The Government Accountability Office (GAO) publicly released a report yesterday recommending changes to the administration of the New Markets Tax Credit (NMTC) under Section 45D. In 2000, Congress established the NMTC program, which provides investors with tax credits equal to 39 percent of eligible investments over seven years for investing in communities that are economically distressed or consist of low-income populations. The GAO found that an estimated 62 percent of NMTC projects also received other federal, state, or local government assistance. The GAO expressed concerns that this could lead to unnecessary duplication of subsidies and above-market rates of return. For example, a study done for Treasury found an investor apparently earning a 24 percent rate of return. The GAO recommended that Treasury issue further guidance on how other government programs can be combined with NMTCs and ensure that adequate controls are in place to limit the risks of unnecessary duplication and above-market rates of return. The report was prepared at the request of Senator Tom Coburn (R-OK), the ranking member of the Committee on Homeland Security and Governmental Affairs.
The report can be accessed here.