Section 38EE: Community investment tax credit
[ Text of section effective until December 31, 2025. Repealed by 2012, 238, Sec. 36. See 2012, 238, Sec. 98 as amended by 2018, 99, Sec. 25.]
Section 38EE. (a) The purpose of this section shall be to enable local residents and stakeholders to work with and through community development corporations to partner with nonprofit, public and private entities to improve economic opportunities for low and moderate income households and other residents in urban, rural and suburban communities across the commonwealth.
(b) For the purposes of this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:--
"Commissioner'', the commissioner of revenue or the commissioner's duly authorized representative.
"Community development corporation'', a corporation certified as a community development corporation by the department consistent with chapter 40H.
"Community investment plan'', an organizational business plan developed by a certified community development corporation that details its goals, outcomes, strategies, programs and activities for a 3 to 5-year period and its financial plans for supporting its strategy; provided, however, that the plan shall be designed to engage local residents and businesses to work together to undertake community development programs, projects and activities which develop and improve urban, rural or suburban communities in sustainable ways that create and expand economic opportunities for low and moderate income households; and provided further, that the specific format and content of a community investment plan may be adapted to the particular organization and community, but shall include the following elements:
(i) a description of the community to be served by the organization, including the neighborhoods, towns, or cities to be served as well as any particular constituencies that the organization is dedicated to serving;
(ii) a description of how community residents and stakeholders were engaged in the development of the plan and their role in monitoring and implementing the organization's activities during the time period of the plan;
(iii) the goals sought to be achieved during the time period of the plan, including how low and moderate income households or low and moderate income communities will benefit and how the entire community will benefit;
(iv) the activities to be pursued to achieve those goals;
(v) the manner in which success shall be measured and evaluated;
(vi) a description of the collaborative efforts that shall support implementation of the plan, including collaborative efforts with nonprofit, for-profit or public entities;
(vii) a description of how the different activities within the plan fit together and how the entire plan fits into a larger strategy or vision for the community;
(viii) the financial strategy to be deployed to support these activities; and
(ix) other information regarding the history and track record of the organization as determined by the department.
"Community investment tax credit'', the tax credit described in subsection (d).
"Community investment tax credit allocation'', an award provided by the department through a competitive process that enables the recipient of the allocation to solicit and receive qualified investments from taxpayers and to provide those taxpayers with a community investment tax credit.
"Community partner'', a community development corporation or a community support organization selected by the department through a competitive process to receive a community investment tax credit allocation.
"Community partnership fund'', a fund administered by a nonprofit organization selected by the department to receive qualified investments from taxpayers for the purpose of allocating such investments to community partners.
"Community support organization'', any nonprofit organization which is not a community development corporation but has a focus on and track record of providing capacity building services to community development corporations.
[ Definition of "Department'' effective until May 30, 2023. For text effective May 30, 2023, see below.]
"Department'', the department of housing and community development.
[ Definition of "Department'' as amended by 2023, 7, Sec. 233 effective May 30, 2023. See 2023, 7, Sec. 298. For text effective until May 30, 2023, see above.]
"Department'', the executive office of housing and livable communities.
"Gateway municipality'', a gateway municipality as defined in section 3A of chapter 23A.
[ Definition of "Low and moderate income community'' in subsection (b) effective for tax years beginning on or after January 1, 2017. See 2016, 219, Sec. 139.]
"Low and moderate income community'', an economic target area designated under section 3G of chapter 23A, an enhanced economic enterprise community or empowerment zone as designated by the United States Department of Housing and Urban Development, or 1 or more contiguous census tracts as designated by a city or town, in which either: (i) a majority of the households are low and moderate income households as defined herein; or (ii) the unemployment rate is at least 25 per cent higher than the annual statewide average unemployment rate at a time when the statewide unemployment rate is less than or equal to 5 per cent or the unemployment rate is at least 10 per cent higher than the annual statewide average unemployment rate at a time when the statewide unemployment rate is greater than 5 per cent.
"Low and moderate income households'', households which have incomes that do not exceed 80 per cent of the median income for the area, with adjustments made for smaller and larger families, as such median shall be determined from time to time by the secretary of the United States Department of Housing and Urban Development pursuant to 42 U.S.C. 1437(a)(B)(2) or any successor legislation and the regulations promulgated thereunder.
"Qualified investment'', a cash contribution made to a specific community partner to support the implementation of its community investment plan or to a community partnership fund, as defined by this section.
"Taxpayer'', a taxpayer subject to an excise under this chapter.
