Rs League Highlight: Mcun: Volunteer Income Tax Assistance Programs: The Montana Story

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Volunteer Income Tax Assistance (VITA) Programs: The Montana Story A REAL Solutions® Program Review

http://www.mcun.coop "Through Montana Credit Unions for Community Development and a partnership with NCUF's REAL Solutions®, we have seen an increase in our free-tax filing services. These vital programs not only save Montanans dollars, they reinforce that credit unions are the best option for consumers. The VITA program embodies so many credit union principles; it's a natural fit for credit unions!" Tracie Kenyon, President/CEO, Montana Credit Union Network

Volunteer Income Tax Assistance (VITA) Programs – the Montana Story is a 2009 publication of the National Credit Union Foundation’s REAL Solutions® program.

About the National Credit Union Foundation (NCUF) The National Credit Union Foundation (NCUF) raises charitable funds, runs innovative programs, and makes impactful grants for America’s credit union movement. NCUF’s mission is to “promote and improve consumers’ financial independence through credit unions.”Among the NCUF programs achieving this mission: REAL Solutions® — Helping millions of consumers gain access to affordable financial services, achieve financial literacy, grow savings, build assets, and buy homes. Development Education — Leading training on cooperative principles in the modern consumer marketplace to overcome what credit unions identify as the greatest threat to their future: “the eroding of credit union philosophy.” Social Impact Management — Meeting a “triple bottom line” that benefits credit unions, members, and communities.

About REAL Solutions® REAL Solutions® is the signature program of the National Credit Union Foundation. REAL — “Relevant, Effective, Asset-building, Loyalty-producing”— Solutions® works to help credit unions offer a wide range of products and services that have proven successful in serving working families with low wealth and modest means. Using product/business models created and tested by credit unions, REAL Solutions® disseminates information to credit unions through special meetings, an online impact center at realsolutions.coop, and state and national conferences. In the first two years as NCUF’s signature program, REAL Solutions® was adopted in 30 states and is saving members tens of millions of dollars. It has now become a documented business strategy for credit unions to grow their memberships by serving the underserved. Real people with real needs are finding REAL Solutions® at credit unions.

About the Author Jeanne Saarinen is Executive Director of Montana Credit Unions for Community Development (MCUCD), a nonprofit organization working to foster financial independence for all Montanans. Jeanne and her team work with credit unions across the state to implement empowering programs that improve the social and economic well-being of Montanans. Jeanne has 20 years of credit union service in Montana, and has been Executive Director of MCUCD since its inception in 2003. Under her leadership, MCUCD has garnered more than $1 million in grants and contributions for MCUCD and partner projects, and its programs have reached over 50,000 Montanans. MCUCD was recently awarded the 2009 Herb Wegner Memorial Award for Outstanding Organization by the National Credit Union Foundation. This award is given to recognize emerging leaders of the credit union movement who are blazing new frontiers to make personal financial independence a reality.

For more information, contact:

Volunteer Income Tax Assistance Programs – The Montana Story

REAL Solutions® c/o National Credit Union Foundation 601 Pennsylvania Avenue NW, Suite 600 Washington, DC 20004-2601 Phone: 800.356.9655, x6770 Email: [email protected] Fax: 202.638.3912 Web: www.realsolutions.coop

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“Five of the seven credit unions in my community collaborate to provide VITA sites. It’s a great gift to the residents of Butte and a marvelous opportunity for us to showcase the credit union differences – people helping people, cooperation, and outreach to underserved.” Kathy Shea – Montana Credit Union League Board Chairman, and President/CEO, Heritage FCU

REAL Solutions®, the signature program of the National Credit Union Foundation (NCUF), provides support, tested business models and tools to leagues and credit unions helping them to provide new and additional financial products and services to families of low-wealth and modest means. To date, over 700 credit unions in 34 states and 32 state-level trade associations are actively seeking to reach emerging markets including immigrants, young people, persons with disabilities and low-wage households. To bring information to leagues and credit unions in the timeliest fashion, NCUF hosts an online impact center at http://realsolutions.coop, full of REAL Solutions® product innovations, case studies, and tested business models. Some of our state leagues/associations also feature Web sites to give their participating credit unions access to the most up-to-date state-specific information. This article is the fourth installment in a monthly series of interviews designed to provide REAL Solutions® League Liaisons and other league staff up-to-date strategies used by their peers to grow their REAL Solutions® efforts. This interview describes the efforts of the Montana Credit Unions for Community Development (MCUCD) and REAL Solutions credit unions to develop a Volunteer Income Tax Assistance (VITA) program for Montana consumers. Please learn more from this interview with Jeanne Saarinen, MCUCD Executive Director, and Robert Coble, MCUCD VITA Program Manager. 1. When did Montana begin participating in the REAL Solutions® Program? MCUCD began its formal partnership with REAL Solutions in the summer of 2007, after attracting sufficient grant funding to support the program. The Kellogg Foundation and Consumer Credit Counseling Services of Montana provided $45,000 to enroll in REAL Solutions and hire staff, and NeighborWorks Montana provided $20,000 toward a guarantee fund to reimburse 33% of credit union losses on their payday loan alternative products. In September 2007, in conjunction with the statewide Annual Montana Credit Union Network Systems Conference, MCUCD and REAL Solutions field coach Nancy Pierce led the introductory meeting of Montana’s efforts to combat predatory lending.

