New Markets Tax Credit News Briefs - April 2021

Reps. Terri Sewell, D-Alabama; Tom Reed, R-New York; and Sens. Ben Cardin, D-Maryland; and Roy Blunt, R-Missouri; Feb. 25 introduced House and Senate versions of the New Markets Tax Credit (NMTC) Extension Act of 2021. The legislation would permanently extend the NMTC at $5 billion in annual credit authority, adjust that amount for inflation in future years and provide an exception from the alternative minimum tax (AMT) for NMTC investments. This legislation builds on recent Congressional action in support of the NMTC, including the passage of the Consolidated Appropriations Act, which extended the NMTC through 2025.

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A bill in the Tennessee General Assembly would create a state new markets development tax credit similar to the federal NMTC, worth 50% of qualified equity investments (QEI). H.B. 1218 would create the credit with an annual statewide cap of $20 million and a transaction cap of $10 million, regardless of how many community development entities are involved. The credit would be worth 10% of the QEI for five years, beginning with the third credit allowance date of the property. The credit could be taken against the state insurance premium tax and would take effect Jan. 1, 2022.

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Legislation introduced Feb. 24 in the Mississippi House of Representatives would extend the state’s NMTC incentive through July 1, 2022. S.B. 2830 makes no other changes to the state NMTC program, which has an annual cap of $15 million and a transaction cap of $10 million. The incentive is currently set to expire July 1.

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The PNC Financial Services Group submitted a letter Feb. 2 to the Financial Accounting Standards Board (FASB) asking FASB to consider expanding its current accounting guidance covering low-income housing tax credit (LIHTC) investment to apply to NMTC investments. Current guidance requires reporting entities to present the depletion of NMTC investments as an expense in their pretax income, while recognizing the economic benefit of the investment below pretax income as a reduction to income tax expense. The PNC letter suggests current guidance complicates NMTC investment accounting and suggests simplifying the guidance to cover all tax credit investments. FASB published PNC’s letter as one of three agenda requests submitted in 2021.

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A bipartisan group of four U.S. Senators introduced legislation Feb. 3 to expand access to affordable and nutritious food in areas designated as “food deserts” by the U.S. Department of Agriculture. The Healthy Food Access for All Americans Act would create a 15% tax credit for new grocery store construction in a food desert and a 10% tax credit for companies that retrofit an existing store’s healthy food section in a food desert. The legislation would also create a grant for 15% of construction costs for certified food banks that build new permanent structures in food deserts and a grant for 10% of annual operating costs for nonprofit certified temporary access markets, such as farmers markets, mobile markets and some food banks, that operate in a food desert. Sens. Mark Warner, D-Virginia; Jerry Moran, R-Kansas; Bob Casey, D-Pennsylvania; and Shelley Moore Capito, R-West Virginia, introduced the bill. 

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The Community Development Financial Institutions (CDFI) Fund Feb. 22 awarded nearly $175.4 million to 48 organizations to finance the development of affordable housing and community facilities in low-income communities through the fiscal year (FY) 2020 round of the Capital Magnet Fund. CDFI Fund director Jodie Harris said that this is both the largest dollar amount ever awarded through the program and the largest number of awarded organizations in a single round. The awards will support financing for the preservation, rehabilitation, development or purchase of affordable housing for low-income communities.

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The CDFI Fund opened the fiscal year 2021 funding round Feb. 25 for the CDFI Rapid Response Program. The program, authorized by The Coronavirus Response and Relief Supplemental Appropriations Act of 2021, will provide $1.25 billion to CDFIs to help their communities respond to the economic hardships created by the COVID-19 pandemic. All applications were to be submitted to the CDFI Fund by March 25.

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The CDFI Fund published in the March 3 Federal Register a notice of guarantee availability for the CDFI Bond Guarantee Program for fiscal year 2021. The CDFI Fund will make up to $500 million available to support CDFI lending for eligible community and economic development purposes, including rental housing, rural infrastructure, day care centers, charter schools, health care facilities, nonprofits, commercial real estate and more. Qualified issuer applications must be submitted by 11:59 p.m. ET April 26 and guarantee applications must be submitted by 11:59 p.m. ET May 3. Any required CDFI certification application must be received by the CDFI Fund by 11:59 p.m. ET April 2.