(c) The department shall promulgate regulations concerning the process by which community development corporations apply to become a community partner and receive qualified investments; provided, however, that:
(1) the department shall design a competitive process to review applications by community development corporations and community support organizations; provided, however, that community support organizations may qualify but not more than 2 such organizations shall, at any given time, be awarded community investment tax credits;
(2) the selection process shall favor community development corporations with the highest quality community investment plans and strong track records and shall strive to ensure that all regions of the commonwealth are able to fairly compete for allocations, including gateway municipalities, rural areas and suburban areas; provided, however, that at least 30 per cent of the community partners shall be located in or serving gateway municipalities and at least 20 per cent of the community partners shall be located in or serving rural areas, as defined by the department, unless the department finds that there are not a sufficient number of qualified applications from those areas;
(3) the department shall implement at least 1such allocation process each year; provided, however, that each tax credit allocation shall be valid for a period of up to 3 years, contingent upon the community partner satisfactorily meeting the reporting requirements of the department; provided further, that community partners who have not fully utilized their community investment tax credit allocations within 3 years may apply to the department for a 1 year extension; and provided further, that community investment tax credit allocations may be revoked after 2 years from the date of the award by the department if: (i) the community partner has been unable to secure donation commitments for at least 50 per cent of total allocation by that time, (ii) if the community partner is found to be in noncompliance with this statute or the department's regulations promulgated hereunder, (iii) if the community partner is determined by the department to be making inadequate progress on its community investment plan, or (iv) for other good cause as determined by the department;
[ Clause (4) of subsection (c) effective for tax years beginning on or after January 1, 2019. See 2018, 99, Sec. 35 as amended by 2018, 162, Sec. 1.]
(4) no community partner shall receive a community investment tax credit allocation of less than $50,000 or more than 2 1/2 per cent of the total credits available in any 1 taxable year; provided, however, that the department may waive this cap if it determines that it would be unable to otherwise fully allocate the credits available during that calendar year to eligible community partners; provided, however, that no community partner shall receive a subsequent allocation unless the department has determined that it has made satisfactory progress toward utilizing any prior allocation;
(5) a community partner may receive qualified investments directly from taxpayers or it may transfer some or all of its community investment tax credit allocation to a community partnership fund and receive qualified investments from that fund;
(6) before receiving a qualified investment from a taxpayer or from a community partnership fund, the community partner shall first receive certification from the department that it has been awarded a community investment tax credit allocation;
(7) the department may authorize up to 2 nonprofit organizations to operate community investment partnership funds; provided, however, that in selecting at least 1 such nonprofit organization to serve in this function, the department shall seek an organization which demonstrates that it has the capacity to solicit, administer and re-grant qualified investments and can advance the purposes of this section; and
(8) the department, in consultation with the commissioner shall prescribe regulations necessary to carry out this subsection; provided, that such regulations shall include requirements for annual reports from community partners and community partnership funds regarding outcomes achieved during the prior year and those reports shall be made available to the public; provided further, that the department shall maintain a list of all community partners and community partnership funds on its website; and provided further, that the department shall produce an annual report not later than April 30 for the general court and the public that describes the outcomes achieved through the program.
(d) There is hereby established a Massachusetts community investment tax credit.
[ Subsection (e) effective for tax years beginning on or after January 1, 2019. See 2018, 99, Sec. 35 as amended by 2018, 162, Sec. 1.]
(e) No tax credit shall be allowed to a taxpayer that makes a qualified investment of less than $1,000.
(f) A taxpayer that makes a qualified investment shall be allowed a refundable credit, to be computed as provided in this subsection, against the taxes imposed by this chapter. If the amount of the credit allowed under this subsection exceeds the taxpayer's tax liability, the commissioner shall treat the excess as an overpayment and shall pay the taxpayer the amount of the excess, without interest. Alternatively, at the option of the taxpayer, a taxpayer entitled to a credit under this subsection for a taxable year may carry over and apply against the taxpayer's tax liability for any 1 or more of the succeeding 5 taxable years, the portion, as reduced from year to year, of the credit which exceeds the tax for the taxable year. If the taxpayer elects to carry over a credit balance, then the credit refund provision allowed by this subsection shall not apply. The credit shall be equal to 50 per cent of the total qualified investments made by the taxpayer, subject to the limits described in subsection (e). The department shall issue a certification to the taxpayer after the taxpayer makes a qualified investment. The certification shall be acceptable as proof that the expenditures related to that investment qualify as a qualified investment for purposes of the credit allowed under this section.
(g) The credit allowable under this section shall be allowed for the taxable year in which a qualified investment is made.
(h) Community investment tax credits allowed to a pass-through entity such as a partnership or a limited liability company taxed as a partnership shall be passed through to the persons designated as partners, members or owners, respectively, pro rata or under an executed agreement among the persons designated as partners, members or owners documenting an alternative distribution method without regard to their sharing of other tax or economic attributes of the entity.
(i) The department shall authorize the tax credits under this section. The total value of the tax credits authorized in this section, together with those authorized in section 6M of chapter 62, shall not exceed: (i) $3,000,000 in taxable year 2014; (ii) $6,000,000 in each of taxable years 2015 to 2018, inclusive; (iii) $8,000,000 in each of taxable years 2019 and 2020; (iv) $10,000,000 in each of taxable years 2021 and 2022; and (v) $12,000,000 in each of taxable years 2023 to 2025, inclusive.
(j) The commissioner, in consultation with the department, shall prescribe regulations necessary to carry out the tax credit established in subsection (d).