Cost Structure

The examples below are provided as means to understand the basic expenses and tax benefits associated with the implementation of a REACH Illinois program. The amount of down payment assistance per employee or the total program budget are determined by the employer.

The tax benefits that are realized depend on the whether the employer has tax liability. Example A has Illinois tax liability; Example B does not.

Example A: Private company

The budget example below is for a 400-500 employee company. Typically a REACH Illinois program is designed with the assumption that less than 10% of the eligible work force would enter counseling and that only 2% would purchase in any one year.

A program with a net cost of as little as $6,355/year could provide the following: counseling for ten-twenty employees, $6,000 of down payment assistance for four employees ($3,000 from employer + an additional $3,000 of state matching funds), and outsourced program administration.

Budget
Down Payment Assistance: 10 employees at $3,000 each $30,000
Outsourced program administration, counseling, evaluation,
etc.: 40-50 people counseled and ten closings: $25,000
Gross Employer Investment $55,000
Less State Tax Credit -$27,500
Less Federal Tax deduction -$10,450*
Net Investment $17,050

Additional Leverage
Employer investment $55,000
State Matching Funds $30,000**
Total Financial Value $85,000

*Figure is based on the 38% tax bracket [(amount of state tax credit) X .38].

** If the employer has income requirements that match those of the program, the state will match up to $30,000 in down payment assistance in this example.

Example B: Not-for-profit Hospital

The budget for Example B would be typical for a hospital with approximately 1000 employees. The primary difference between Example A and B is that the employer in Example B cannot claim the federal tax deduction and must transfer or “sell” state tax credits to another entity in order to realize this cost off-set.

Budget

Down Payment Assistance: 10 employees at $3,000 each $30,000
Outsourced program administration, counseling, evaluation,
etc.: 40-50 people counseled and ten closings: $25,000*
Gross Employer Investment $55,000
Less Proceeds of State Tax Credit: - $22,825**
Net Cost of Program $32,175

Program Value
Employer Investment $50,000
State Matching funds $30,000
Total Financial Value $80,000

* If the employer has income requirements that match those of the program, the state will match up to $30,000 in down payment assistance in this example.

**Not-for-profit entities without state tax liability are able to transfer or sell their tax credits to another entity with Illinois tax liability. Tax credit sales have yielded eighty to eighty-six cents on the dollar (this example yields eighty-three cents).

For more information, contact:

Katie Gottschall Donohue
Director of Technical Assistance
312-939-6074
katie@housingactionil.org