The Bay State is challenging the private sector to up its commitment to community development with a new tax credit program that supporters say is intended to incentivize donors to double their charitable contributions to community development corporations (CDCs).
This year, the Community Investment Tax Credit program will award $3 million in tax credits through a competitive process to Massachusetts CDCs who submit viable community investment plans and demonstrate that their ability to engage local stakeholders and implement their strategies. Next year, that total doubles to $6 million. The program ends in 2019.
“We think by emphasizing those two things, the ability to engage local residents and the ability to get things done, this will drive resources to performing groups,” said Joe Kriesberg, president of the Massachusetts Association of Community Development Corporations.
According to Kriesberg, 38 groups, out of 45 eligible organizations in Massachusetts, have applied for the tax credits. Certain percentages have been designated for rural communities and gateway cities, too – 20 and 30 percent, respectively.
The Executive Office of Housing and Economic Development, through the Department of Housing and Community Development, will award $50,000 to $150,000 worth of tax credits to each community development corporation it chooses, said Aaron Gornstein, undersecretary for Housing and Community Development.
Organizations can receive the tax credit for up to three years, though they may have to check back in so the agency can make sure the CDC is doing what it said it would do.
The CDCs that receive the tax credits can then turn around and use those credits to solicit donations from private companies, who will get a 50-cent tax credit for every dollar they donate. So in other words, a person or company who donates $10,000 will get a $5,000 tax credit for that donation.
After taking into account the deduction for a charitable donation, the out-of-pocket cost to the donor is closer to $3,200, said Mike Durkin, president of the United Way of Massachusetts Bay and Merrimack Valley.
‘Investing In The Organization’
Gornstein does not know yet how many CDCs will receive the tax credit, or exactly what types of business plans will ultimately be funded because of it. Those community investment plans will inevitably vary according to the community.
“We’re investing in the organization, as opposed to a specific project,” he clarified.
“CDCs over the past many years have developed affordable housing, they’ve assisted small businesses, they’ve done job training and workforce development. It’s a range of economic activities these organizations have undertaken,” Gornstein said.
Kriesberg thinks the program essentially is a win-win-win.
“We’re hopeful that banks and financial institutions, which are relatively familiar with CDCs, will see this as a way to increase their support,” he said. “We’re also hoping this will attract new donors, both high net-worth individuals and companies. It’s an opportunity for the banking and real estate industries to increase their community impact.”
Reception from the business community has been positive so far, supporters say.
“This tax credit would be a tremendous opportunity for individuals who want to help CDCs and local communities do more. It’s a powerful way to do it,” Durkin said.
Email: lalix@thewarrengroup.com
