Massachusetts Tax Incentive Available to Credit Unions and Other Nonprofits

09/29/2017

By Charles R. Kennedy, CPA, MBA Director of Tax Services G.T. Reilly & Company

A Massachusetts tax incentive designed to encourage support of economic development in low- and moderate-income neighborhoods is available to credit unions and other nonprofit organizations.

The Community Investment Tax Credit (CITC) provides a refundable 50% state tax credit for donations of $1,000 to $2 million to qualified community development corporations. Some 58 CDCs in the commonwealth are certified to receive these donations.

Available to nonprofit organizations

An organization exempt from taxation under federal tax code 501 that makes a qualified donation is eligible to claim a refund of the tax credit. The credit would first be applied to any “unrelated business income tax (UBIT)” before refunding any excess.

Available to Massachusetts federal and state-chartered credit unions

Since credit unions are tax-exempt under federal tax code 501(c)(1) or 501(c)(14) they are eligible to claim the credit. A credit union would simply file a Form M-990T tax return to claim the credit against any UBIT that the credit union may have or to simply request a refund of the CITC credit. A total pool of $6 million in CITC credits is available for each year through 2019. In addition to getting a state tax credit, a credit union also may be able to earn recognition and meet certain regulatory requirements in accordance with the Community Reinvestment Act (CRA).

What CDCs do

Community development corporations support economic development in their towns and neighborhoods through housing and business initiatives. CDC programs include real estate development, small business development, creation of parks and infrastructure and first-time homebuyer programs. According to the Massachusetts Association of Community Development Corporations, its members have invested more than $587 million in Massachusetts towns and cities in 2016, through programs to provide housing, stimulate business ownership and create jobs.

United Way administering

The United Way is administering the CITC program for the commonwealth. Donors may earmark donations to benefit specific certified CDCs, or they may make general donations that United Way will direct.

If you have questions about how to donate to a CDC and take advantage of the CITC, please contact email

Charles R. Kennedy, CPA, MBA, at CRK@GTReilly.com or 617-696-8900.

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