As the year’s end brings a barrage of appeals from nonprofit groups hoping to capitalize on the spirit of holiday giving, the state’s community development corporations are making a pitch for a new tax credit program that enjoys the bipartisan backing of both the outgoing Democratic governor and his Republican successor.
The Massachusetts Association of Community Development Corporations, the umbrella group that advocates on behalf of the state’s nonprofit community development agencies, is making a final push to enlist donors, who can claim a 50 percent state tax credit on contributions to a qualifying CDC.
The new community investment tax credit helps steer private money to CDCs that might otherwise struggle to underwrite deserving community projects, particularly those that benefit low- and middle- income residents, or to close funding gaps.
Using the state tax credit in tandem with a federal income tax deduction means that a donor can reap huge tax season savings.
The tax credits allow community development groups to reduce their reliance on grants which typically benefit new programs, but aren’t necessarily available as a source of continuous funding for more mature projects like the Cape Cod Fisheries Trust.
The Community Development Partnership, an Eastham-based CDC, established this cutting-edge “quota bank” for local fishermen in 2010. Each year, fishermen are allocated a share of the regional quota set for fish, such as tuna or skate. The quotas can be traded or leased. Using money generated from the tax credit program, the Cape CDC buys quotas and leases them at half the market rate to smaller, independent fishermen, who usually find themselves at a disadvantage against larger fishing concerns.
The new 50 percent state tax credit enabled one of the trust’s long-time donors, the Sailors’ Snug Harbor, a foundation that offers aid to current and former fishermen and their families, to double its annual $15,000 contribution to $30,000. “It’s no cost to them, but they are able to make a more significant investment in our work,” says Jay Coburn the executive director of the Cape’s community development organization.
Most of partnership’s donors are individuals and local businesses that make donations in the $100 to $200 range. Coburn noted that because of the tax credit, he’s now seeing these smaller donors make $1,000 donations.
The Cape organization also uses the funds to start new programs, plug deficits, and set future priorities, “It is very locally driven by our community and addresses community needs without having to twist and morph our grant proposals to respond to the needs of the state or the federal government who think that they know what we ought to do,” Coburn said.
Gov. Deval Patrick signed the community investment tax credit into law in 2012. The program got up and running this year, offering $3 million in tax credits.
Beginning in 2015, more than $5 million in credits will be available to community development corporations each year until 2019, when the program sunsets.
Only CDCs that have been certified by the state Department of Housing and Community Development can receive donations that qualify for the tax credit. Of the 53 Massachusetts CDCs, 42 will be able to solicit donations that receive tax credits in 2015. (Two other nonprofit organizations will also receive tax credits in the new year.) The 2015 tax credit awards to individual CDCs range from $60,000 to $150,000.
To qualify for the program, CDCs compete against each other for the tax credits. Getting into the state program isn’t slam dunk: a CDC must have solid finances, demonstrate superior technical know-how, and show strong local support.
In 2014, the Cape-based Community Development Partnership received $80,000 in tax credits; in 2015, it will see $100,000.
The rigorous application process has produced grumbling from some association members who would prefer to get outright grants instead of having to “chase donors,” says Joe Kreisberg, executive director of MACDC, the statewide CDC organization . But he believes that the state certification framework provides built-in accountability by forcing applicants to engage in some deep thinking to support their “asks” and live up to their commitments—or lose their credits.
It also creates a new group of local givers who may be motivated to continue making donations in the future. “I am convinced that having hundreds, if not thousands, of new donors across the state is going to give us the kind of financial, political, intellectual and moral support that will strengthen the field and make it more durable,” says Kriesberg.
There may be unease in some quarters about what the impending change in administrations means for a particular policy that’s been in place during the Patrick years. But such worries don’t appear to be warranted for the Community Investment Tax credit.
Gov.-elect Charlie Baker sang the tax credit program’s praises on the campaign trail and voiced support for increased funding down the road. “It’s a great idea, makes tons of sense,” he told the annual convention of state CDCs last October. “We should be all over it as a Commonwealth.”