THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release January 13, 2000
PRESIDENT CLINTON'S FY2001 BUDGET AND NEW OPPORTUNITY AGENDA EXPANDS THE ADMINISTRATION'S COMMITMENT TO NEW MARKETS AND BRINGING PEOPLE INTO THE ECONOMIC MAINSTREAM
Today, in New York, President Clinton will announce further elements of his new opportunity agenda. Today in New York, President Clinton will announce a series of proposals to help more Americans share in our country's economic prosperity including:
- A major expansion of his New Markets and Empowerment Zone Tax Credits.
- A new initiative known as First Accounts, to bring the "unbanked" into the financial mainstream.
- An invitation to corporate leaders to participate in a roundtable at the White House to discuss how the business community can build upon the success of the Community Reinvestment Act (CRA).
Building on last year's momentum, President Clinton will expand upon his commitment to prompt private investment in America's urban and rural areas. On two trips last year in July and November, the President led a delegation of CEOs, Members of Congress and Cabinet Secretaries throughout the country to highlight the potential for new private sector investments in economically distressed communities. The President has also announced that he will lead a trip this spring, inspiring investments to close the digital divide. Based on his agreement with Speaker Hastert announced in Chicago last year, the President is committed to developing and passing a bi-partisan New Markets legislative initiative. President Clinton's bold new agenda:
More than Doubles the proposed New Markets Tax Credit to spur $15 billion in new private investment for New Markets. Businesses in our nation's inner cities and isolated rural communities often lack access to equity capital to grow and succeed. For the FY2001 budget, the President proposes a major expansion of his effort to help attract new capital to these businesses through tax credits for equity investments. Last year, Representative Rangel introduced the President's original New Markets tax credit proposal in the House (H.R. 2713), and Senators Rockefeller and Robb introduced similar legislation in the Senate (S. 1526). Here is how the President's newly expanded proposal would work:
- $15 Billion of Investment in Community Development Entities. If an entity makes a new equity investment in a selected community development project, then it will be eligible for a tax credit worth 25 percent of the cost of the investment. This tax credit will cover $15 billion in investment in community development - with a budget cost of $4.5 billion over 10 years. The President's FY 2000 proposal would have cost $1.8 billion over ten years.
- Every $1 Invested by the Government Leverages About $3 of Private Investment in New Markets. Each dollar invested by the Government is matched by about three dollars of investment by the private sector.
- Tax Credits Are Allocated in a Competitive Process to Organizations Making the Most Productive Investments in New Markets. A competitive process will be used to allocate the credits for $15 billion of new investment to different community development entities including community development banks, venture funds and corporations and new investment company programs proposed by the President (America's Private Investment Companies and New Markets Venture Capital Firms).
- Community Development Organizations Will Invest in New Markets. These organizations will be required to lend or invest the money they raise through the New Markets Tax Credit in businesses in new markets. For the purpose of the proposal, "New Markets" are defined as census tracts with poverty rates of at least 20 percent or median family income which does not exceed 80 percent of the income in the area.
Expands the Empowerment Zones Tax INCENTIVES to promote economic growth in underserved areas. In his FY2001 budget, the President will propose a series of measures to extend and improve economic growth in the 31 existing Empowerment Zones and create a Third Round of 10 new Empowerment Zones. The total budget cost of the President's proposals is about $4 billion over 10 years. These measures include:
- Create a Third Round of 10 New Empowerment Zones. This will add to the 31 Round I and Round II urban and rural Empowerment Zones created by the President's 1993 budget and the 1997 budget agreement, and administered by HUD and USDA. All zone designations would remain in effect through 2009.
- Extend Wage Credits for Existing and New Empowerment Zones. To encourage employment and growth, employers in Round I Empowerment Zones are currently eligible to take a 20 percent credit on up to $15,000 of qualified wages per employee. This credit is currently scheduled to expire after 2004. In his FY2001 budget, the President will propose to:
- Extend this credit through 2009 for the 11 Round I Empowerment Zones.
- Allow the Round II and proposed Round III Empowerment Zones to take this wage credit through 2009.
