A recent report* identified several data challenges that make it difficult to assess the effectiveness of the federal New Markets Tax Credit program.  Many of these challenges are familiar to those trying to evaluate state incentive programs. These include: 

  • Incomplete and inaccurate data provided to the administering CDFI Fund
  • Unclear instructions provided by the CDFI Fund to guide data provision and reporting
  • Complex financing structures that hinder program assessment
  • Lack of clarity on the appropriate time period for which data should be reported
  • Optional rather than required data inputs for several factors, including those used to determine distressed projects
  • Lack of closeout reports at the end of the compliance period to determine project success or failure

This US Government Accountability Office (GAO) report, “New Markets Tax Credit. Better Controls and Data Are Needed to Ensure Effectiveness,” also found:

  • The financial structures of the NMTC investments have become more complex and less transparent while Treasury guidance covers only the simpler structures.
  • A majority of NMTC projects used other public funds (from federal, state or local sources) in 2010-2012.
  • Fees and retentions reduce the available NMTC equity but lack of transparency makes the size of the reduction uncertain.
  • Data on NMTC equity remaining in the low-income community businesses are not sufficiently complete or accurate.

The GAO report included the following recommendations:

  • Issue guidance on how funding or assistance from other government programs can be combined with the NMTC
  • Ensure that controls are in place to limit the risk of unnecessary duplications at the project level in funding or assistance from government programs
  • Ensure that the CDFI Fund clarifies the instructions for reporting the amount of equity which may be acquired by the low-income community business at the end of the 7-year compliance period
  • Ensure that the CDFI Fund clarifies the instructions it provides to CDEs about reporting loan performance and making the reporting of that data mandatory

Good recommendations, but easier said than done.



* “New Markets Tax Credit. Better Controls and Data Are Needed to Ensure Effectiveness.” GAO-14-500, July 2014.