By Evelyn Moreno, Nixon Peabody
A new Massachusetts tax credit that took effect on January 1 of this year provides individuals with an opportunity to magnify the impact of their charitable giving while gaining significant tax benefits. The Community Investment Tax Credit (CITC) is designed to encourage individuals (and companies) to donate to qualified Community Development Corporations that are helping to expand economic opportunities for families and communities in Massachusetts. These community development corporations enable local residents to work together to improve their communities by building affordable housing, renovating dilapidated properties, starting and growing local businesses, helping families develop financial knowledge and capacity, and otherwise improving the quality of life in their communities.
The CITC allocates $3 million in tax credits (this year) to 38 community development corporations (“CDC’s”) across Massachusetts. These tax credits allow donors to receive a 50% tax credit for every dollar donated to these selected organizations: give $10,000 and receive a $5,000 tax credit on your Massachusetts state taxes. And if you don’t have any tax liability, you can get a refund! This means that Donor Advised Funds can participate as well, with the 50% refund (or rebate) being deposited back into the Fund for future giving.
Furthermore, out-of-state taxpayers who have no income tax liability or are not otherwise required to file a return in Massachusetts may make a donation to a qualified CDC and claim a refund of the credit. The Massachusetts Department of Revenue recently released its draft regulations which explain how individuals and different entities can claim the credit (see 860 CMR 62.6M.1).
The CITC will generate a total of $6 million for community development in 2014 and $12 million in 2015 through 2019, when the tax credit cap is extended to $6 million annually. The structure of this new program provides a unique opportunity for individuals to work with qualified community development corporations in Massachusetts to improve local communities.