# COMAR Title 05 — Department of Housing and Community Development

## Subtitle 14 — Neighborhood and Community Assistance Program

### Chapter 01 — Community Investment Tax Credit Program

**Authority:** Housing and Community Development Article, Title 6, Subtitle 4, Annotated Code of Maryland

**Administrative History:** Effective date: January 13, 1997 (24:1 Md. R. 28)

**Administrative History:** Regulation .01 amended effective May 13, 2002 (29:9 Md. R. 744); January 1, 2010 (36:21 Md. R. 1590)

**Administrative History:** Regulation .02 amended effective May 13, 2002 (29:9 Md. R. 744)

**Administrative History:** Regulation .02B amended effective January 1, 2010 (36:21 Md. R. 1590)

**Administrative History:** Regulation .03B amended effective September 17, 2001 (28:18 Md. R. 1619); May 13, 2002 (29:9 Md. R. 744); December 20, 2004 (31:25 Md. R. 1790); January 1, 2007 (33:26 Md. R. 1995); January 1, 2010 (36:21 Md. R. 1590); September 1, 2014 (41:17 Md. R. 970)

**Administrative History:** Regulation .04B amended effective May 13, 2002 (29:9 Md. R. 744); December 20, 2004 (31:25 Md. R. 1790)

**Administrative History:** Regulation .05B amended effective May 13, 2002 (29:9 Md. R. 744); December 20, 2004 (31:25 Md. R. 1790); September 11, 2006 (33:18 Md. R. 1505); September 1, 2014 (41:17 Md. R. 970)

**Administrative History:** Regulation .06A amended effective September 17, 2001 (28:18 Md. R. 1619); May 13, 2002 (29:9 Md. R. 744); September 11, 2006 (33:18 Md. R. 1505)

**Administrative History:** Regulation .06B amended effective May 13, 2002 (29:9 Md. R. 744); January 1, 2010 (36:21 Md. R. 1590)

**Administrative History:** Regulation .06D amended effective September 1, 2014 (41:17 Md. R. 970)

**Administrative History:** Regulation .06F amended effective May 13, 2002 (29:9 Md. R. 744); September 1, 2014 (41:17 Md. R. 970)

**Administrative History:** Regulation .07 amended effective January 1, 2010 (36:21 Md. R. 1590)

**Administrative History:** Regulation .07A amended effective September 17, 2001 (28:18 Md. R. 1619); January 1, 2007 (33:26 Md. R. 1995)

**Administrative History:** Regulation .07D amended effective January 1, 2007 (33:26 Md. R. 1995)

**Administrative History:** Regulation .08 amended effective January 1, 2010 (36:21 Md. R. 1590)

**Administrative History:** Regulation .10 amended effective September 11, 2006 (33:18 Md. R. 1505)

**Administrative History:** Regulation .10A amended effective January 1, 2010 (36:21 Md. R. 1590)

**Administrative History:** Regulation .11 amended effective March 16, 2015 (42:5 Md. R. 485)

**Administrative History:** Regulation .13B amended effective January 1, 2010 (36:21 Md. R. 1590)

#### Regulation .01 General.

*COMAR 05.14.01.01*

This chapter prescribes the policies, procedures, and authorizations for allocating tax credits to business entities and individuals that contribute to approved projects of nonprofit organizations that provide services to priority funding areas.

#### Regulation .02 Purpose and Objectives.

*COMAR 05.14.01.02*

A. The purpose of the Program is to improve the well-being of people and the health of communities in priority funding areas by strengthening the ability of nonprofit organizations serving those areas to build partnerships with private sector businesses.

B. The objectives of the Program are to:

  (1) Assist nonprofit organizations in carrying out approved projects to improve the welfare, health, and economic conditions in priority funding areas;

  (2) Encourage businesses and individuals to invest in priority funding areas; and

  (3) Strengthen public/private partnerships.

#### Regulation .03 Definitions.

*COMAR 05.14.01.03*

A. In General.

  (1) In this chapter, the following terms have the meanings indicated and as defined in the Act.

