Interfaith Housing caught in tax law shakeup

Feb 1, 2014

Interfaith Housing Services is seeking legislative support for a change in state tax law so that individuals can once again purchase state income tax credits that are the main source of funding for the nonprofit organization's Individual Development Account Program.

That program helps low-income people save for purchasing or repairing a home, continuing their education or starting a small business.

Before 2013, Interfaith raised $650,000 by selling the 75 percent income tax credits. At the time, anyone - individuals and any type of corporation - could buy the tax credits, and individuals bought nearly all of them.

But late in the 2012 legislative session, a bill that would have continued the IDA program in that form got lost in the scramble to rewrite state tax law and didn't pass. Interfaith President and CEO John Scott said the IDA tax credits got lumped in with other tax credits. "It all happened so fast, no one understood what happened," he said.

The new law wrote individuals out of the equation, and the IDA tax credits could be sold only to businesses. The Kansas Department of Revenue subsequently interpreted the law to exclude limited liability corporations and S corporations as well, leaving only C corporations eligible to purchase the tax credits.

As a result, Interfaith was able to sell only $65,000 in tax credits in 2013.

Lorna Moore, Interfaith's IDA program coordinator, said the money raised before 2013 also was matched by a $350,000 federal grant, giving the organization $1 million in annual funding, enough to serve 150 clients across much of the state. The money now coming in, she said, will support only about 10 clients.

"For this program to get back to what it was designed for, from a legislative standpoint we have got to get eligibility back for individuals," Scott said. "From the programmatic and leveraging side, it's a no-brainer."

Scott said housing and small business are hot-button issues in the state, "and this program addresses those in one way or another."

"So why we're having trouble getting funding is beyond me, because the results are incredible," he said.

Clients of the program attend six hours of financial education courses, do 30 days of homework such as collecting receipts and identifying areas where they can reduce spending and creating a personal budget. Then they can open an Individual Development Account to which they contribute monthly. The program then deposits $2 for every $1 they save toward their goal, such as a down payment on a house.

Since the inception of the program, 177 clients have graduated from the program and achieved their goal. Those clients saved $341,157 and received $648,457 in matching money. Fifty-six clients purchased homes; 46 repaired their homes; 71 used the money for their education, while four started or capitalized a small business.

Moore said that each dollar spent in the program generates about $5.

Currently there are 208 more clients participating in the program. Matching money for their savings is coming from donations and tax credits sold previously.

Moore said 52 percent of those clients have income less than the federal poverty standard.

"But they are still saving every month, buying a home, saving for college or repairing their homes," she said.

The IDA program currently extends to 85 of Kansas' 105 counties. Most of the counties currently excluded are in the northwest part of the state. Moore said she has a service provided that wants to extend coverage to the other counties, but she can't justify it when the current funding is adequate to only take in 10 more clients across the current 85 counties.

"That's just one client for each service provider," Moore said.

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