GAO Finds Minority CDEs Less Successful in Competing for NMTCs

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Tax Credit Advisor, July 2009: During 2005 through 2008, minority-owned community development entities (CDEs) had less success than non-minority CDEs in winning awards of new markets tax credit (NMTC) allocations, according to a new report (GAO-09-536) by the Government Accountability Office.


The report notes that during this period, only 9% of the minority CDEs that applied for an NMTC allocation award received one, and their awards represented only about 4% of the $8.7 billion applied for by minority CDEs. By comparison, 27% of non-minority CDE applicants obtained awards, receiving 15% of the total $89.7 billion they requested.


The report was requested by U.S. Reps. Barney Frank (D-MA), Charles Rangel (D-NY), Melvin Watt (D-NC), and Richard Neal (D-MA). In a news release issued 6/1/09, Financial Services Committee Chairman Frank, Watt, and Neal expressed disappointment with the findings and indicated they will seek to remedy the inequity. Rangel is chairman of the House Ways and Means Committee.


The Community Development Financial Institutions Fund began collecting data on minority CDEs in 2005. A CDE is minority-owned if more than 50% is owned or controlled by members of a minority ethnic group. 


The report says minority CDEs accounted for 88 of the 934 total NMTC applications submitted during 2005-2008. Six minority CDEs won a total eight allocation awards.


The report doesn’t identify why minority CDEs have had less success in obtaining NMTC allocations, but noted a CDE’s resources and application experience are factors.


On 6/18/09, a joint congressional hearing on the GAO report was held by subcommittees of the House Ways and Means and Financial Services Committees.


(Report: http://www.gao.gov/products/GAO-09-536)