  (2) Any terms also appearing in the Internal Revenue Code have the meanings defined there as well.

B. Terms Defined.

  (1) “Act” means the Neighborhood and Community Assistance Program established in Housing and Community Development Article, Title 6, Subtitle 4, Annotated Code of Maryland.

  (2) “Approved project” means a project approved by the Department in accordance with Regulation .04 of this chapter.

  (3) “Business entity” means a person that:

    (a) Conducts or operates a trade or business in the State; and

    (b) Is subject to the:

      (i) State income tax on individuals or corporations,

      (ii) Financial institution franchise tax,

      (iii) Public service company franchise tax, or

      (iv) Insurance premiums tax.

  (4) “Contribution” means a donation by a business entity or an individual of money, goods, or real property of at least $500 in value to an approved project.

  (5) “Department” means the Department of Housing and Community Development, a principal department of the State.

  (6) “Designated neighborhood conservation area ”means a geographically defined area that has been designated a neighborhood conservation area under COMAR 05.17.03.

  (6-1) “Individual” has the meaning stated in Tax-General Article, §10-101, Annotated Code of Maryland.

  (7) “Individual of limited income” means an individual whose income does not exceed the upper income limits established by the Secretary under Housing and Community Development Article, §4-212, Annotated Code of Maryland.

  (8) “Internal Revenue Code” means the federal Internal Revenue Code of 1986 and the regulations promulgated under it.

  (9) “Nonprofit organization” means a not-for-profit corporation, foundation, or other legal entity that is exempt from federal income tax under §501(c)(3) of the Internal Revenue Code.

  (10) “Program” means the Community Investment Tax Credit Program.

  (11) “Priority funding area” has the meaning stated in State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland.

  (12) “Redevelopment assistance” means the expenditure of funds by nonprofit organizations for labor and materials used directly in the physical improvements of any part or all of a priority funding area.

  (13) “Secretary” means the Secretary of Housing and Community Development.

  (14) “State fiscal year” means July 1 through June 30.

  (15) “Sustainable community” means the part of a priority funding area that:

    (a) Has been designated as a sustainable community in accordance with COMAR 05.17.02;

    (b) Has been designated as a BRAC Revitalization and Incentive Zone under Economic Development Article, Title 5, Subtitle 13, Annotated Code of Maryland; or

    (c) Has been designated as a transit-oriented development under Transportation Article, §7-101, Annotated Code of Maryland.

#### Regulation .04 Eligibility Standards for Approved Projects.

*COMAR 05.14.01.04*

A. A project shall be submitted for approval by a nonprofit organization.

B. In order to be eligible for approval under the Program, the project shall satisfy the following requirements:

  (1) The project shall provide services to a priority funding area;

  (2) The project shall provide services including:

    (a) Community services, such as child care, recreational services, and economic development services,

    (b) Redevelopment assistance,

    (c) Job training for individuals of limited income and related job placement services,

    (d) Education,

    (e) Crime prevention, or

    (f) Other services approved by the Program; and

  (3) The project shall have the written approval of the governing body of each:

    (a) County in which the priority funding area benefited by the project is located, and

    (b) Municipal corporation in which the priority funding area benefited by the project is located.

#### Regulation .05 Project Proposals and Processing.

*COMAR 05.14.01.05*

A. Number of Proposals. A nonprofit organization may submit only one project proposal in any State fiscal year.

B. Forms and Documentation. A project proposal shall be made on standard forms provided by the Program and shall include:

  (1) The name and a description of the project to be conducted, and the amount of the tax credit allocation requested;

  (2) A description of the problem to be addressed by the project and who will benefit from the project;

  (3) A description of the project goals and the measurable objectives;

  (4) The priority funding area benefited by the project, together with a statement whether the priority funding area includes, in whole or in part, a sustainable community or a designated neighborhood conservation area;

  (5) A description of the experience and capabilities of the nonprofit organization and its key staff members:

