While there is no definition of the term "community development corporation" in Maryland law, community development corporations, or "CDCs," are typically local tax-exempt non-profit corporations defined by their community-based leadership and community-based goals. Often, CDCs promote physical and social improvements in communities with a significant low-income population.
CDCs can be set up by community residents, local small business owners, church congregations and leadership, members of civic associations, and others to promote the revitalization of their community. They can perform a wide variety of roles, such as housing, commercial, and retail development, leading community planning, providing social services, health education, career training, and assisting with community improvement programs such as improved lighting and streets. A CDC’s reach may include a small neighborhood or extend to cover an entire city, county, region, or even an entire state.
There are private and government programs that fund CDCs. Each program has its own eligibility criteria. Some states require an organization to meet certain requirements to receive funding from the state and to be considered a CDC. Maryland does not have special requirements.
What is a CDC in Maryland?
In Maryland, a CDC is legally the same as any other non-stock corporation. In order to form a CDC, one must follow Maryland’s steps to incorporate as a tax-exempt non-stock corporation.
Some Steps to Forming a CDC in Maryland
The list below includes certain required preliminary steps and some best practices in forming a CDC in Maryland. Consulting with an attorney for all steps is not necessary, but it is a good idea for some of the steps.
- Define the community by attributes such as its geographic boundaries.
- Define and assess the needs of such community and consider what the CDC could contribute to these needs.
- Examples include economic development, jobs, housing, education, health, senior citizen assistance, and other social services.
- Examples include economic development, jobs, housing, education, health, senior citizen assistance, and other social services.
- Form an initial steering committee - Find like-minded individuals to form an initial steering committee for the future CDC.
- These individuals can be leaders from the city and county government, community, churches, public charities, or an established group within the organization forming the CDC.
- These individuals can be leaders from the city and county government, community, churches, public charities, or an established group within the organization forming the CDC.
- Provide an open forum - At this point, the organization may want to share ideas and gather information by providing an open forum where members of the community are invited to learn, offer suggestions, and ask questions regarding the steering committee’s vision for the CDC.
- Develop a specific mission of the CDC and organize a group of people dedicated to that mission.
- Who you are and what you will do; why is the mission important; and what are your core values?
- Who you are and what you will do; why is the mission important; and what are your core values?
- Consider and plan finances and funding
- If the CDC plans to solicit charitable contributions, the Maryland Solicitations Act, Title 6, Business Regulation Article of the Annotated Code of Maryland, requires the CDC to first file documents with the Office of the Secretary of State. The type of registration required depends upon the level of charitable contributions received by a charitable organization.
- Instructions, checklist and form for registration statement (COR-92)
- Instructions and form for exempt organization fundraising notice form
- Develop and draft bylaws that control the board of directors, officers, and members of the CDC, then form the initial board of directors and select the principal officers.
- Also consider who will be the CDC’s resident agent. A resident agent is designated to accept service of process if the corporation is summoned to court for any reason. The agent must be either an adult citizen of Maryland or another existing Maryland corporation. The address must include the street, city and zip code in Maryland. A corporation cannot act as its own resident agent.
- Also consider who will be the CDC’s resident agent. A resident agent is designated to accept service of process if the corporation is summoned to court for any reason. The agent must be either an adult citizen of Maryland or another existing Maryland corporation. The address must include the street, city and zip code in Maryland. A corporation cannot act as its own resident agent.
- File with the State Department of Assessments and Taxation (SDAT) to become a non-stock corporation.
- The form and instructions are available on the SDAT website. This form serves as the corporations Articles of Incorporation.
- There will be fees associated with filing. The total fees are currently $170.00.
- The CDC must list a corporate name on the form. The corporate name must contain "Corporation", "Incorporated", "Limited", "Inc.", "Corp.", or "Ltd."
- If the CDC decides to use a different name than the one listed on the Articles of Incorporation, it must also register that Trade Name with SDAT. The form and instructions are available on the SDAT website. The fee for a Trade Name application is currently $25.00.
- In addition to mail or hand-delivery, the SDAT Business Express website can also be used to file the required forms.
- Non-expedited review typically takes 6 to 8 weeks according to SDAT.
- Obtain a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
- Visit the IRS website to apply online.
- The IRS’s website’s online tool will generate an EIN within minutes for free. Beware of websites that charge for an EIN. You can also apply by fax, phone, or mail.
- Once the CDC gets an EIN, it must file required tax returns or information returns.
- Apply for federal tax-exempt status - While it is not required, the CDC may also wish to apply for federal tax-exempt status with the IRS. Many applications for grants require proof of tax-exempt status.
- Detailed instructions for applying for tax-exempt status are available on the IRS’s website. See also:
- The CDC may also consider using the services of a like-minded fiscal sponsor. A fiscal sponsor allows you to use its tax-exempt status for purposes such as applying for grants and soliciting donations. A CDC should consider the fiscal sponsor’s requirements and fees when selecting one to partner with.
- Once the CDC receives a 501(c)(3) determination, it can file for a Maryland State sales and use tax exemption with the Comptroller of the Treasury. See the Exemption Application Guide.
- Open a corporate bank account using the CDC’s EIN and Articles of Incorporation.
- Maintain compliance with ongoing legal and filing obligations.
- Ongoing obligations could include filing tax returns, annual SDAT reporting, annual charitable solicitation registration update, and more. Consider discussing these obligations with an attorney to see what applies.