South Carolina Needs the Community Development Tax Credit
The COVID-19 pandemic is ravaging the health, social fabric and economies of South Carolina communities.
The virus is having a disproportionate effect on communities of color due to the widening racial gap in health and economic disparities.
Community Development organizations across South Carolina for decades have focused on improving the quality of life and creating economic opportunity in low-income communities. These organizations are on the frontlines and are crucial to not only providing immediate emergency services but are essential in the relief and recovery efforts resulting from the Coronavirus pandemic.
South Carolina Community development organizations have been vital resources to local residents of the state during this health and economic crisis. Community development financial institutions (CDFIs) have created funds in direct response to COVID-19. These funds include access to low interest loans for small business owners and nonprofit organizations who may not qualify for the federal Paycheck Protection Program (PPP), for which community development organizations also provide technical assistance in applying.
Housing organizations are establishing and providing support to prevent home foreclosure and keep people in their home through financial assistance, budgeting, and navigating public resources. In addition to direct relief services such as food programs and utility assistance, community organizations also are providing much needed personal protective equipment (PPEs) for community residents to decrease the spread of the COVID-19, and serve as virus and antibody testing sites.
As the South Carolina General Assembly reconvenes and is tasked with passing legislation that provides the necessary resources for all citizens and especially communities who are disproportionally impacted the health and economic crisis; now more than ever is the time for the South Carolina General Assembly to support community development organizations by allocating $2 million for the Community Development Tax Credit. The program was reauthorized in 2019, but the $1 million in tax credits have already been exhausted.
The Community Development Tax Credit program provides private donors and investors a state tax credit of up to 50% for contributions to — and investments in — state- certified community development corporations (CDCs) and community development financial institutions (CDFIs).
The program is a vital public-private partnership that leverages a modest public investment to attract private sector participation.
This spring, a team of students from MIT found that in 2019 every $1.00 in state investment attracted $2.60 of private capital. $1 million in state tax credits leveraged $2.6 million in private funds resulted in a state and local fiscal impact of $310,000 per year in savings and increased tax revenue. The tax credit program was also directly responsible for creating 40 local jobs, 5 new small businesses, training 180 workers, and developing 47 housing units in South Carolina.
This private, public partnership will provide the necessary, flexible capital these organizations need to continue operations and support communities throughout South Carolina.
Federal support and protections are soon going to come to an end. Now is the time for the South Carolina General Assembly to provide the necessary support for the economic recovery of South Carolina. We encourage and request the Senate allocate $2 million in Community Development Tax Credits.
(Bernie Mazyck is President & CEO of the SC Association for Community Economic Development.)