Tax Credits for Community Developers

Great news for Massachusetts taxpayers that want to invest in their communities:  the Community Investment Tax Credit Program is here.  This innovative approach to community development leverages private donations to help build and sustain local efforts to address local needs.  Here’s how it works:

Nonprofit community development corporations apply for and receive state tax credits from the Department of Housing and Community Development (check out DHCD’s link on the program–  http://www.mass.gov/hed/community/funding/community-investment-tax-credit-program.html).  A qualified CDC may receive up to $150,000 in tax credits each year for up to three years.  The CDC is obligated to demonstrate to DHCD that it will use the funds it raises for critical community needs such as affordable housing, small business development and “other projects that create and expand economic opportunities for low and moderate income households.”  G.L. c. 62, sec. 6M(a).  The list of certified CDCs is here:  http://www.mass.gov/hed/docs/dhcd/cd/citc/listofcertified-cdcs.doc

Individual and corporate donors make private donations to the CDC in exchange for a fifty percent state tax credit.  For example, John Smith makes a $5,000 donation to XYZ Community Development Corporation and receives a state tax credit of $2,500.  The balance of the donation is treated as a charitable donation for federal income tax purposes.  Assuming a 35% tax bracket, the taxpayer receives a federal tax credit of $875.  The minimum donation is $1,000.  The maximum donation is $1,000,000 but since each CDC is only entitled to $150,000 of tax credits annually, larger donations must be spread between eligible organizations.

For more information, check out DHCD’s website (linked above) or the information posted by the Massachusetts Association of Community Development Corporations: www.MACDC.org

If the Low Income Housing Tax Credit program provides any guidance, the Community Investment Tax Credit Program could provide substantial incentives for local investment in community initiatives throughout the Commonwealth.