    (a) In carrying out similar projects, and

    (b) In general;

  (6) The proposed budget for the project;

  (7) A description of the plans for implementing the project;

  (8) A copy of the following organizational documentation for the nonprofit organization:

    (a) The letter from the Internal Revenue Service granting tax-exempt status under §501(c)(3) of the Internal Revenue Code,

    (b) Articles of incorporation,

    (c) Bylaws, and

    (d) A corporate resolution authorizing submission of the application and designating the person or persons authorized to sign documents in connection with the approval of the project, allocation of tax credits, and certification for contributions;

  (9) As required by the Program, financial statements, annual operating budget, list of major contributors, and current and anticipated funding sources;

  (10) Written approval for the project of the governing body of each:

    (a) County in which the priority funding area benefited by the project is located; and

    (b) Municipal corporation in which the priority funding area benefited by the project is located; and

  (11) Any other information considered necessary by the Program.

C. Timing. Applications shall be made in accordance with application and competition cycles publicized to nonprofit organizations, local governments, and other interested persons by direct mailing, press release, or other methods selected by the Program.

#### Regulation .06 Project Review and Selection Procedures.

*COMAR 05.14.01.06*

A. Threshold Requirements. Each project shall meet the following threshold requirements:

  (1) The application shall be complete, providing all of the items and information required in Regulations .04 and .05 of this chapter;

  (2) The service or services proposed shall be consistent with the Program purpose and eligible under this chapter and any guidelines issued by the Program;

  (3) The application shall identify the priority funding area in which the project will operate; and

  (4) If the applicant was awarded an allocation of tax credits for a project during a previous State fiscal year, the applicant shall, in the discretion of the Program, have made substantial progress toward utilizing its previous award of tax credits and satisfying all other Program requirements for the previous project.

B. Additional Project Review. In approving or disapproving a proposal, and in determining the maximum amount of contributions to an approved project that will be eligible for the Program tax credits, the Department shall consider:

  (1) The need for the project in relation to the need for other projects proposed;

  (2) The anticipated benefit to the priority funding area and the anticipated effect on the problem to be addressed;

  (3) The ability of the applicant to complete the project in a timely and cost-effective manner;

  (4) The capacity of the applicant to raise funds for the project, which may include any commitment from a business entity or an individual to make a contribution to the project;

  (5) The readiness of the applicant to proceed with the project;

  (6) Geographic distribution of projects;

  (7) Proposed involvement of local residents or businesses, or both, in the planning or implementation, or both, of the project;

  (8) Feasibility of the project, financially, in terms of staffing, and in other respects as determined by the Program; and

  (9) Any other relevant factors.

C. In reviewing applications, the Program may request data and assistance from other units of State government.

D. Minimum and Maximum Amounts of Tax Credits.

  (1) The Program may set guidelines for minimum and maximum amounts of tax credits per project for each round of applications.

  (2) The sum of contributions eligible for tax credits for all projects approved for each State fiscal year may not exceed $3,500,000.

E. Time Period for Using Tax Credits Allocated to a Project.

  (1) The Program may establish a deadline for receiving contributions eligible for tax credits.

  (2) If, by the Program deadline, the nonprofit organization has not received the maximum amount of contributions for the tax credits allocated to the project, then the remaining tax credits may be used in the discretion of the Secretary:

    (a) By extending the deadline for that project; or

    (b) For a reserve of tax credits to be allocated by the Secretary to projects approved by the Secretary, all in the Secretary's discretion, with or without review by the evaluation committee described in §F of this regulation.

F. Selection.

  (1) The Secretary shall designate members of the committee to evaluate project applications.

  (2) The committee shall evaluate the project proposals based on the guidelines described above and make recommendations to the Secretary for project approval and allocation amounts.

  (3) The Secretary shall make all final decisions on project approval and the tax credit allocations.

  (4) A decision concerning project approval and tax credit allocation is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01.02.

