Investors

Invest In Your Community Through CEDF

As an investor, you can help CEDF work with community stakeholders to develop and implement high-impact community development projects.  These projects typically happen in two phases.

  • Phase I: The process starts with a broad range of stakeholders working to identify critical issues and devise solutions.
  • Phase II: Project implementation follows based upon Phase I results. Projects can range from simple, inexpensive efforts that yield direct visible results to larger multi-stage, projects that have a broader positive impact.

Three Ways for You to Invest:

1.         Direct Contributions

As a 501 c.3. organization, individuals and qualified business entities may make tax-deductible contributions to CEDF.  Such contributions may be directed to specific divisions within CEDF such as our loan funds for low and moderate income business owners or for neighborhood-based community development projects.

2.         Short-Term: CT Neighborhood Assistance Act (NAA) Program
Short-Term projects normally are completed within one year.

Noujaim's Specialty Foods in Torrington, CT

The program provides a state tax credit to eligible business firms (primarily Corporations) that make cash donations to qualifying not-for-profit community programs.

CEDF is approved to disburse tax credits on up to $150,000 in donations received from one or more sources. Your donation entitles you to a credit equal to 60% of the amount donated.  This represents $90,000 in state tax credits available to CEDF donors.

The minimum donation that a corporation can make to receive a tax credit is $250 (representing a $150 tax credit).  The maximum contribution that a corporation can make to this program is $125,000 (or $75,000 in tax credits).  The total charitable contribution from the business must equal or exceed its prior year’s amount. There are also federal tax savings that accompany this program.

Eligible businesses include:

  • Any business entity authorized to do business in Connecticut and which is subject to the corporation business tax under Chapter 208 Connecticut General Statutes (CGS);
  • Any insurance company, hospital or medical services corporation subject to the insurance companies, hospital and medical services corporations tax under Chapter 207 (CGS);
  • Any air carrier subject to the air carriers tax under Chapter 209 (CGS);
  • Any railroad company subject to the railroad companies tax under Chapter 210 (CGS);
  • Any express, telegraph, telephone, cable, car or community antenna television company subject to the express, telegraph telephone, cable, car and community antenna television companies tax under Chapter 211 (CGS);
  • Any utility company subject to the utility companies tax under Chapter 212 (CGS); or
  • Any public service company subject to the public service companies tax under Chapter 212a (CGS)

Example

An investment (charitable contribution) to CEDF of $10,000, for example, results in a state tax credit worth $6,000 which in turn shelters the company from Connecticut corporate tax on up to $80,000 of taxable income. The donor may also receive favorable federal tax savings as a result of the donation. On average, depending on your tax situation, this represents a 15% federal tax savings.  Again, depending upon the specifics of your tax situation, the company may realize up to 75% or more of the donation in tax savings.

The donor specifies the community project they wish to support. Then, by October 1st, the donor reserves through CEDF the maximum amount of tax credits that they think they may use.  The donor may wait until the end of the year to determine their exact tax liability. If it is less than the amount reserved, they can lower their donation and corresponding tax credit to match their exact tax liability. The donation must be received by CEDF by Dec. 30th in order to be eligible for the tax credit.

For more information contact Michael P. Sweeney, CFO of CEDF @ 203-235-2333 ext 2010 or Donna Wertenbach at extension 2080.

3.         Long-Term: Equity Equivalent Investment (EQ2) (Socially Responsible Investing)

Long-Term projects typically extend beyond one year and up to five or more.

To move project implementation forward, you can make a Socially Responsible investment called an EQ2. An EQ2 is a long-term, deeply subordinated loan with features that make it function like equity.

Based upon a projected 5% annual yield, investors receive a 2% guaranteed cash return. The 3% balance goes directly to covering the project’s costs. Since this 3% is considered a donation to the non profit (CEDF), it provides a federal tax deduction for the total value of the 3%, giving the investor a total rate of return of 5%.

From the investor’s perspective, EQ2’s are financially a better investment and a better use of your funds. The EQ2 offers an opportunity to make a safe  investment that directly benefits the community year after year, while providing a threefold benefit to the investor. First, is a guaranteed 2% return on investment.  Second, the entire investment is recovered at the end of the designated period (5 to 10 years) unless the investor elects to roll over the investment.  Third, and most important, the balance of the EQ2’s annual yield directly impacts the community for which it is designated.

Eligible investors include: Individuals, Corporations, Foundations or public sector entities.  The product was originally designed to help not-for–profit Community Development Financial Institutions (CDFI’s) such as CEDF obtain alternative funding sources and enhance the lending flexibility of the CDFI portfolio. For bank investors,  EQ2’s can either be classified as loans or investments under CRA, at the discretion of the investor bank.

Example

An investor determines that they wish to support an initiative seeking to improve local economic conditions.  One million dollars is invested to facilitate completing this project over a five-year period.

A contract is prepared between the investor and CEDF.  The one million dollar investment is placed with CEDF. Each year, the investment yields $50,000 at 5%.  Of the $50,000, $20,000 is returned to the investor in 6 month increments, and $30,000 is utilized to cover the project’s costs.  The project is administered by CEDF with on-going input from the investor, if they so choose.

At the end of five years, the investor may elect either to have their original investment returned in full or to roll-over the investment for another period of time.

For more information contact Michael P. Sweeney, CFO of CEDF @ 203-235-2333 ext 2010 or Donna Wertenbach at extension 2080.

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