President Clinton's New Markets Initiative: Revitalizing America's Underserved Communities
December 14, 2000
Today, President Clinton is pleased to announce the passage of the historic new bipartisan New Markets and Community Renewal initiative. This announcement is the outcome of the commitment President Clinton and Speaker Hastert made in Chicago last Nov. to develop a bipartisan legislative initiative on New Markets and revitalizing impoverished communities this year. This initiative will help encourage private sector equity investment in underserved communities throughout the country to ensure that all Americans share in our nation's economic prosperity. The President's New Markets Initiative was originally proposed in President Clinton and Vice-President Gore's FY 2000 budget. President Clinton has highlighted the potential of the nation's New Markets in three separate trips across America to underserved inner city and rural communities like Newark, NJ, Hartford, CT, the Mississippi Delta, Appalachia, and rural Arkansas, and the Pine Ridge Indian Reservation in S. Dakota.
THE KEY ELEMENTS OF THE LEGISLATION ARE:
NEW MARKETS INITIATIVES:
- The New Markets Tax Credit. The credit will spur $15 billion in equity investment for business growth in low- and moderate-income rural and urban communities throughout the United States and Puerto Rico. The credit, worth over 30 percent of the amount invested (in present value terms), will be available to taxpayers who invest in a wide range of privately managed community development investment funds, such as community development banks and other CDFIs, venture funds, and new investment companies, that finance businesses in low- and moderate-income communities.
- New Markets Venture Capital (NMVC) Firms. NMVC firms will provide incentives to increase the availability of venture capital in low and moderate-income communities for small businesses. Expert guidance will also be made available to small business entrepreneurs in inner city and rural areas. Ten to twenty NMVC firms are planned. The agreement authorizes the SBA to guarantee up to $150 million in loans that will match $100 million in private equity for a total of $250 million and provides $30 million in technical assistance for small businesses.
- BusinessLINC (Learning, Investment, Networking and Collaboration). The bill provides $7 million in funding for BusinessLINC -- an innovative public-private partnership launched by Vice Pres. Gore -- and designed to encourage large businesses to work with and mentor small business owners and entrepreneurs in economically-distressed communities.
-* Strengthened & Expanded EZs.* President Clinton and Vice President Gore proposed and signed Empowerment Zone legislation in 1993 establishing 9 EZs across the country – today there are 31 across America. This agreement:
- A third round of 9 new EZs, bringing the total number to 40, and extends all EZs to 2009.
- An additional $110 million, for a total of $200 million in discretionary investment this year for existing EZs.
- Expansion of 20% EZ wage credit (first $15,000 in annual wages for each worker), increased small business expensing (up to $35,000 more than in current law for equipment), and enhanced tax-exempt bonds to all EZs.
- Tax-free rollovers for EZ investments, and 60% capital gains exclusion for investment in small EZ businesses.
- The creation of 40 Renewal Communities designated by the U.S. Dept. of Housing and Urban Development with targeted, pro-growth tax benefits. Key incentives aimed at spurring investment in Renewal Communities include:
- Zero capital gains rate on the sales of certain assets held for more than 5 years.
- Increased small business expensing (up to $35,000 more than in current law for equipment).
- 15% employment wage credit (first $10,000 in annual income for each worker).
- Commercial revitalization deductions for taxpayers who revitalize buildings in a Renewal Community.
In addition, the New Market/Renewal Communities legislation includes these 2 provisions:
- EXPANSION OF THE LOW INCOME HOUSING TAX CREDIT: To expand and improve the supply of available low-income housing, This bill increases the Low-Income Housing Tax Credit by more than 40% over two years and then indexes the credit for inflation thereafter. The increase will help to create an additional 180,000 units of affordable housing for working families over the next five years. The credit will increase to $1.50 per capita for each state in 2001 and $1.75 per capita in 2002.
- INCREASE IN THE PRIVATE ACTIVITY BOND CAP: The legislation increases the state private activity bond cap from $50 per resident to $75 per resident, phased in from 2001 to 2002. Private activity bonds allow states and municipalities to encourage economic growth in communities through the issuing of lower cost tax exempt bonds.