This paper presents the Canadian CED Network’s (CCEDNet) policy proposal for using tax credits and other mechanisms to increase the amount of financial capital available for CED in Canada. The recommendations in this paper grew out of CCEDNet’s national Policy Forum, held in 2001, where Community Economic Development (CED) practitioners from across Canada came together to build a national policy framework.

Since that time, CCEDNet has been building on the work of the Policy Forum and actively working to document the evidence base for the Policy Framework’s recommendations regarding human, social and financial capital. This paper presents the results of CCEDNet’s research regarding tax credit and community investment models, and a cost-benefit analysis showing potential benefits to government from the proposed equity tax credit.

Return on Investment

A national cost-benefit model is still being developed by CCEDNet. Equity tax credits in Nova Scotia similar to those proposed in this document resulted in a cumulative net benefit to the provincial government of $180 million dollars after five years.

A proposed $5 million charitable tax credit expenditure in Alberta is predicted to product present value net benefits of $10,588,650.

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Table of Contents

EXECUTIVE SUMMARY
Tax Credit Recommendation
INTRODUCTION
     National Policy Framework
     Methodology
     About this Document
THE CASE FOR CED IN CANADA
     INCOME INEQUALITY
     COMMUNITY INEQUALITY INDICATOR
     A CED APPROACH TO DECLINING COMMUNITIES
THE CASE FOR COMMUNITY INVESTMENT
     Community Investment Potential
REVIEW OF EXISTING TAX CREDIT MODELS
     1. EQUITY TAX CREDIT MODELS
          Nova Scotia Community Economic
          Development Investment Funds
          Manitoba Grow Bonds
          Manitoba Community Enterprise Development
          Tax Credit
          United States New Markets Tax Credits
          United Kingdom Community Investment Tax Credit
     2. CHARITABLE TAX CREDIT MODELS
          New Hampshire Community Development Finance Authority
          Crocus Fund
          Proposed Alberta CED Investment Fund Tax Credit
LESSONS LEARNED: BALANCING COMMUNITY AND INVESTOR NEEDS
     LOCAL RESPONSIVENESS
     INVESTOR PROTECTION AND RISK PROFILES
     ECONOMIES OF SCALE
     SUMMARY
RECOMMENDED TAX CREDIT MODELS
     GOVERNMENT PAYBACK MODELS
          Nova Scotia
          Alberta
     INVESTOR PAYBACK MODEL