The state has introduced a new tax credit program designed to help nonprofit community developers launch more ambitious projects, partly by making them more attractive to corporate donors.
The new community investment tax credit can only be used by state-certified community development corporations (CDCs). CDCs are location-specific nonprofits that work with residents to improve and redevelop their communities, helping to build new housing, attract businesses or provide needed resources.
Following the housing crash and the foreclosures and distressed properties left in its wake, many CDCs shifted staff and resources to focus on services like foreclosure prevention and counseling or purchasing and rehabbing distressed properties. As the state’s economy has begun to recover and the housing market slowly returns to normal, however, many are once again looking to broaden their horizons and reconnect with the communities they serve, tackling such ambitious projects as helping to provide health services and child care, as well as housing in the projects they develop.
But it can be difficult to fund such projects after years of federal and state belt-tightening, which has hit development funds hard. Many of the funding sources that nonprofits look toward, both government and private, are earmarked for particular – often hyper-specific – projects or missions.
“Most sources of funding available to CDCs are siloed – this grant’s for micro-housing, this is for small business lending, this is for job training in the health sector. And those are all fine [goals] and our organizations compete for [the funds], but there’s a growing recognition that if we really want this work to be successful and durable, then it needs to be driven by an engaged resident base and be cross-sector,” said Joe Kriesberg, president and CEO of the Massachusetts Association of Community Development Corporations (MACDC), an umbrella group. “And there’s no funding for those things. The rental housing funds can’t be used for the community engagement work, or to connect schools and housing. This is a program that can. It’s really about putting the ‘community’ back in community development.”
MACDC has lobbied hard for the new credits program. For 2014, $3 million in credits have been allotted to 36 CDCs across the state, in amounts ranging from $50,000 to $110,000. Next year, there will be $6 million in credits available.
A Win For Donors
The credits are used to incentivize larger donations from corporations and individuals. When donors contribute to a CDC, the CDC provides certification of the gifts; donors can then deduct 50 percent of the gift. So by donating $10,000 to the CDC, the donor can trim their own state tax bill by $5,000, effectively reducing the out-of-pocket cost for the donor. The credits can also be used in combination with federal tax credits for charitable donations, reducing the cost even more.
The new tax credit is designed to help CDCs fill in the gaps, paying for staff time to begin preliminary planning work on new projects, reach out to local leaders, establish partnerships with outside organizations and research potential sites. That can be crucial in getting a new project off the ground, said Jeanne DuBois, executive director of the Dorchester Bay Economic Development Corporation.
“There’s a lot of upfront staff time spent on these projects to get them to a point [where] you’d finally be ready to start borrowing money for pre-development and then, construction,” she explained. “Especially commercial projects, where there’s no cookie-cutter model like you have in housing where you go to the city, and then you go to get your state tax credits and so on.”
Dorchester Bay EDC received $110,000 in credits, which the group is using to help launch a new digital fabrication lab for artists and artisans called 259 Q/the DREAM Factory, which will provide educational resources as well as have facilities for 3-D printing, industrial fabrication and computer-aided design.
Other projects aiming to use the credits to help launch or expand services include the creation of an eco-innovation district in Boston’s Codman Square, the introduction of public health services to residents in Madison Park Development Corporation’s Roxbury projects, and the Western Mass. Food Processing Corporation, an industrial production center run by the Franklin County CDC that helps local farmers and chefs produce commercially saleable products.
Perhaps most usefully for nonprofits, the credits can be combined with federal charitable deductions. Donors to the groups can deduct 50 percent of their contribution from their tax bill though the state credits. If combined with federal charitable deductions, that can turn a $3,250 out-of-pocket expense for the donor into a $10,000 donation to a CDC. That kind of math is appealing to large corporate sponsors, said DuBois.
“A lot of the people who have done business in the past, or wanted to do business with us, were willing to dig down and give more,” once they heard about the credit, she said. Since the funds were announced last month, Dorchester Bay EDC already been able to raise more than $80,000 on the strength on the new program, boosting the funds generated by the annual gala by more than $30,000, to $146,000, according to DuBois.
Email: csullivan@thewarrengroup.com
