New Markets Tax Credit Extension Act of 2025

Bill Number

H.R. 1103

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-02-06: Referred to the House Committee on Ways and Means.

Last Updated

2025-12-18T09:07:33Z

AI-Generated Summary

Purpose

The New Markets Tax Credit Extension Act of 2025 aims to permanently extend the New Markets Tax Credit (NMTC), a federal tax incentive program designed to encourage private investment in low-income communities by providing tax credits to investors. This extension supports economic development in underserved areas, such as rural and urban distressed neighborhoods, by making the program ongoing rather than temporary.

Key Provisions

• Permanent Extension of NMTC: Amends Section 45D of the Internal Revenue Code (IRC) to extend the NMTC indefinitely, starting from calendar year 2020 and continuing thereafter, removing the previous sunset provision after 2025.
• Inflation Adjustment: Introduces an annual cost-of-living adjustment to the NMTC allocation amount beginning in 2026. This adjustment is based on inflation from the year 2000 (using the consumer price index method under IRC Section 1(f)(3)), with increases rounded to the nearest $1 million.
• Alternative Minimum Tax (AMT) Relief: Modifies IRC Section 38 to allow NMTC credits for qualified equity investments made after December 31, 2024, to be exempt from the AMT limitation. (AMT is a parallel tax system that ensures high-income taxpayers pay a minimum amount of tax.)
• Effective Dates: Most changes apply to taxable years beginning after December 31, 2024. The AMT relief specifically applies to investments made after that date.

Significant Changes to Existing Law

• From Temporary to Permanent: Previously, the NMTC was authorized only through 2025 with fixed annual allocations (e.g., $5 billion per year from 2020–2025). This bill eliminates the expiration, ensuring continuity without needing repeated congressional renewals.
• Addition of Inflation Indexing: No prior inflation adjustment existed for NMTC allocations, so this introduces a mechanism to maintain the program's value against rising costs over time.
• Expanded AMT Exemption: Builds on existing AMT relief by extending it to new investments post-2024, preventing the credit from being reduced or eliminated for certain high-income investors subject to AMT.

Potential Impacts

• On Government Agencies: The U.S. Department of the Treasury and Internal Revenue Service (IRS) will need to administer a permanent program with inflation-adjusted allocations, potentially increasing administrative workload for certifying community development entities (CDEs) and monitoring investments. This could lead to more stable funding for economic initiatives without annual appropriations debates.
• On Citizens: Low-income communities may see increased private investment in businesses, housing, and infrastructure, fostering job creation and economic growth in underserved areas. Investors (often corporations or funds) benefit from ongoing tax credits, which could lower their effective tax rates on qualifying investments.
• On International Relations: Minimal direct impact, as the NMTC focuses on domestic U.S. communities; however, it may indirectly attract foreign investment if multinational entities participate as investors.

Main Stakeholders Affected

• Investors and Taxpayers: Individuals, corporations, and financial institutions that claim the NMTC, gaining long-term certainty and inflation protection for their investments.
• Community Development Entities (CDEs): Nonprofit and for-profit organizations that receive NMTC allocations to channel investments into low-income areas; they benefit from program stability.
• Low-Income Communities: Residents and businesses in designated distressed areas (e.g., census tracts with poverty rates above 20% or median incomes below 80% of the area average) who gain from enhanced economic opportunities.
• Government Entities: Congress (via Ways and Means Committee oversight), Treasury/IRS (implementation), and state/local governments (potential partners in community projects).

Notable Legal, Constitutional, or Political Implications

• Legal Implications: Strengthens the NMTC framework under the IRC by embedding permanence and adjustments, reducing litigation risks from program expirations. Ensures compliance with tax code uniformity by applying changes prospectively (after 2024), avoiding retroactive effects that could raise equal protection concerns.
• Constitutional Implications: No significant challenges anticipated, as the bill involves standard congressional authority over taxation and spending (Article I, Section 8). It promotes general welfare through economic incentives without targeting specific groups in a discriminatory way.
• Political Implications: Bipartisan sponsorship (from 23 representatives across parties) signals broad support for economic development policies. Permanence could shift future debates from extension fights to allocation levels, potentially influencing budget negotiations and anti-poverty initiatives.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Tenney, Claudia [R-NY-24]

Cosponsors (54)

Rep. Kelly, Mike [R-PA-16], Rep. Sewell, Terri A. [D-AL-7], Rep. Davis, Danny K. [D-IL-7], Rep. Moore, Gwen [D-WI-4], Rep. Van Duyne, Beth [R-TX-24], Rep. Sánchez, Linda T. [D-CA-38], Rep. Miller, Carol D. [R-WV-1], Rep. DelBene, Suzan K. [D-WA-1], Rep. Buchanan, Vern [R-FL-16], Rep. LaHood, Darin [R-IL-16], Rep. Gomez, Jimmy [D-CA-34], Rep. Beyer, Donald S. [D-VA-8], Rep. Panetta, Jimmy [D-CA-19], Rep. Yakym, Rudy [R-IN-2], Rep. Miller, Max L. [R-OH-7], Rep. Chu, Judy [D-CA-28], Rep. Feenstra, Randy [R-IA-4], Rep. Carey, Mike [R-OH-15], Rep. Smucker, Lloyd [R-PA-11], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Steube, W. Gregory [R-FL-17], Rep. Moran, Nathaniel [R-TX-1], Rep. Fischbach, Michelle [R-MN-7], Rep. Pingree, Chellie [D-ME-1], Rep. Kustoff, David [R-TN-8], Rep. Diaz-Balart, Mario [R-FL-26], Rep. Bishop, Sanford D. [D-GA-2], Rep. Finstad, Brad [R-MN-1], Rep. Bacon, Don [R-NE-2], Rep. Gooden, Lance [R-TX-5], Rep. Morelle, Joseph D. [D-NY-25], Rep. Davis, Donald G. [D-NC-1], Rep. Mann, Tracey [R-KS-1], Rep. Houlahan, Chrissy [D-PA-6], Rep. Van Orden, Derrick [R-WI-3], Rep. McCollum, Betty [D-MN-4], Rep. Mrvan, Frank J. [D-IN-1], Rep. Goldman, Daniel S. [D-NY-10], Rep. Neguse, Joe [D-CO-2], Rep. Stefanik, Elise M. [R-NY-21], Rep. Pappas, Chris [D-NH-1], Rep. Conaway, Herbert C. [D-NJ-3], Rep. Crow, Jason [D-CO-6], Rep. Rogers, Harold [R-KY-5], Rep. Larson, John B. [D-CT-1], Rep. Omar, Ilhan [D-MN-5], Rep. Vindman, Eugene Simon [D-VA-7], Rep. Turner, Michael R. [R-OH-10], Rep. Bergman, Jack [R-MI-1], Rep. Sykes, Emilia Strong [D-OH-13] and 4 more

Recent Actions

• 2025-02-06: Referred to the House Committee on Ways and Means.
• 2025-02-06: Introduced in House
• 2025-02-06: Introduced in House

Bill Versions

• New Markets Tax Credit Extension Act of 2025 — issued 2025-02-06 — PDF (4 pages)

Related Bills

• S. 479 (119th Congress)