Community Development Tax Credit

COMMUNITY DEVELOPMENT TAX CREDIT
AB2922
Assemblyman Adam Gray

CCEDA has secured the authorship of AB 2922 – Community Development Tax Credit by Assemblyman Adam Gray ( D-Merced). This tax credit will provide a 50% state income tax credit to any individual or corporation that makes a grant or charitable contribution to a state certified Community Development Corporation (CDC) or federally certified Community Development Financial Institution in an amount no less than $100,000 and not greater than $500,000. A certified CDC is any existing CDC, Community Housing Development Corporation, Community Action Agency, or other community based nonprofit that submits an acceptable Community Investment Plan (CIP).

CCEDA is seeking support letters to Assemblyman Gray from all its members and supporters ASAP. Download the support letter here.

Summary

The Community Development Tax Credit, a specific allocation of additional Low Income Housing Tax Credits, allows for private investment in housing, job creation, community facilities and neighborhood revitalization through community development corporations and other community-based organizations. In Massachusetts, a similar program generated nearly $24 million in private donations for efforts in small business development, housing production, job growth, and neighborhood revitalization. By 2017, an independent study found the donations generated by the Massachusetts Community Investment Tax Credit leveraged new private and federal dollars, generating investments of over $1.2 billion.

AB 2922 is expected to help address the continuing displacement of residents and small businesses and the increasing income inequality in disadvantaged neighborhoods as well as the acute housing shortage and affordability crisis in California cities,. It will also generate $100 million in private investment and upwards of $500 million in private investments and federal dollars.

Background

Since the elimination of redevelopment in 2011 by Governor Brown the State Legislature and interested stakeholders have been trying to bring back a replacement funding mechanism. Most recently, Senate Bill 5 (Beall and McGuire) which sought to fill the financing void for local jurisdictions to finance affordable housing, economic development, and other revitalization priorities was vetoed. Part of the reason lawmakers are hesitant to bring back redevelopment or “redevelopment 2.0” is because of the significant costs (debts and obligation) to the state’s general fund.

Over the last several legislative sessions legislators have tried to still meet some of the goals of the former redevelopment program by introducing bills that sought to increase the funding supply for affordable housing, and supporting the creation of new jobs by providing tax credits.

Problem

Despite robust economic recovery in certain parts of the state and economy, many communities are grappling with disinvestment, shrinking anti-poverty funds from the federal government, and a housing crisis. As a result, lawmakers’ will continue to search for a replacement for redevelopment and other revitalization funding mechanisms.

Given the recent success of passing some new and old tax credit legislation through the legislative and budget process, a California version of the CDTC program is worth consideration. A CDTC California program would support local community developers and regional lenders and their neighborhood based efforts.

Solution

In 2020, the state of California can allocate additional Low Income Housing Tax Credits to create a specific Community Development Tax Credit (CDTC) program. This program would be designed to enable local residents and stakeholders to work with and through community development corporations (CDCs) and community development financial institutions (CDFIs), to partner with nonprofit, public, and private entities to improve economic opportunities for low and moderate income communities. CDCs and CDFIs accomplish this through adoption of community investment plans (CIPs) respectively, to undertake community development and lending programs, policies, and activities. The Treasurer’s Office is the administering agency for LIHTC and thus CDTC and is responsible for managing the process by which the credits are allocated to eligible CDCs and CDFIs. The State of California Community Service and Development Division would be responsible for certifying community development corporations and community development organizations as eligible entities. CDFIs would be eligible by virtue of their federal certification.

Eligible projects would include affordable housing (very low, low and moderate income), community facilities ( child development, charter schools, community healthcare, administrative support), micro and small business lending and training, small business and food incubators, neighborhood retail development and anti-gentrification efforts, CDC owned commercial and industrial real estate, workforce and job training centers, interim (homeless) housing.

Eligible organizations would include community development corporations, community development financial institutions, community action agencies (CAAs), community housing development corporations, subject to an acceptable community investment plan.

Basically, the CDTC offers a 50% state tax credit for gifts, grants, or charitable contributions of $100,000 or more, while fueling the work of more than 100 CDCs and CAAs and 100 CDFIs across California. CDCs, which have been certified, and federally certified CDFIs are eligible to apply for an allocation of tax credits. Awards are based on the Treasurers’ determination of the quality of the adopted CIP and its described to low and moderate and underserved communities.

As is the custom with all tax credit programs it would be over five years and then “sunset”, unless renewed by the Legislature. In addition, the total cost of the program or “tax expenditure” will be modest — $50 million in 2020-2021. Program set up would occur in 2020 and tax credits would be available in 2021. The bill is sponsored by the California Community Economic Development Association (CCEDA). For information, please contact Roberto Barragan, Executive Director, 8180-416-2555, [email protected]

How to make a $5000 impact with $2500

*Source from MACDC