Evolution of the New Market Tax Credit

Abstract The New Market Tax Credit (NMTC) is a place-based policy in the United States which annually incentivizes billions in direct investments towards selected impoverished communities. I document how project characteristics and NMTC claimants have changed over the lifetime of the policy. The share of real estate projects has declined by over 30 percentage points and the share of projects in metropolitan areas has declined by over 20 percentage points. Although available to both corporate and individuals tax filers, the NMTC is primarily claimed by corporate filers. NMTC claimants have higher levels of income and assets than the average taxpayer. By 2018, the NMTC is over 45% of all general business credits for NMTC claimants. I also quantify how economic conditions are correlated with the probability and amount of NMTC investment a tract receives. Cross-sectional comparisons within states indicate tracts with greater poverty rates are correlated with a higher likelihood of receiving NMTC investment and receiving more investment. However, comparisons within tracts across time are inconclusive.