The MA Community Investment Tax Credit Joe Kriesberg March 2015

Innovation Forum: Lessons Learned 1) CDCs must reflect authentic community- base 2) CDCs must develop a strategy tailored to their local market context 3) The CDC business model needs updating 4) New real estate development must be balanced with long-term stewardship of existing portfolios 5) We need to break down boundaries between CED and other sectors

Innovation Forum: Lessons Learned 6) Evidence and data are increasingly important for defining needs and impact 7) We need to apply “state of the art” communication strategies to secure broader support 8) Collaboration at all levels is critical 9) 21 st century community development needs to be community-centric, not real estate centric 10) Need to balance supply-side and demand- side community development

Our Strategy  Support changes needed to advance all 10 lessons  Use training, technical assistance, and peer learning to lift CDC practice  Use partnerships and programs to advance new innovations and best practices  Seek policy and system change  CITC is a way to drive multiple goals simultaneously – and to do so at scale

Goal of CITC “To enable local residents and stakeholders to work with and through community development corporations to partner with nonprofit, public and private entities to improve economic opportunities for low- and moderate-income households and other residents in urban, rural and suburban communities across the Commonwealth."

CDC: Theory of Change

CITC: Leverage Partnership & Collaboration

What does CITC provide?  Authorizes DHCD to allocate the following to Certified CDCs selected through a competition: 2013: $750,000 in community investment grants 2014: $3M in Community Investment Tax Credits : $6M in Community Investment Tax Credits annually  Potential to generate $66 million over seven years  Community Investment Tax credits provide a 50% credit on donations to selected CDCs  $50K to $150K in tax credits each year for 3 years  20% Rural, 30% Gateway Cities

Community Investment Plans 1) Description of the service area and constituency 2) Description of how community residents and stakeholders were engaged in the development of the plan and their role in monitoring and implementing the plan 3) Goals sought to be achieved during the time period of the plan, including how LMI households or LMI communities will benefit and how the entire community will benefit 4) Activities to be pursued to achieve those goals 5) How success will be measured and evaluated

Community Investment Plans 6) Description of the collaborative efforts that support implementation of the plan 7) Description of how the different activities within the plan fit together How the entire plan fits into a larger strategy or vision for the community 8) Present financial strategy to support these activities 9) Provide other information regarding the history and track record of the organization as determined by DHCD

CITC: Tax Savings Examples (Illustration - 35% Tax Bracket) Situations vary. Consult your tax advisor. Minimum DonationMaximum Donation $ 1,000 $ 2,000,000 Community Investment Tax Credit $ 500 $ 1,000,000 Federal Tax Deduction (35%) $ 175 $ 350,000 Total Tax Savings $ 675 $ 1,350,000 Final out-of-pocket donation $ 325 $ 650,000

CDC level  Community  Mission  Program  Organizational  Financial

Program Level  Annual reports to DHCD from each CDC  Common data collection from all CDCs to allow for aggregate impact analysis  Perhaps 3 rd party evaluation to determine how the CITC is “working”

What MACDC is doing  Helping DHCD and DOR  Educating potential donors  Building the United Way Partnership  Offering training through Mel King Institute  Providing 1-1 technical assistance to CDCs

CITC Results So Far  36 CDCs & 2 Community Support Organizations Selected in 2014  Over 1,000 donors participated  Approximately $4.5 million in private funding was secured  Approximately 80% of tax credits deployed  Vast majority of donors were either brand new or increased their prior donations by 100% or more  44 CDCs and 2 CSOs have received $5.2 million in credits for 2015

CITC Results So Far  Significant majority of donors were individuals, not corporations or foundations  Donors also include corporations, banks, lawyers, architects, consultants, churches, donor advised funds, foundations, local businesses  All but a few CDCs were highly successful; those that were not are smaller groups without fundraising capacity/culture  Program inspired many boards to get more involved in fundraising  Program inspired investment in communications, outreach, public relations

CITC Challenges  Confusion regarding the fact that this is a donation not an investment  Slow roll out of rules & procedures  Inadequate communication between/among state agencies, United Way and program participants  Slow & cumbersome processing of credits  National Banks unwilling to respond to local program  Some donors think it is too good to be true  Hard to break through gatekeepers  Keeping the “CITC Promise”

For More information Joseph Kriesberg