CDAC Spotlight
Leveraging the Earned Income Tax Credit and Community Partnerships

The Louisville Asset Building Coalition (LABC) is a small nonprofit organization in Louisville, Ky. The organization leads a community effort to promote economic mobility and to improve lives through Volunteer Income Tax Assistance (VITA) and connections to asset-building activities that move low- to moderate-income (LMI) families from financial uncertainty to financial security.

The organization’s focus remains on those who are claiming the earned income tax credit (EITC), which is a refundable tax credit that increases the income of LMI working families. The primary purpose of this credit is to aid employed workers in achieving and maintaining their independence from welfare by making work more attractive and to raise the standard of living for low-wage earners.

The EITC, with its ability to lift families out of poverty, has many long-term advantages for the young children in these families. Research has found that increased household income not only improves a child’s immediate educational outcomes but also is associated with his or her further education and higher earnings in adulthood.See the Center on Budget and Policy Priorities’ EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds. Updated October 1, 2015, https://www.cbpp.org/sites/default/files/atoms/files/6-26-12tax.pdf. The research also indicates that raising income can lead to improved health for parents – in turn, helping them to better support their children’s learning.

Upon claiming the EITC and other valuable tax credits, along with being able to avoid having to pay someone to prepare and file their tax returns, low-income taxpayers are better prepared to meet life’s most basic needs and pay for things such as housing, groceries and transportation. Knowing that these refunds are spent locally is an added benefit for the communities in which these individuals and families live and work.

Free federal and state tax preparation is the core service provided, but LABC also links clients to partners that help them meet other needs. Tax time is seen as an important first-touch point for other financial empowerment and asset-building programming. During the 2018-19 tax season, we participated in a Consumer Financial Protection Bureau tax-time saving cohort. This program provided education materials, and training and technical assistance to approximately 75 VITA programs across the country that were interested in promoting saving education and opportunities for saving at tax sites. Tax time offers a unique opportunity for many consumers to save because the majority of tax filers receive a lump-sum refund. While many households use this income to reduce debt and maintain current financial obligations, there are opportunities for also establishing small nest eggs for financial goals that at other times during the year may only be aspirations. Many tax filers mentally set aside money for savings at tax time but are not offered or may not be aware of the opportunity to save while filing their tax returns. Consumers that had existing savings accounts were able to split their refunds into two separate accounts, and consumers that did not have savings accounts were provided with the option to purchase savings bonds and were given resources that would connect them to the Bank On program in Louisville, which focuses on providing low-cost transaction accounts to those previously unbanked and underbanked.

In 2017, our organization strengthened our partnership with the Louisville Metro Government’s Office of Resilience and Community Services. The goal of this partnership is to more effectively reach our target audience of LMI individuals and families, and to create synergy with the department’s Office of Financial Empowerment. The department in which we reside is both the social services arm of city government and Louisville’s Community Action Agency. This agency’s work encompasses numerous customer-based social services for Louisville residents with the intent to serve the needs of low-income and vulnerable populations in a holistic way. We are interested in using our partnership to build bridges with other outcomes – such as improved health – for individuals and families in Louisville. The city’s 2017 Health Equity Report recommended that to improve health equity, the city needs to ensure more opportunities for wealth-building, education and employment in our community for those needing it most. We are positioned to partner with Louisville Metro’s Office of Financial Empowerment to address the root causes of health inequity by promoting financial access and inclusion, and household stability through the VITA program.

Our organization measures our impact by looking at the financial health and stability of our community and its residents. We do this by evaluating the overall economic impact that tax credits bring to the local community, and the more personal impact that our services have on each individual and family we serve. We also look at how effectively we are able to connect our work with the larger financial empowerment strategy in the city that is focused on how to help people build stability and wealth.

For more information about the Louisville Asset Building Coalition and the services that we offer, you can visit www.labcservices.org.

CDAC Member Spotlight

Brittany Sims is the program director for the Louisville Asset Building Coalition. She manages Louisville’s Volunteer Income Tax Assistance program and looks for new ways to connect VITA with the broader financial empowerment movement in the city. Prior to joining LABC, Sims worked at the University of Louisville and as a fellow in the Lexington, Ky., mayor’s office. She will be relocating to Richmond, Va., in the summer of 2019, where she hopes to continue her community development work. Sims is a member of the Community Development Advisory Council (CDAC) for the Federal Reserve Bank of St. Louis.

CDAC members are experts in community and economic development and financial education. They complement the information developed through outreach by the District’s Community Development staff and suggest ways the Bank might support local efforts. A list of current members is available at www.stlouisfed.org/community-development.