June 28, 2022
Our Chief Impact Officer Sandra M. Moore recently spoke on the Washington Report panel at the Novogradac 2022 Spring New Markets Tax Credit Conference, an annual event covering important topics and updates concerning the new markets tax credit that hold value for investors, developers, and others in the field.
Sandra’s panel discussed the legislative outlook for New Markets Tax Credit (NMTC) provisions—more specifically legislation concerning making NMTC a permanent part of the tax code—in addition to how regulatory matters and legislature changes resulting from midterm elections could affect the community development sector. She was joined in conversation with Michael Novogradac, Managing Partner at Novogradac, Bob Rapoza, President and Principal of Rapoza Associates, U.S Representative Richard Neal (D-MA), Chairman of the Ways and Means Committee, and Merrill Hoopengardner, President of the National Trust Community Investment Corporation.
Here are three key takeaways from the panel:
(1) There is investor equity uncertainty
With the current volatility in the tax credit market and rising inflation, tax credit pricing has become significantly dicier. One would usually assume an inverse relationship between rising interest rates and tax credit pricing, but Sandra emphasized that nothing in the markets is working as it should. This uncertainty in the markets brings challenges to Community Development Entities CDEs like Advantage Capital, it’s ultimately nothing we’re unprepared to handle with our 30 years of experience in tax credits.
(2) Advocacy messaging must reflect the current economic conditions
Low labor participation rates in the economy have led some to question whether the jobs created by NMTC programs are necessary. In response, NMTC advocates must retool their messaging to emphasize the high-quality, well-paying jobs funded by tax credits are the jobs the public really wants. At the end of the day, businesses funded by NMTC programs can provide jobs that encourage people to rejoin the labor market.
(3) Changes are happening to the Community Reinvestment Act
A new rule is in the works for the Community Reinvestment Act (2020) that will replace the vastly unpopular June 2020 rules. As opposed to the June 2020 unilateral rule, the new rule will be an inter-agency rule that will apply to all banks insured by the FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency. Not only will it encourage greater inter-agency collaboration, it will also help ensure the OCC continues to help banks pursue activities that help meet credit needs in low and moderate-income communities. Going forward, Sandra is optimistic that the new rule will help the three government agencies provide us with clearer guidance and recommendations.
