent, small businesses and low-income communities could count on sustained assistance. Permanence also provides investors the certainty of knowing the incentive will be available for years to come, likely leading to greater investor interest and higher equity pricing.

With the start of a new congressional session, the New Markets Tax Credit Extension Act will have to be reintroduced. Previous iterations of this legislation would make the NMTC a permanent part of the tax code, set an initial annual allocation amount of $5 billion, index that amount in future years by inflation and allow the NMTC to be taken against alternative minimum tax liability.

The FY 2023 omnibus spending package enacted at the end of 2022 did not include any community development tax incentives, as there was not a significant tax title in the bill. This will likely lead to a push for tax legislation in the newly opened congressional session in which tax extenders and other tax proposals that were left unaddressed during the close of the previous session can be included. NMTC enhancements and permanence will be among the provisions advocates fight to have included in any tax legislation.  

To learn more about the NMTC and the fight for permanence, consider joining the NMTC Working Group.