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Montana Nonprofit Bank Gets $40 Million in Federal Tax Credits

By Robert Struckman, 10-20-08

The Missoula-based Montana Community Development Corp., a nonprofit bank, received $40 million in tax credits from the U.S. Treasury Department to encourage investment in the state.

“We’ll be able to use this program to help take Montana businesses to the next level,” said MCDC’s David Glaser.

The New Markets Tax Credits can be used to lower financing costs to expand certain businesses and develop infrastructure in low-income census tracts across Montana. The award was the only one granted to a Montana organization out of $3.5 billion granted Monday, and the first awarded to the state in the program’s seven-year history.

“We are thrilled to bring this large allocation of tax credits to Montana,” said MCDC director Rosalie Sheehy Cates.

The tax credits, which can be sold, lower the finance costs on projects. Cates also plans to use some of the proceeds from the tax credits to add cash to a small business loan fund.

According to the Treasure, the tax credit program has successfully spurred economic development in low-income communities. That designation describes Missoula north of the Clark Fork River, essentially, and east of Reserve Street—in other words, most of Missoula. Few places in Montana would not be eligible.

MCDC has a solid history of building finance packages for rural projects, such as a small-log saw mill in Hall, Montana, and a farm in Corvallis and many others.

The tax credits can be used towards a variety of community revitalization efforts. The financing can be applied towards construction costs, working capital, machinery and equipment, fixed assets and certain development of commercial, industrial and retail real estate.

Entities such as MCDC help organize and manage the financing aspects of the project by matching the equity investors with local banks to provide additional project funds. While investors receive a 39% tax credit on their funds, realized over seven years, the overall impact to the financing package is that the project is infused with investment capital that would not be in play without the tax credits, according to the Treasury.

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