THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release May 23, 2000
PRESIDENT CLINTON & SPEAKER HASTERT ANNOUNCE BIPARTISAN AGREEMENT
ON NEW MARKETS AND RENEWAL COMMUNITIES
May 23, 2000
Today, President Clinton will be joined by Speaker Dennis Hastert in announcing a bipartisan agreement on a New Markets and Community Renewal legislative initiative. This announcement is the outcome of the commitment President Clinton and Speaker Hastert made in Chicago last Nov. to develop a bipartisan legislative initiative on New Markets and revitalizing impoverished communities this year. This initiative will help encourage private sector equity investment in underserved communities throughout the country to ensure that all Americans share in our nation's economic prosperity. The President's New Markets Initiative was originally proposed in President Clinton and Vice-President Gore's FY 2000 budget. President Clinton has highlighted the potential of the nation's New Markets in three separate trips across America to underserved inner city and rural communities like Newark, NJ, Hartford, CT, the Mississippi Delta, Appalachia, and rural Arkansas, and the Pine Ridge Indian Reservation in S. Dakota.
THE KEY ELEMENTS OF THE AGREEMENT ARE:
NEW MARKETS INITIATIVES:
The New Markets Tax Credit. Under this agreement, this credit will spur $15 billion in equity investment and will be available to taxpayers who invest in certain privately-managed investment funds and institutions, which, in turn, use these funds to finance businesses in low- and moderate-income communities. The proposal would provide a 30-percent credit (in present-value terms) for investments in a wide range of investment vehicles. Eligible investment companies include community development banks and other CDFI's, venture funds, and financial institutions such as the new investment company programs.
- America's Private Investment Companies (APICs). Just as America's support for the Overseas Private Investment Corporation helps promote growth in emerging markets abroad, APIC will encourage private investment in this country's untapped markets. Leveraging $2 for every $1 in private investment, the agreement authorizes HUD to guarantee up to $1 billion in low cost loans to match $500 million in private investment for a total of $1.5 billion in investments in underserved communities.
- New Markets Venture Capital (NMVC) 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 also be made available to small business entrepreneurs in inner city and rural areas. Ten to twenty NMVC firms are planned. The agreement authorizes the SBA to guarantee up to $150 million in loans that will match $100 million in private equity for a total of $250 million. SBA will also have the authority to make $30 million in operating assistance grants to match equivalent private commitments.
- Expanded To 40 EZs & Strengthened EZs. President Clinton and Vice President Gore proposed and signed Empowerment Zone legislation in 1993 establishing 9 EZs across the country -- today there are 31 across America. This agreement:
- Designates a third round of 9 new Empowerment Zones (for a total of 40).
- Expands the Empowerment Zone tax incentives to form strategic partnership with all existing EZs so that all can utilize the 20% EZ wage credit, additional business expensing, and other incentives.
- Commits $200 million in discretionary investment this year for existing EZs.
- Establishes zero-rate capital gains rollover for investments within the EZ.
- A 60% capital gains exclusion for investment in small businesses.
- D.C. tax incentives would also be extended to 2009.
- The creation of 40 Renewal Communities (32 urban, 8 rural), designated by the U.S. Dept. of Housing and Urban Development with targeted, pro-growth tax benefits, regulatory relief,. The tax benefits of Renewal Communities would address key hurdles facing small businesses when they are just getting started -- raising capital and maintaining cash flow. Key incentives aimed at spurring investment in Renewal Communities include:
- Zero Capital Gains Rate on the sales of assets held for more than 5 years.
- Increased Expensing for Small Businesses (up to $35,000 more than in current law for equipment).
- 15% Employment Wage Credit (up to $10,000 ) for each worker.
- Commercial Revitalization deductions for taxpayers who rehabilitate or revitalize buildings in a Renewal Community.
In addition, the New Market/Renewal Communities Agreement includes these 2 provisions:
- EXPANSION OF THE LOW INCOME HOUSING TAX CREDIT: To expand and improve the supply of available low-income housing, this agreement increases the Low-Income Housing Tax Credit by more than 40% to build an additional 180,000 units of affordable housing for working families over the next five years.
- ALLOWING FAITH-BASED ORGANIZATIONS TO QUALIFY FOR SUBSTANCE ABUSE FUNDING: The initiative allows faith-based substance abuse prevention and treatment programs to qualify for federal funds on the same basis as other non-profits consistent with the 1996 Welfare Reform Act and the constitutional line between church and state.