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Article
More Private Equity, Less Government Subsidy, and More Tax Efficiency in Urban Revitalization
Florida State Business Law Review (2009)
  • Roger M Groves, Florida Coastal School of Law
Abstract
MORE PRIVATE EQUITY, LESS GOVERNMENT SUBSIDY, AND MORE TAX EFFICIENCY IN URBAN REVITALIZATION: Modeling Profitable Philanthropy and Investment Incentives In hopes of revitalizing depressed urban areas, US tax policy has been to use tax credits as a major incentive to induce private equity re-investment. But those give away subsidies to private investors have failed to have transformative effects, and come at a price in the billions to the public treasury. This article seeks a shift in the tax policy paradigm to increase the private equity investment, while reducing tax subsidy dependence. For the philanthropic urban investor, the short term incentive of an annual tax benefit (credits from the annual tax returns) is singularly inadequate to cause a major shift in equity investments for the urban core. A preferred method of increasing that investor’s participation is to increase the return on investments through joint ventures with tax exempt entities. As a catalyst for increasing that investment return, Congress should transform favorable, but non-precedential private letter rulings into statutory laws that strengthen the legal authority for joint ventures between private equity investors and tax exempt entities -a process this article terms “statutorization”. This broadened base of private equity investors accelerates the timing and volume of projects that over the long term reduce both direct subsidies to the low income residents and the indirect subsidies to the investor-creators of those projects.
Keywords
  • private equity,
  • government subsidy,
  • tax efficiency,
  • urban revitalization,
  • urban renewal,
  • tax exemptions,
  • limited liability companies,
  • private foundations,
  • public charities,
  • ethnicity,
  • investors,
  • joint ventures,
  • charitable organizations,
  • ethnivestors,
  • tax policy,
  • social philanthropy,
  • social entrepreneurs,
  • double bottom line,
  • tax subsidy
Disciplines
Publication Date
2009
Citation Information
Roger M Groves. "More Private Equity, Less Government Subsidy, and More Tax Efficiency in Urban Revitalization" Florida State Business Law Review Vol. 8 Iss. 93 (2009)
Available at: http://works.bepress.com/roger_groves/4/