Proposed California State NMTC Speaks to the Success of the Federal New Markets Tax Credit

Published by Michael Novogradac on Thursday, January 12, 2012 - 12:00am

Last week, California Assembly Bill 643 was amended to include the creation of a California New Markets Tax Credit Program. A.B. 643 would authorize the California Tax Credit Allocation Committee or TCAC to grant up to $50 million in state new markets tax credits each year from 2013 through 2019.

The state NMTC would be modeled after the federal new markets tax credit. Investments including, but not limited to, retail businesses, real property, financial institutions and schools would be eligible for the California NMTC.

Currently, nine states have state new markets tax credit programs: Ohio, Florida, Mississippi, Kentucky, Illinois, Maine, Oregon, Texas and Connecticut. Three states previously enacted state NMTCs: Missouri, Louisiana and Oklahoma. It is estimated that, on average, these states successfully leveraged $13 in federal NMTC for every dollar of state credits initially allocated for the state program. And California is one of three states, along with Wisconsin and Alabama, where state new markets tax credits have been proposed but not yet enacted.

The proposed creation of a state NMTC should be considered an affirmation of the federal new markets tax credit. The stated goal of the California NMTC would be to stimulate economic development and hasten the state’s economic recovery. The preamble of A.B. 643 states that investment in small business ventures is a proven method of stimulating economic activity, creating new jobs, and generating revenue by expanding the tax base.  It goes on to note that the federal New Markets Credit Tax Program has been “an effective means of stimulating state and regional economies due to its provision allowing the creation of matching state programs to leverage additional federal funds for investment capital benefitting local communities.” This kind of recognition of the federal tax credit is welcome as the NMTC community monitors developments in Congress and the potential for an extension of this successful program.

Back at the state level, letters of support for the California new markets tax credit program can be directed to:

Assembly Speaker John A. Pérez
State Capitol
State Capitol
P.O. Box 942849
Sacramento, CA 94249-0046
Tel: (916) 319-2046
Fax: (916) 319-2146

If you wish to copy Assemblyman Mike Davis, his office’s contact information is:

Assemblyman Mike Davis
State Capitol
P.O. Box 942849
Sacramento, CA 94249-0048
Tel: (916) 319-2048
Fax: (916) 319-2148