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Stimulus Dollars Available for Community Development

April 27, 2009

I was recently fortunate enough to attend a legal seminar at which Washington, D.C. tax attorney Michael Sanders discussed new market tax credits and the availability of stimulus funds for community development efforts.  Although this program has been available since 2000, it was news to me, and I’m thinking perhaps there are organizations and businesses out there who might be a good fit for the program but aren’t aware of it.  A run-down of the basics:

On March 23, 2009, the Treasury Department announced that due to an earmark in the American Recovery and Reinvestment Act of 2009 (the federal stimulus bill), an additional $5 billion will be available for the new markets tax credit.  This is great news for both investors and community development organizations/businesses because it means access to capital in economically depressed areas.

The new market tax credit stemmed from federal legislation passed in 2000 that allowed a 39% tax credit for investors in certified Community Development entities, or CDEs.  Here’s how it works: an entity applies for CDE certification through the Department of the Treasury.    Upon receiving this certification, the CDE can then seek funding and investment from banks, private individuals and foundations.  Investors in a CDE can claim a tax credit equal to 39% of whatever they have invested.  The goal is to attract investment and promote growth in economically distressed communities.

The CDE can then use the money it raises to provide loans to “qualified active low-income community businesses,” charter schools or other entities that qualify.  I’m still researching the details, but you can check out the Treasury Department’s site on the New Markets Tax Credit here.

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