GAO Reports  
GAO-04-326 January 04, 2004

New Markets Tax Credit Program:
Progress Made in Implementation, but
Further Actions Needed to Monitor Compliance

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.

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