Scope and Methodology

To describe the status of the NMTC program, we interviewed various CDFI  Fund and IRS officials tasked with program design and implementation. The identified issues that we could analyze were  as follows:  geographic distribution of the community development projects  proposed by CDE allocatees, including the scope of the area to be  served ranging from local to national, the type of community served  such as urban or rural, and the specific states to be served;  experience in serving low-income communities; and  type of service activity proposed for the community development  project. To determine whether the CDFI Fund and IRS have systems in place or  planned to ensure compliance with the NMTC program and to evaluate the  success of the NMTC program in achieving its goals, we interviewed  various CDFI Fund and IRS officials on the systems for obtaining the data  to be used for compliance monitoring and evaluation. We requested written comments  on a draft of this report from the CDFI Fund and IRS; their comments are  reprinted in appendixes IV and V.

	Initial NMTC Investments in Community Development Projects Were Unlikely Until Late 2003 due to NMTC Program Start-up Delays

Although Congress authorized billions of dollars in annual NMTC  allocations beginning in 2001 to spur investments in community  development projects, it is unlikely that many investments had been made  as of December 2003, according to CDFI Fund officials. According to CDFI Fund officials, they made  the allocations to CDEs in 2003 instead of 2001 because of the time taken  for various start-up tasks for the new program, such as establishing the  rules for using the allocations. Finally, all allocatees reported  at least some experience in assisting low-income communities. However, a number of details remain to be  settled on how the data will actually be used to monitor compliance. The CDFI Fund and CDEs are expected to have  significant amounts of data that should be useful for the evaluation. Officials from both agencies believe they have time to complete  their plans for monitoring compliance, but they do not have schedules or  documented plans for ensuring that compliance monitoring processes will  be in place when needed. To monitor allocation agreement  compliance, CDFI Fund officials said that they would focus on data in  section 3.2 of the allocation agreement. However, there was no consensus on the specific  data required to evaluate the NMTC program. Conclusions

The NMTC program provides billions of dollars over multiple years as an  incentive to stimulate additional billions of dollars in investments in low- income communities. Distribution of New Markets Tax Credit Eligibility by State

Congressional Staff Interviews

To provide a profile of community development entities (CDE) that  received New Markets Tax Credit (NMTC) allocations, we reviewed the  congressional contact file from a recent GAO report.
Why GAO Did This Study

The Community Renewal Tax Relief Act of 2000 authorized up to $15 billion under the New Markets Tax Credit (NMTC) program to stimulate capital investment in low-income and economically distressed communities. The act mandated that GAO report to Congress on the NMTC program by January 31, 2004, 2007, and 2010. Based on consultation with staff at appropriate congressional committees, this report (1) describes the status of the NMTC program, (2) profiles community development entities (CDE) that were selected to receive NMTC allocations in 2003, and (3) determines whether systems are in place or planned to ensure compliance and evaluate the success of the NMTC program.

What GAO Found

Although Congress authorized the NMTC program to provide credit against federal taxes for billions of dollars starting in 2001 to spur investments in community development projects, CDFI Fund officials said that it is unlikely that many projects had started by the end of 2003 and that they will not know the status of projects for all CDEs until early 2005. Progress was made in developing data systems, selection processes, and program rules, but allocations were delayed because of the various start-up tasks associated with a new program, especially in establishing the rules on using the allocated credits. CDEs that received NMTC allocations (allocatees) proposed projects to serve urban, rural, and mixed areas, as well as local, state, multiple-local, multistate, and national areas. The distribution of state and local allocations was not concentrated in any one state or in a few states. All allocatees reported at least some prior experience in low-income communities, particularly in providing capital to low-income communities. The CDFI Fund and IRS have identified data with which to monitor compliance with allocation agreements and tax laws, and are developing systems to collect the data. However, many details remain to be settled on how the data will actually be used to monitor compliance. Agency officials believe they have time to devise their compliance monitoring processes. However, they do not have schedules or documented plans for ensuring that compliance monitoring processes will be in place when needed, and they have other tasks to complete. In terms of evaluating the NMTC program, the CDFI Fund intends to contract for an evaluation, and officials believe they are collecting significant amounts of data that will be useful for the evaluation and that CDEs will maintain additional relevant data.