|
By Nancy Carpenter
A federal plan aimed at spurring economic development in low-income
neighborhoods is starting to catch on with developers, housing agencies,
and lenders looking for investment opportunities in underserved
markets. The New Markets Tax Credit (NMTC) program offers investors
a substantial credit against their federal income tax for investing
in business enterprises as designated by the program. The tax credit
totals 39 percent of the investment and is taken over a seven-year
period.
The Federal Home Loan Bank of Boston (the Bank) has monitored the
effectiveness of this federal program since it became part of the
Community Renewal Tax Relief Act of 2000. Four years later, the
Bank made a $600,000 advance to member Compass Bank to finance a
project that qualifies for tax breaks under the NMTC program.
Last year, the Bank stepped up efforts to educate members and potential
participants by sponsoring a
day-long seminar on the program in Portsmouth, New Hampshire. The
Bank's Housing and Community Investment Department hosted the session,
which drew about 100 attendees from member institutions, developers,
and economic-development agencies around New England.
Seminar presenters highlighted eligibility requirements and allowable
investments under the NMTC program. Participants shared insights
and advice based on their experiences navigating the detailed process
of qualifying for the tax credit, which is designed to bring private
investment capital to commercial enterprises in low-income communities.
Introducing NMTC and covering its key points was Arthur Garcia,
director of the Community Development Financial Institution Fund,
which administers the program for the U.S. Treasury. Mr. Garcia
provided real-world glimpses of how the tax credits have encouraged
development of affordable housing and small businesses in the southwestern
United States.
Offering a user's perspective on the program was Andrea Daskalakis,
chief investment officer of the Massachusetts Housing Investment
Corporation, which finances development of low-income and minority
neighborhoods throughout the state. Ms. Daskalakis oversaw the recent
renovation of vacant historic properties into mixed-income apartments
and commercial space in New Bedford. In this instance, the agency
used the NMTC subsidy to support the commercial component of the
Union Street Lofts initiative (see story on page 5) and fill gaps
in the project's financing.
NMTCs are taken over a seven-year period and provide $39 in tax
credits
to every $100 put in by the investor. An ever-dwindling availability
of funds for developing low-income communities has boosted the program's
visibility. The Treasury's second round of awards included $336
million in tax credits for New England enterprises. The next round
of awards is anticipated for the spring.
|
