Novogradac’s Updated New Markets Tax Credit Mapping Tool Highlights Investments Found in all 50 States as of 2021
Novogradac’s New Market Tax Credit (NMTC) Mapping Tool has updated its database to show fiscal year (FY) 2021 data on qualified low-income community investments (QLICIs) by state and congressional district. The FY 2021 update gives important insight into the NMTC investments made over time since the creation of the tax credit.
This data comes from the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund’s public release and it shows the amount of QLICIs from FY 2003 though FY 2021 in states, the District of Columbia and territories.
About the NMTC and QLICIs
The NMTC promotes economic development by incentivizing private investments in low-income communities. It allows for individual and corporate investors to receive tax credits against their federal income tax in exchange for making equity investments. Community development entities use proceeds from qualified equity investments (QEIs) to make QLICIs in qualified active low-income community businesses. Over a seven-year period, investors may claim a tax credit worth 39% of their QEIs. As of FY 2021, the NMTC has generated $8 of private investment for every $1 of federal funding and financed more than 10,000 businesses, according to the CDFI Fund. QLICIs support the creation of small businesses in low-income communities. There are severaltypes of businesses that have benefited from QLICIs, such as manufacturing, food, retail, housing, health, technology, energy, education and childcare. Investments from new businesses financed by NMTCs bring needed economic development into underserved low-income communities. In FY 2021, the most recent data available, every state, the District of Columbia, Guam and Puerto Rico had at least one QLICI. While almost every congressional district had at least one QLICI, 27 did not have any for FY 2021. Due to the fact that Guam projects do not include a 2010 census tract assignment, the two QLICIs in Guam were not included in the mapping tool.
In the 19 total rounds of the NMTC program, the CDFI Fund has made 1,563 allocation awards totaling $76 billion in tax credit authority. It has supported the construction of77 million square feet of manufacturing space, 94 million square feet of office space and 78 million square feet of retail space, according to the CDFI Fund.
Total QLICIs in Each State
The NMTC has raised nearly $76 billion in QLICIs since its inception in 2003 through the 2022 round. Below is a table that shows the total QLICI funding in each state, the District of Columbia and Puerto Rico rounded to the nearest thousand through FY 2021.
Top 10 States with the Most QLICI Dollar Amounts
The chart listed below displays the 10 states that contain the highest QLICI dollar amounts from the inception of the NMTC through FY 2021.
Some states have higher amounts of QLICIs due to a variety of reasons. Many NMTC investors make investments into their respective Community Reinvestment Act assessment areas. One of the reasons Louisiana has more than $2.7 billion in QLICIs is because under the Gulf Opportunity Zone Act of 2005, the CDFI Fund allocated an additional $1 billion in NMTC authority from 2005 to 2007 for QLICIs in the Hurricane Katrina GO Zone.
States and Territories that have Historically Received Fewer QLICI Dollars
Though QLICIs have been made in all 50 states, the District of Columbia, Puerto Rico and Guam, the activity of these distributions vary from state to state. The states the CDFI Fund has identified as having historically received fewer dollars of QLICIs in proportion to their statewide population residing in low-income communities (LICs) are shown in the graphic below.
States with the lowest investment per low-income population were identified by dividing the total dollars of QLICIs invested from FY 2003 through FY 2021 in each state by the population residing in low-income communities in that state. The U.S. territories of Puerto Rico, American Samoa, Guam, Northern Mariana Islands and the U.S. Virgin Island have also been identified by the CDFI Fund as receiving lower levels of NMTC investment. Only Puerto Rico and Guam had any QLICIs through FY 2021, receiving about $207 million and $24 million, respectively.
Not all Congressional Districts Have Seen Investment
Some districts have few or do not have any severely distressed census tracts, making it difficult to place a QLICI in that congressional district, given the priority the CDFI Fund gives to applications serving severely distressed census tracts. Still, only 27 congressional districts located in 13 different states do not contain a single QLICI. Texas contains six districts that have no QLICIs, while Pennsylvania, Virginia and California each have three districts with no QLICIs. New York and Georgia have two districts with zero QLICIs while Minnesota, Michigan, Ohio, New Jersey, Alabama and Florida each have one district with no QLICIs.
The Future of the NMTC
The current update to the QLICI mapping tool may only include data through FY 2021, but the NMTC has continued to support low-income communities through FY 2023. The 2023 New Market Tax Credit Progress Report shows that there were 297 projects in 40 states and the District of Columbia during the current fiscal year. These projects generated 52,800 jobs, including 29,210 permanent full-time-equivalent jobs and 23,612 construction jobs. Investments mostly targeted severely distressed communities, with 83.1% of NMTC projects targeting these areas. A total of 30.5% of projects were also located in non-metropolitan areas.
The NMTC will continue to provide quality investments to low-income communities and small businesses nationwide. The Consolidated Appropriations Act of 2021 provided a five-year extension of the NMTC with $5 billion in annual allocation authority through 2025. However, enacting the New Markets Tax Credit Extension Act (H.R. 1321, S. 456) would make the NMTC an indefinite part of the tax code. This bill would also set the initial annual allocation amount to $5 billion, adjust this amount in future years for inflation and allow for NMTC to be taken against alternative minimum tax liability. A possible vehicle for the bill could be a year-end tax package that is currently being negotiated in Congress.
To learn more about the NMTC and the importance of making it permanent, be sure to attend the Novogradac 24th Annual New Markets Tax Credit Conference, in-person or online Jan. 25-26, 2024. To participate in the push for NMTC permanence and to stay up to date on NMTC regulations, consider joining the NMTC Working Group.