- Enhance the Incentive for Small Businesses to Make Productive Investments. The President's proposal will lower the cost of investment for small businesses in Empowerment Zones by allowing them to fully deduct the cost of an additional $35,000 in investment above and beyond the amount allowed for any small business in any area (currently $20,000).
- Increase Access to Capital Through Expanded Tax-Exempt Financing. The proposal will help to stimulate needed investment by allowing local governments to issue tax-exempt bonds on behalf of local businesses located in any Empowerment Zone. The capital will be used to invest in a wide-range of growth-enhancing activities in the Empowerment Zone.
- Encourage Environmental Remediation of Brownfields. Current law lowers the cost of cleaning up and developing brownfields through targeted tax incentives. The President's proposal would permanently extend this incentive which would apply to all Empowerment Zones and other targeted areas.
PROVIDES ACCESS TO FINANCIAL SERVICES TO LOW AND MODERATE INCOME AMERICANS THROUGH FIRST ACCOUNTS. Too many Americans are without banking services--it is estimated that 11 million low-income American families do not have bank accounts. The Federal Reserved estimated that 25 percent of all low-to-moderate income families in 1995 (those earning less than $24,000) had no bank account - about 11 million families. Other studies put the number higher and lower. Today, President Clinton will announce a new initiative called First Accounts to bring the "unbanked" into the financial mainstream. The Treasury Department will include $30 million to pilot strategies to help low- and moderate-income Americans benefit from basic financial services that most people take for granted - like bank accounts and ATM cards. The initiative involves three components:
- First Accounts: The Treasury Department will work with financial institutions to encourage the creation of low cost banking accounts.
- ATMs: The Treasury Department will work with financial institutions to expand access to automatic teller machines in safe, secure, and convenient locations, such as U.S. Post Offices, in low-income neighborhoods that often lack even these basic services. This program will build on a small pilot recently begun with a financial institution that has placed ATMs in post offices in neighborhoods in Baltimore, MD and Tallahassee, FL.
- Financial Education: The Treasury Department will work with community-based partners and other organizations to educate lower income Americans about the benefits of having a bank account, managing household finances, and building assets.
CONTINUES EFFORTS TO ATTRACT CAPITAL TO UNDERSERVED AREAS AND PROMOTE PUBLIC-PRIVATE PARTNERSHIPS. In addition to the tax incentive programs, key components of the President's New Markets agenda also include:
- America's Private Investment Companies (APICs). Just as America's support for the Overseas Private Investment Corporation helps promote growth in emerging markets abroad, APICs will encourage private investment in this country's untapped markets. Last year, Senator Sarbanes and Congressman LaFalce introduced legislation in the Senate (S. 1565) and the House (H.R. 2764) that would provide guaranteed debt to private investment companies, licensed by HUD, to help leverage private equity capital and lower the cost of capital for communities. APICs will make equity investments in larger businesses that are expanding or relocating in inner cities and rural areas. Last year, Congress appropriated $20 million for APICs, which, if authorized, would leverage nearly $800 million in private investment in New Markets areas. For the FY 2001 budget, the President is proposing $37 million to leverage nearly $1.5 billion in public and private investment.
- New Markets Venture Capital (NMVCs) Firms. NMVC firms will provide incentives to increase the availability of venture capital in low and moderate-income communities for small businesses. Expert guidance will be made available to small business entrepreneurs in inner city and rural areas through the program. Ten to twenty NMVC firms are planned. SBA will match the equity and technical assistance of private investors. Representative Nydia Velasquez will announce today that she will introduce NMVC legislation upon the return of Congress later this month. Last year, Senator John Kerry introduced this legislation (S. 1594) in the Senate.
Roundtable on the Community Reinvestment Act. President Clinton issued an invitation to corporate leaders to participate in a roundtable at the White House to discuss how the business community can build upon the success of the Community Reinvestment Act (CRA). The President stood firm for a strong CRA. President Clinton fought hard to ensure that when bank powers were expanded, banks had to comply with CRA to engage in these new activities. Last year, under CRA, banks and thrifts made $88 billion in loans for home ownership and small businesses in low and moderate income communities. Over 95% of the financial commitments made under CRA have been made in the last six years - over $1 trillion in long-term commitments to lend in communities.