On February 10, three members of the House Ways and Means Committee, including Congressmen Pat Tiberi (R-OH), Tom Reed (R-NY), and Richard Neal (D-MA), introduced a New Markets Tax Credit (NMTC) extension bill: The Markets Tax Credit Extension Act of 2015 (H.R. 855). The three lawmakers were quickly joined the next day by an additional 11 co-sponsors from both parties.
If Enacted, What Does the Bill Accomplish?
The Markets Tax Credit Extension Act of 2015 (H.R. 855) is similar to last year’s Gerlach/Neal legislation. It would permanently extend the NMTC, increase the annual allocation authority to around $5 billion, and index annual allocation to inflation in subsequent years. The legislation would also provide Alternative Minimum Tax (AMT) relief for NMTC investments, thereby ensuring NMTC investors receive the same consideration under the AMT as is currently provided to investors in many other federal tax credit programs.
Additional Education and Campaigning Efforts Are Needed
The introduction of the bill kicks off the 2015 NMTC Extension Campaign, an effort necessitated by the short one-year extension of the NMTC in December of 2014.
To start, the NMTC Coalition is focused on two groups: members of the Ways and Means Committee, and Representatives who have indicated their support for the NMTC in the past, either by signing one of the Coalition’s letters or by co-sponsoring extension legislation like H.R. 4365 (the extension bill from the 113th Congress).
The Coalition has also analyzed NMTC data by Congressional district and is focusing its efforts on members with significant activity in their districts. The Coalition encourages the NMTC community to reach out to freshman members, in particular, to educate them on the program. There are 58 new members of the House of Representatives this year, and it is crucial that NMTC advocates bring them up to speed on the positive impact of the NMTC program in their districts.
In the Senate
As of publication of this article, there was not a Senate extension bill – yet. However, an introduction is expected soon. Similar to efforts within the House, Senate advocacy efforts should focus around members of the tax-writing committee, the Senate Finance Committee. The Coalition also urges NMTC supporters to engage the 13 new Senators. Engagement tools including co-sponsorship lists, target lists, and state-level fact sheets are available on the Coalition’s website. The state-level fact sheets include jobs and investment data from the recent Economic Impact Report, along with a list of organizations from each state that signed onto the NMTC extension letter last November.
The 2015 Tax Reform Road Ahead…
Tax reform efforts should continue this year, but the process and likely path is still unclear. President Obama included a permanent authorization of the NMTC in his FY 2016 Budget and has indicated an interest in finding common ground through corporate tax reform. New Ways and Means Committee Chairman Paul Ryan (R-WI) recently signaled that he may be open to corporate-only tax reform. New Senate Finance Committee Chairman Orrin Hatch (R-UT) set up bipartisan tax reform working groups that will meet this spring. Chairman Hatch – like Paul Ryan – prefers comprehensive tax reform that includes individual and corporate reform, but he has also indicated the potential for a smaller scale effort aimed at corporate provisions.
While there seems to be some tentative agreement among all the key players, tax reform legislation must still overcome longstanding disagreements between the two parties including:
Revenue
Scoring methods
The progressivity of the tax code
The utility of various tax provisions
Some argue that business-only tax reform is impossible to do without also addressing tax reform on individual taxpayers. The potential for the use of the reconciliation process for tax reform is yet another wildcard.
What Does CohnReznick Think?
Regardless of the outcome of tax reform efforts, Congress must act before the end of the year to extend the New Markets Tax Credit. CohnReznick looks forward to working with the NMTC Coalition and its members to affect that outcome.
Contact
For more information about the New Markets Tax Credit Coalition and current NMTC legislation, please contact Paul Anderson at [email protected] or click here.
