Inside Philanthropy has previously described federal tax credits that yield millions of dollars for charitable organizations in economically distressed areas. The New Markets Tax Credit program, which was enacted by Congress as part of the Community Renewal Tax Relief Act of 2000, is important to know about at a time when raising money from a shrinking pool of individual donors is getting harder.
As one Pennsylvania nonprofit has found, the tax credits can be leveraged to motivate big monetary rewards, including statewide funds and grants from private foundations.
Millions for a Health Care Clinic
The Wright Center for Community Health is a healthcare nonprofit that operates multiple clinics serving more than 20,000 patients, nearly half of whom are uninsured, underinsured or low-income. Last month, it received $2.3 million from the sale of federal New Markets Tax Credits for an expansion project that will create more than 40 full-time jobs in Scranton, Pennsylvania.
The $2.3 million was generated by a $9.5 million allocation. Nonprofits that receive these allocations sell the tax credits to companies that pay a reduced price for them, thereby offsetting their federal tax burden. As a rule of thumb, nonprofits can expect to receive from 20 to 25 percent of a New Markets Tax Credit allocation as a cash investment. (A $10 million allocation, for example, will result in a net cash infusion of between $2 million and $2.5 million.)
In addition to its work as a primary healthcare hub for patients, the Wright Center also operates the largest government-designated independent medical residency program for medical school graduates nationwide. Together, these two Wright programs aim to create a sustainable primary-care physician pipeline of doctors who are prepared and committed to serve underinsured regions.
This month, the Wright Center announced another $1.5 million grant from a statewide fund that assists organizations with capital projects. The center is using the money raised to expand to a new 41,900-square-foot complex that will open this fall, and will greatly increase the number of patients served.
In addition to federal and state funds motivated by the tax credits, the Wright Center has received nearly $200,000 from area foundations, and it has another pending grant request that could yield more than $1 million for the expansion project, which will cost about $10 million.
Spurring Grantmakers to Invest
The New Markets money definitely spurred private grantmakers to invest, says Maria Montoro-Edwards, the Wright Center’s vice president for strategic initiatives. “We were able to demonstrate that the project is a community priority in a high-need area vetted by the government.”
While the Wright Center is close to completing its expansion project, getting the money has not been easy, Montoro-Edwards says. Obtaining the federal tax credits was a 15-month process that necessitated hiring new market tax experts, as well as financial and legal consultants.
“It is a consultant-heavy process,” she adds. "But the New Markets investment has significantly leveraged our private foundation efforts. Combined, these funds flowing into our community will make a dramatic difference in the delivery of quality healthcare to many thousands of underserved residents.”