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Yonts on New Market Tax Credits

October 16, 2009
Yonts House15

Rep. Brent Yonts

State Rep. Brent Yonts, a Greenville Democrat, writes about the New Market Tax Credits program in his column this week.

Yonts is proposing that Kentucky create a state-level program to work with the federal New Market Tax Credit Program and offer income tax credits to those that invest in developing low-income, economically depressed areas.

The program is one that has been mentioned by Greater Owensboro Economic Development Corp. head Nick Brake as a possibility for Owensboro as it works on downtown revitalization.

Here’s what Yonts has to say about it –

Innovation in Kentucky takes more than an good idea. It takes state legislative support to spawn the success we have seen from programs like the high-tech small businesses program I touched on last week.

Now lawmakers are considering adding a state component to a federal tax credit program that has been breathing new life into low-income communities for nearly a decade. By creating a limited state-level tax credit for the federal New Markets Tax Credit Program, proponents of the state credit say the Commonwealth can become more economically competitive, attracting millions of investments dollars that would otherwise go to other states. What’s more, the state tax credit would allow Kentucky to leverage the federal program to $23 billion as part of federal financial bailout bill passed by Congress early this year.

The federal New Markets Tax Credit program, which was extended last year, spurs private sector investment in low-income areas by giving a federal income tax credit to investors in so-called Community Development Entities (CDEs) that in turn invest in low-income communities. CDEs are businesses that serve or invest in low-income communities or persons and are formally accountable to low-income persons, according to information from the Appalachian Regional Commission.

Kentucky lawmakers were told at an Interim Joint Committee on Agriculture meeting in Allen County in early October that a Kentucky New Markets Tax Credit would give the state access to capital for small businesses in Kentucky’s low-income communities by creating $300 million in new investment in the state within 18 months after the credit takes effect. The committee was also told that a state credit would bring $600 million in small business investment to Kentucky over the seven-year life of the credit.

So what do we as lawmakers need to do to produce these kind of results? We would have to provide up to $25 million in state income tax credits a year to investors. The credits would not become effective until qualified investments were made, with the first credits taking effect in 2012.

New Markets Tax Credits have a good track record in Kentucky. The federal credit have helped restore historic buildings in downtown Louisville, build a 42,000 square foot science center at Lindsey Wilson College in Columbia in southcentral Kentucky, and is helping turn the old American Legion Hall in a low-income area of Lexington into office condominiums.

I am sure that state lawmakers will be taking a good look at the proposed Kentucky New Markets Tax Credit given today’s hard business climate. Any opportunity to improve life in the economic pressure cookers that have become our low-income communities shouldn’t be ignored.

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One Comment
  1. Ed Marksberry permalink
    October 19, 2009 8:53 am

    Representative Yonts proposal is right for Kentucky and the timing is crucial. There are only a few other states that are using the New Market Tax Credit Program in conjunction with a state program. I feel other states will too jump on board and pass legislation that will create more competition for out of state investors. I say “strike while the iron is hot.”

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