Will Philadelphia be the first city to give tax breaks to sustainable businesses?
Are we about to see real live tax incentives for social ventures?
Tomorrow, the City Council of Philadelphia is scheduled to vote on legislation to give a tax credit to businesses that have received a B Corp rating. That’s a rating system for triple-bottom-line companies, evaluating businesses along five areas, such as labor and environmental policies. If it passes, Philadelphia would be the first city in the U.S. to adopt a financial incentive for such companies. (The City Council Finance Committee already approved the incentive.)
The bill would create a Sustainable Business Tax Credit for B Corp-certified companies based in Philadelphia. Initially, it would take the form of a pilot program for tax years 2012 through 2017. Eligible businesses would receive a credit of $4,000 to be used against the gross receipts portion of the city’s business privilege tax. After the pilot ends, the legislation would be reviewed for possible extension.
Apparently, the scope has been scaled down somewhat, however. Only 25 eligible companies per year can receive the credit–a change from the original proposal. Councilman James Kenney, who sponsored the proposal, was quoted in the Philadelphia Enquirer as saying he favored expanded participation, but the city couldn’t afford it thanks to the bad economy.
Why is Philadelphia the first? That’s easy. B Lab, the nonprofit that created and conducts the evaluations, is based in Berwyn. But, some other city governments are considering such legislation.
I recently wrote about the potential benefits of using tax incentives for social ventures aimed at both investors and companies. Some possibilities include a lower capital gains and dividend tax rate for investors and a lower corporate tax rate for companies, as well as tax credits that would make these businesses more attractive to investors.
Looks like the City of Brotherly Love might be where it all starts.
Update: The Council approved the bill unanimously. For more, see my post.