In an effort to incentivize investment in West Virginia’s struggling communities, a bipartisan group of state senators introduced Senate Bill 341, which would establish a tax credit program aimed at spurring economic growth and business activities in West Virginia’s low-income neighborhoods.
The bill unanimously passed a vote by the full Senate on Tuesday, March 21, after passing through the Senate Economic Development and Finance Committees. It was then reported to the House, where it has been double referenced to House Small Business, Entrepreneurship, and Economic Development, and then House Finance.
To have a chance at becoming law, SB 341 will have to speed through its committee references and reach the floor of the House by Thursday, April 6.
Modeled after the federal New Markets Tax Credit Program, this proposal would incentivize private investment in West Virginia’s low-income communities by providing private investors with a tax credit for equity investments made in businesses or economic development projects in distressed communities.
The bill specifically targets businesses working in coordination with Community Development Financial Institutions (CDFIs), a critical player in the community development field, and could be used to support investment in health care facilities, new grocery stores in West Virginia’s food deserts, mixed-use redevelopment projects, and direct investments in businesses.
In 2000, the federal New Markets Tax Credit program was implemented to drive investment in low-income communities and is currently funded through 2019.
Thus far, Congress has allocated $61 billion in New Market Tax Credit investments throughout the country. On an annual basis, the U.S. Treasury’s Community Development Financial Institutions Fund allocates the tax credit funding to approved Community Development Entities (CDEs). A CDE then takes their allocated credit and matches an investment in a business or economic development project located in a struggling community.
Investors in the CDE then receive a tax credit valued at 39 percent of the cost of the qualified investment that can be claimed by the investor over the course of seven years.
At the close of FY 2016, the US Treasury concluded that the New Market Tax Credit has leveraged $8 of private investment for every $1 of federal funding, financed more than 5,400 businesses, created or retained 275,000 jobs, and supported the construction of 178 million square feet of manufacturing, office and retail space.
In West Virginia, 17 projects have been completed using New Market Tax Credits, totaling $97 million. Kentucky has attracted $730 million in new market investment, $1.4 billion has been invested in Pennsylvania, and Ohio (photo, above) has attracted more $1.9 billion in new market credit investment.
To address this disparity, Senator Shelley Moore Capito introduced the Creating Opportunities for Rural Economies (CORE) Act in the U.S. Senate in 2016, which would set aside 5 percent of the funding allocated to the New Market Tax Credits program annually for struggling coal communities. West Virginia Congressman Evan Jenkins also introduced the CORE Act in the US House. However, the federal legislation has yet to move.