U.S. Bancorp (USB) supported $202 million of tax-credit-based financing in the southeastern United States last year, more than doubling its community development financing from the previous year.
U.S. Bancorp Community Development Corporation, the $13.6 billion-asset subsidiary of Minneapolis company, specializes in state and federal tax credit supported community development financing. Its work funds the rehabilitation of historic buildings, construction of affordable and market-rate homes and small business development in underserved communities in Alabama, Florida, Georgia, Louisiana and Mississippi, the bank said in a press release.
The tax credits it receives are designed to make it more attractive for the bank to finance community development or clean energy projects. Tax credits are more attractive than tax deductions as they offer investors a dollar-for-dollar reduction in federal income tax, while a tax deduction only provides a reduction in taxable income.
Examples include the Low Income Housing Tax Credit, a dollar-for-dollar tax credit for affordable housing investments created under the Tax Reform Act of 1986 to promote the use of private equity investments in affordable housing development projects. That tax credit has reportedly helped in the development of nearly 90% of all affordable rental housing in the United States.
Clean energy financing incentives include a 30% investment tax credit for projects that replace traditional energy sources with solar energy generators through 2016.
U.S. Bancorp projects in 2013 included a combined $47 million in tax-credit financing for developments in Florida, such as a 94-unit affordable multifamily apartment complex in Miami, and a 112-unit senior affordable housing apartment building in Fort Lauderdale. In Louisiana more than $22 million in tax credits supported the rehabilitation of an office tower in the Central Business District of New Orleans that had been vacant since Hurricane Katrina. In Alabama, part of the tax credits helped renovate a vacant facility in rural Selma that helped create 175 permanent jobs.
The bank will continue to look for new investment opportunities "that promote economic vibrancy in urban and rural areas," said Zack Boyers, chief executive officer for U.S. Bancorp Community Development Corporation in a news release.