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November 9, 2017
2017-1895

Repeal of New Markets Tax Credit included in House tax reform bill

On November 2, 2017, the House Ways and Means Committee released the text of its tax reform bill. There were many key business provisions in the bill, including the elimination of various deductions and credits, one of which was the New Markets Tax Credit (NMTC). Specifically, the bill would revise the calendar-year tax credit limitation expiration from 2019 to 2017, effective December 31, 2017. In addition, any carryover of unused tax credit limitation would expire in calendar-year 2022. Together, these changes would see the NMTC program expire after the 2017 allocation round. All outstanding allocation awards would not be effected by the House Bill, but all previously awarded NMTC allocation, including the 2017 awards that have yet to be announced, would not expire until 2022. The pertinent section as currently drafted is included in this Alert.

Current timeline of the NMTC program

Currently, the Treasury's Community Development Financial Institution Fund (CDFI Fund) is reviewing applications for $3.5B in allocation authority for the 2017 award round. Even with the release of the proposed House tax reform bill, the CDFI Fund will proceed with awarding the 2017 allocation as planned. We currently expect the 2017 award announcement to be made in Q1 of 2018. If the House bill is passed, however, this award would be the final award of the NMTC Program.

Next steps

While the inclusion of the repeal of NMTC in the House bill was unexpected, the release of this text is a very preliminary step toward enacting tax reform. On the immediate horizon is the legislative markup process in the House Ways and Means Committee where further discussions and negotiations will occur. The Senate is also working on their draft of a tax reform bill which is expected to be released this week. The two versions will inevitably contain differences which must be reconciled before a tax reform bill could be enacted. The NMTC team will update the relevant tax reform provisions that relate specifically to the NMTC program as they become available.

Proposed NMTC language as drafted in the House Bill:

SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT.

(a) IN GENERAL. — Section 45D(f) is amended —

(1) by striking "2019" in paragraph (1)(G) and inserting "2017", and

(2) by striking "2024" in paragraph (3) and inserting "2022".

(b) EFFECTIVE DATE. — The amendments made by 19 this section shall apply to calendar years beginning after December 31, 2017.

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Contact Information
For additional information concerning this Alert, please contact:
 
New Markets Tax Credit Group
• Mike Bernier(617) 585-0322;
• Megan Millin(612) 371-8337;
• Mike Roney(216) 583-3462;
 

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