  (5) The Secretary may delegate to the Assistant Secretary for Neighborhood Revitalization or the Deputy Secretary of the Department the authority to issue the notification letter and execute any agreement required by the Department.

  (6) In approving or disapproving a proposal, and in determining the maximum amount of contributions to an approved project that will be eligible for tax credits, the Secretary may give preference to a proposal that benefits a sustainable community or a neighborhood conservation area.

G. Notification.

  (1) Each nonprofit applicant shall receive notice in writing whether or not the project was approved. An approval notice also shall state the maximum amount of contributions to the approved project eligible for the tax credits under the Program.

  (2) Notice of approval may be accompanied by an agreement to be entered into by the nonprofit applicant, as required by the Program.

  (3) Approval is not effective until the nonprofit applicant has signed and returned the notice and any agreement required by the Program.

#### Regulation .07 Procedures for Claiming and Using Tax Credits.

*COMAR 05.14.01.07*

A. Certification of Contribution.

  (1) In order to claim a tax credit for a contribution under the Act, the business entity or individual shall submit a request for certification through the nonprofit organization on forms provided by the Program, together with any documentation of the contribution as required by the Program.

  (2) Each request for certification of a contribution shall contain:

    (a) The name of the approved project for which the contribution was made, the project identification number, and the name of the nonprofit organization to which the contribution was made;

    (b) A receipt from the nonprofit organization for the contribution; and

    (c) In the case of a:

      (i) Cash contribution, proof of the amount of the contribution;

      (ii) Contribution of new goods, an invoice or receipt provided by the business entity or individual as certification of the contribution's net cost, consistent with Internal Revenue Service Publication 561;

      (iii) Nonmonetary contribution not described in §A(2)(c)(ii) of this regulation, a certification by an independent and unrelated third party as to the value of the contribution consistent with Internal Revenue Service Publication 561; or

      (iv) Contribution of real property, a properly executed and recorded deed, evidence that the property was conveyed free and clear of all liens and encumbrances, a recent property appraisal, and evidence that the contributed property will be used for the approved use described in the application; and

    (d) Any other information considered necessary by the Program.

  (3) Notice of certification may be made by the Assistant Secretary for Neighborhood Revitalization.

B. Timing.

  (1) A request for certification may not be accepted for contributions received before January 1, 1997.

  (2) An initial claim for a tax credit shall be made for the taxable year in which the contribution is made.

  (3) The contribution shall be received by the nonprofit organization within the deadline set by the Program.

  (4) A request for certification shall be submitted by the nonprofit organization and received by the Program by the later of:

    (a) The end of the taxable year; or

    (b) 1 month after the contribution is made.

C. Refusal to Certify Contribution. The Program may refuse a request for certification of a contribution if it determines that:

  (1) The maximum amount of contributions eligible for Program tax credits for that project would be exceeded by the sum of:

    (a) The amount of the proposed contribution; and

    (b) The total amount of contributions previously certified for that project for the State's fiscal year;

  (2) The business entity or individual has overstated the value of any nonmonetary contribution included; or

  (3) The request for certification is not made in a timely manner.

D. Calculating the Tax Credit.

  (1) The tax credit allowed to a business entity or an individual shall be equal to 50 percent of the amount of the contribution that:

    (a) Was made in the taxable year of the business entity or individual; and

    (b) Has been certified by the Program.

  (2) For any taxable year, the sum of all Program tax credits, including any carryover credits, may not exceed the lesser of:

    (a) $250,000; or

    (b) The total amount of tax otherwise payable by the business entity or individual for the taxable year.

  (3) Any excess credit that would have been allowed but for the limitations of §D(2) of this regulation may be carried over and applied as a credit for succeeding taxable years until the earlier of:

    (a) The full amount of the excess tax credit is used; or

    (b) The expiration of the fifth taxable year after the taxable year in which the contribution was made.

