H.R.1103 - New Markets Tax Credit Extension Act of 2025 (119th Congress)
Summary
H.R.1103, the New Markets Tax Credit Extension Act of 2025, aims to permanently extend the New Markets Tax Credit (NMTC) by amending the Internal Revenue Code of 1986. The bill also includes provisions for inflation adjustments to the credit amount and alternative minimum tax relief for qualified equity investments made after December 31, 2024. This is intended to incentivize investment in low-income communities.
The bill modifies Section 45D of the Internal Revenue Code to remove the sunset provision for the NMTC, making it available indefinitely. It also introduces an inflation adjustment mechanism to maintain the real value of the credit over time.
Furthermore, the bill provides relief from the Alternative Minimum Tax (AMT) for credits determined under Section 45D, specifically for investments made after December 31, 2024.
Expected Effects
The primary effect of this bill would be the continuation of the New Markets Tax Credit program without the need for periodic extensions. This provides certainty for investors and community development entities (CDEs) operating in low-income areas.
The inflation adjustment ensures that the credit's value is not eroded by inflation, maintaining its effectiveness in attracting investment. The AMT relief could further incentivize investment by reducing the tax burden on corporations and individuals.
Potential Benefits
- Increased Investment in Low-Income Communities: The permanent extension provides certainty, encouraging long-term investment in underserved areas.
- Job Creation: By stimulating investment, the bill could lead to the creation of new jobs in economically distressed communities.
- Economic Development: The NMTC supports projects that revitalize communities, such as business expansion, infrastructure improvements, and community facilities.
- Inflation Protection: The inflation adjustment ensures the credit remains effective over time, even as prices rise.
- Reduced Tax Burden: The AMT relief could lower the tax burden on investors, making NMTC investments more attractive.
Potential Disadvantages
- Potential for Inefficient Allocation of Resources: Without rigorous oversight, the NMTC could be used to fund projects that do not provide significant community benefits.
- Complexity: The NMTC is a complex tax credit, which can be difficult for small businesses and community organizations to navigate.
- Cost to Taxpayers: Permanently extending the NMTC will have a cost to the federal government, potentially increasing the national debt.
- Risk of Abuse: The tax credit could be subject to abuse if not properly monitored and regulated.
- Limited Scope: The NMTC primarily benefits specific low-income communities, potentially neglecting other areas in need of investment.
Constitutional Alignment
The bill appears to align with the spirit of the Constitution's preamble, which includes promoting the general welfare. Congress has the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States, as stated in Article I, Section 8, Clause 1.
The New Markets Tax Credit falls under the purview of Congress's power to tax and spend for the general welfare. The specific mechanisms for inflation adjustment and AMT relief are within Congress's authority to define the terms and conditions of tax credits.
However, the Constitution does not explicitly address tax credits or economic development programs. The key consideration is whether the program operates in a non-discriminatory manner and serves a legitimate public purpose.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).