Stronger Coalitions: State Tax Credit Provides Reliable Funding for Community Development, CDC’s
Fluctuating levels of funding have long been a challenge to the internal capacity and external impact of organizations in the public services sector. It is difficult to design and implement long-term programs when time and resources must be reallocated to completing grant applications or when a lost grant results in severely curtailed capacity or community impact. With the intention of changing this dynamic, in 2014 the Massachusetts legislature established the Community Investment Tax Credit (CITC). Established in part due to income inequality in the state (currently only five other states surpass Massachusetts in income inequality), the CITC is intended to provide a reliable source of funding to community development corporations (CDCs) that will in turn support the local community and combat inequality through organizing, advocacy, affordable housing, economic development, and other initiatives adapted to address local needs.
Administered by the Massachusetts Department of Housing and Community Development (DHCD), the CITC stimulates private philanthropy by entitling donors to receive a 50% refundable state tax credit for donations of $1,000 or more made to participating CDCs (or one of two DHCD-designated community support organizations) and a federal tax deduction as allowed under federal law. This tax credit is available to any taxpayer, including corporations, non-profits, and individuals. To be eligible to participate in the program, a CDC must be selected through a competitive process administered by the DHCD. Organizations submit a comprehensive, multi-year Community Investment Plan (CIP) that is scored on a 100 point scale. Tax credits are then distributed according to the scoring of each organization’s CIP, with awards ranging from $50,000 to $150,000 in credits on an annual basis. These credits are good for three years, and after three years a CDC must submit a new CIP to continue to participate in the program (for more information one can watch this CITC informational video made by the Massachusetts Association of Community Development Corporations (MACDC)).
Over 200 community developers congregate in the Massachusetts State House to advocate for extending and expanding the CITC. (credit: Joe Kreisberg, MACDC)
Since its implementation in 2014, the CITC has been very successful in stimulating private philanthropy. To date it has generated $23 million in private investment, with a total economic impact of $1.2 billion in economic activity over the past two years. In addition, the CITC has proven capable of engaging a wide range of donors. In the first two years 1,316 of the participating donors were new donors, and over 90% of donors are either new donors or donors who doubled their prior year’s contribution. In 2014 and 2015, 66 percent of donors were individuals. Throughout 2015 and 2016 these donations have helped participating CITC groups build or preserve 2,916 homes, create or preserve 8,743 jobs, assist 1,420 small businesses, and serve 135,054 families with housing, jobs, or other services.
While it is still a relatively recent development, the Community Investment Tax Credit has already proven itself a powerful tool for supporting the efforts of local community organizations. The strength of the CITC lies in its ability to engage a wide variety of donors while keeping this money within the community and supporting local needs. This flexible and reliable source of funding allows organizations to refocus their resources from grant applications to community programming that makes a tangible impact. For more detailed information on the CITC, how it works, and its impact, visit the CITC page on the MACDC website.
By Kyle Machicado, Emerson National Hunger Fellow