E. The same tax credit may not be applied more than once against different taxes by the same taxpayer.

#### Regulation .08 Taxes Against Which Tax Credits May Be Applied.

*COMAR 05.14.01.08*

A. General Description. The Program tax credits described in the Act authorizing the Program are credits against taxes:

  (1) For certain insurance companies, under Article 48A, §634, Annotated Code of Maryland, or Insurance Article, §6-105, (effective October 1, 1997) Annotated Code of Maryland;

  (2) For certain financial institutions against the financial institution franchise tax, under Tax-General Article, §8-214, Annotated Code of Maryland;

  (3) For certain public service companies against the public service franchise tax, under Tax-General Article, §8-411, Annotated Code of Maryland;

  (4) For certain corporations against income tax under Tax-General Article, §10-704.4, Annotated Code of Maryland; and

  (5) For individuals against income tax under Tax-General Article, §10-704.6, Annotated Code of Maryland.

B. Disclaimer of Liability. The Department makes no representation, and accepts no responsibility, as to any tax or other consequences to a business entity, an individual, or any other party, arising out of the approval of a project, the allocation of credits, or the certification of a contribution.

#### Regulation .09 Program Administration.

*COMAR 05.14.01.09*

A. Handbooks and Manuals. The Program may adopt a handbook containing internal guidelines related to the administration of the Program or establishing other requirements relating to the Program. The handbook shall be available for public examination at the Department's principal office. The Department, upon request, shall make copies available to the public.

B. Delegation of Authority. An action or decision required to be taken or permitted to be made by the Department under the Act, or by the Secretary or the Department under these regulations, may be delegated by the Secretary.

#### Regulation .10 Record Keeping and Record Retention; Semiannual Reports.

*COMAR 05.14.01.10*

A. Record Keeping. Nonprofit organizations receiving an allocation of tax credits for an approved project shall keep the following records:

  (1) Financial records in connection with the approved project;

  (2) Records in connection with contributions from business entities or individuals that claim or expect to claim tax credits; and

  (3) Semiannual reports described in §C of this regulation.

B. Record Retention. The records described in §A of this regulation shall be kept for at least 7 years from the completion of the project.

C. Semiannual Reports.

  (1) Nonprofit organizations receiving an allocation of tax credits for an approved project shall provide the Program with reports on the project on a semiannual basis.

  (2) Each semiannual report shall contain the information and be in the form required by the Program.

  (3) The Program may elect to change the frequency of reporting from time to time, in its discretion.

#### Regulation .11 Nondiscrimination; Drug and Alcohol Free Workplace.

*COMAR 05.14.01.11*

In order to participate in the Program, the nonprofit organization shall comply with the following requirements:

A. A nonprofit organization may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program, or in any aspect of employment by any nonprofit organization in connection with any project financed or assisted under the Program;

B. A nonprofit organization shall comply with all applicable federal, State, and local laws, and Department policies and programs regarding discrimination and equal opportunity in employment, housing, credit practices, and drug and alcohol free workplaces, including:

  (1) Titles VI and VII of the Civil Rights Act of 1968, as amended;

  (2) Title VIII of the Civil Rights Act of 1968, as amended;

  (3) State Government Article, Title 20, Annotated Code of Maryland, as amended;

  (4) The Department’s Minority Business Enterprise Program, as amended;

  (5) The Governor’s Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order;

  (6) The Fair Housing Amendments Act of 1988, as amended; and

  (7) The Americans with Disabilities Act of 1990, as amended.

C. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements with the Department and other parties.

#### Regulation .12 Waiver.

*COMAR 05.14.01.12*

The Secretary may waive or vary provisions of this chapter to the extent that the waiver or variance is consistent with the Act and if, in the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act.

#### Regulation .13 False Statements.

*COMAR 05.14.01.13*

A. A person may not knowingly make or cause to be made a false statement or report in any document required to be furnished to the Department or in any agreement relating to the Program.

B. A nonprofit organization, a business entity, or an individual that knowingly makes or causes to be made a false statement or report is subject to cancellation and withdrawal of an allocation of credits, or cancellation and withdrawal of a certification of a contribution, in addition to any other penalties authorized by law.