The Tax Credit Program is actually very simple, so we'll try not to overcomplicate it for you. Businesses that donate to a CDFA-approved project can get at least 75% of that contribution back in the form of a state business tax credit.
Sounds like a win-win to us.
Through the program, also known as the Community Development Investment Program (CDIP), CDFA grants state tax credit awards on a competitive basis to qualified organizations for specific projects or programs. CDFA is attracted to innovative projects that show a high degree of community support, build partnerships, and leverage other funds.
We issue tax credits totaling 75% of the value of each donation to the project donors. For example, a donor making a $10,000 donation to CDFA on behalf of an approved project will receive a state tax credit in the amount of $7,500. All approved Tax Credit project sponsors must raise the money for their project within an allocated time frame.
The tax credit may be applied against the donating company's business profits tax, business enterprise tax, and/or the insurance premium tax. The donation also may be eligible for treatment as a state and federal charitable contribution.*
The contributing company may carry forward the credit for up to five years. The company can select which business tax and how much of their credit to apply towards their taxes in any given year.
There's no complicated paperwork either. CDFA sends all the documentation to the Department of Revenue Administration (because we're nice that way). The business simply fills out the credit amount on the appropriate line on their tax form (it's line 6a; we checked).
Tax credit awards are made annually in July. By law, CDFA is restricted to providing support to nonprofit community development organizations, cooperatives, and some municipal entities. Legislation permits CDFA to accept donations of up to $5 million in each state fiscal year in exchange for $3.75 million in state tax credits for CDFA approved community development projects.
If we overcomplicated it, or you still want to learn more about how the program works, call us at 226-2170, or drop us a line here. Also, you can read a list of frequently asked questions by clicking here.
*Contributors are responsible for consulting with their own tax advisors to determine the impact of contributing to the CDFA tax credits on their finances.
CDFA will be conducting application writing workshops for the CDBG Microenterprise Program.