The New Markets Tax Credit (NMTC) Program, part of the 2000 Community Renewal Tax Relief Act, was designed to encourage investment in Community Development Entities (CDE) in low-income areas. The thinking was that companies not normally interested in investing in depressed communities would do so with the tax credit, which covers 39% of the investments made. Not only do NMTC projects bring capital into poor neighborhoods, but they also create jobs for local residents.
Annie Donovan, the head fo the New Market Tax Credits Coaltion has explained, “The NMTC has shown it can convert a modest amount of money into meaningful economic growth and job creation.” (NMTC expired in December of 2011 and is waiting for renewal and extension from Congress.)
Puerto Rico has a lower per capita income and higher unemployment than any state in the Union, and would appear to be an obvious choice for the NMTC.
That is not how the program has played out. According to the Government Accountability Office, Puerto Rico benefited very little from the NMTC opportunity. The island received 1,634,384, or about 40 cents per resident, one of the smallest amounts given any state or territory. Only two projects in Puerto Rico were funded. Vermont had only one project funded, but its total funding was three times that of Puerto Rico.
One of the CDEs funded in Puerto Rico is the PR Redevelopment Fund, LLC,which is intended to finance infrastructure and development which will allow the Municipality of Vega Baja to create more opportunities for its residents. Right now, the people of Vega Baja still rely largely on agriculture, but this is no longer practical. The NMTC program is intended to encourage other forms of income, including tourism, in the Vega Baja area.
Another is Puerto Rico Housing Finance Authority’s (PRHFA) subsidiary Puerto Rico Community Development Fund, LLC. In Puerto Rico, it is not unusual for families to spend 50% of their income on housing, leaving little for food and other basic needs. The PRHFA project is intended to provide affordable housing for the people of the island. The Puerto Rico Community Development Fund provides financing for construction, and home loans for low income individuals.
Are these the only projects that could benefit from NMTC? It seems unlikely. Puerto Rico needs renewable energy, improved infrastructure to draw additional business to the island, and jobs for its residents. However, Puerto Rico has no voting representation in the United States. Unlike the states which have Congresspeople and Senators who advocate for them, Puerto Rico has only a non-voting Representative. The structure of many laws – including NMTC, which was enacted through the broader federal tax code that excludes Puerto Rico – is drafted only to include “States.”
Without advocacy, Puerto Rico has trouble accessing critical programs explicitly written for “States” with little or no thought given to territories. As a State, Puerto Rico would be better able to take advantage of opportunities designed to encourage nationwide economic advancement, job growth and urban renewal. As an independent nation or sovereign free associated state, Puerto Rico would not be eligible at all. Under the current territorial arrangement, Puerto Rico receives the hope of support without the full reality.