Tax credits awarded

Northwestern Financial Review, Jun 15-Jun 30, 2004 by Bengtson, Tom

Eighteen months of work paid off for Indiana bankers when the U.S. Treasury Department announced on May 6 that the CBAI Community Development Inc., was awarded $50 million in New Market Tax Credits. The subsidiary of the Community Bankers Association of Indiana was one of 271 organizations to apply for the credits; 62 were selected. The allocations ranged from $2 million to $150 million, with the average award being $56 million. The CBAI Community Development award was the largest ever to an Indiana-based organization. CBAI estimates that by leveraging the tax credits with loans, community bankers throughout the state will be able to fund $128 million in projects related to low income areas and job creation.

The New Market Tax Credit program offers financial institutions a real opportunity to make a difference in their communities. The government is funding $15 billion in credits through a six-year program, now in its third year. The program allocated $3.5 billion last month; that comes on top of $2.5 billion allocated in 2003. Applications for the next round of funding will be available this summer, and will have to be turned in by fall for awards that will be announced next spring. Although the process is complicated and cumbersome, I encourage bankers to take a serious look at this and figure out a way to bring investment capital to their communities.

The Indiana effort came together when attorney Frank Huffman of the Indianapolis firm Krieg DeVault started talking to CBAI exec Joe DeHaven about the tax credits. Presentations were made to the CBAI board of directors and DeHaven said the bankers immediately grasped the program's potential. The organization decided to move forward with the effort, which ultimately cost $150,000 to complete. A "community development entity" had to be incorporated, and the Indiana bankers further created 76 subsidiaries of the CDE, one for each of the designated lowincome areas in Indiana. CBAI applied for $300 million in tax credits, and ended up getting 16.6 percent ofthat. According to DeHaven, his 115 members are likely to participate as both tax credit purchasers and as lenders on selected projects. The CDE board will select projects, based on recommendations from economic development experts who sit on an advisory board CBAI set up. The Indiana Loan Clearing House, another CBAI venture, will be involved in the allocation of the credits.

DeHaven said the first projects should see funding by fall, with all $50 million expected to be allocated by the end of the year. But DeHaven said that's not the end of it. His organization will be putting in another application this fall for more credits. I encourage other banker groups to consider doing the same.

By Tom Bengtson, Publisher