New Markets Tax Credit: Minority Entities Are Less Successful in Obtaining Awards Than Non-Minority Entitities

The Community Development Financial Institutions (CDFI) Fund in the Department of the Treasury has awarded $19.5 billion of the $26 billion in New Markets Tax Credits (NMTC) it is authorized to award through 2009 to encourage investment in low-income communities. The NMTC allows investors to claim a tax credit in exchange for investing in Community Development Entities (CDE) that reinvest the funds in qualified communities. Recent congressional interest has focused on participation by minority CDEs. As requested, this report (1) identifies the number of minority and non-minority CDEs that have applied to the CDFI Fund and received NMTC awards, (2) explains the process by which the CDFI Fund makes NMTC awards and summarizes application scores, (3) describes challenges, if any, minority and non-minority CDEs face in applying for and receiving NMTC awards and (4) identifies efforts the CDFI Fund and others are taking to assist minority CDEs in applying for NMTC awards. GAO analyzed CDFI Fund application data and interviewed minority and non-minority CDE officials, the CDFI Fund, and industry groups.