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Above: Nancy Pierce presenting at the REAL Solutions introductory conference in September 2007.

2. How many Montana credit unions are REAL Solutions partners? As a result of the introductory meeting, 14 credit unions signed a REAL Solutions memorandum of understanding (MOU), with the intention of developing and offering an affordable alternative to payday loans. MCUCD Executive Director Jeanne Saarinen and REAL Solutions Field Coach Nancy Pierce organized a series of training webinars and provided one-on-one consulting to each partner credit union during the nine-month contract period. While 14 credit unions signed an MOU, in reality there are 30 (out of 60) Montana credit unions that are REAL Solutions partners. This is because all of MCUCD’s initiatives fall within REAL Solutions (free tax services, matched savings accounts, financial/consumer education, and combating predatory lending), and currently 30 Montana credit unions are involved in one or more of these program areas.

3. What was Montana’s primary REAL Solutions focus? The primary focus of Montana’s REAL Solutions program is to implement credit union alternatives to payday loans throughout Montana. Again, while all of MCUCD’s efforts are considered “REAL Solutions” (free tax services, financial/consumer education, matched savings accounts, and combating predatory lending), MCUCD needed assistance specifically on assisting credit unions with payday loan alternatives. All other MCUCD initiatives were moving forward and expanding, with the exception of this area.

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4. What were the major outputs? Each month, starting in November through May, MCUCD and REAL Solutions provided a training webinar to partner credit unions. This comprehensive series covered all pertinent alternative payday loan information (see page 11 for the webinar schedule and topics). An audio recording of the training series was sent to each partner credit union to allow for future training of staff. Today, ten Montana credit unions offer a payday loan alternative product and two credit unions offer a refund anticipation loan alternative product. In 2008, these credit unions disbursed 1,475 loans totaling $696,501, with losses totaling just $10,984. Because of this success, NeighborWorks Montana extended their guarantee fund through 2009 (originally set to expire at year-end 2008).

5. What is MCUCD? Montana Credit Unions for Community Development is a state-wide nonprofit organization working together with Montana's credit unions to improve the lives and financial independence of all Montanans. In existence since 2003, MCUCD’s mission is to improve the social and economic well-being of Montanans through credit unions. MCUCD is the charitable arm of the Montana Credit Union Network, the state’s credit union trade association. MCUCD also has the Community Development Financial Institution (CDFI) designation from the U.S. Treasury Department, and a 501(c)(3) charitable designation from the IRS. Our belief is that it is imperative for a state credit union association to provide assistance to its member credit unions in the area of outreach and serving the underserved. This is in addition (and equal in importance) to the traditional state credit union trade association services – advocacy, public relations, compliance, and education. MCUCD provides technical and financial assistance to credit unions wanting to implement one of its programs. Our goal is to streamline the procedures and make implementation and execution as efficient as possible for credit union staff. MCUCD seeks grants to support its programs, provides program training and management to partner credit unions, and keeps credit unions informed and up to date. It takes an extraordinary amount of time to develop a VITA site, an IDA (individual development account) program, a payday loan alternative product, or a community consumer resource center. With expertise and support at the state-wide trade association level, adding these programs makes it feasible for any credit union regardless of its size.

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6. What is MCUCD’s primary focus? Currently MCUCD’s efforts are focused in the following areas:    

Financial/Consumer Education Free Tax Services Matched Savings Accounts Combating Predatory Lending

Financial/Consumer Education: The primary objective of this MCUCD program is to provide credit union members and consumers with the tools and resources needed to make smart, safe financial choices for themselves and their families. A secondary objective is to have Montana’s credit unions viewed as a valuable community resource for consumer education. MCUCD helps credit unions provide a Consumer Resource Center offering easy access to pertinent national and Montana-specific resources on a variety of topics. The resources are made available through a display rack at the credit union, a comprehensive one-stop web resource, a public Internet station in the credit union, and extensive outreach. Free Tax Services: Free tax services support has been offered by MCUCD since 2006. MCUCD provides the technical assistance as well as grant reporting, volunteer recruitment, technology and e-file administrator. Matched Savings Accounts: MCUCD administers several matched savings account (or Individual Development Account/IDA) programs – a list of current programs are available at www.MontanaCreditUnions.coop. Matched funds can be used for education, a small business, or a first home. IDAs are designed to help families and individuals of modest means establish a pattern of regular saving and, ultimately, reach a specific financial goal. MCUCD partners with local credit unions and other organizations to help manage the account and provides case management to accountholders. MCUCD provides technical assistance by producing the monthly match statements, tracking participant savings and on-line financial education progress, and seeking grant funds for additional accounts. MCUCD also maintains and tracks the webbased financial education curriculum that IDA participants must complete before accessing matched funds. Combating Predatory Lending: And of course, MCUCD works to combat predatory lending through its partnership with REAL Solutions.

7. How did MCUCD become interested in VITA? VITA stands for Volunteer Income Tax Assistance. VITA is an IRS program designed to prepare taxes for low and moderate income citizens at no cost. The VITA program is run by volunteers

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and local non-profits. VITA volunteers are trained and certified through IRS materials and covered by the Volunteer Protection Act. The VITA program was a natural fit with MCUCD’s vision that Montana’s credit unions should provide the right financial serves to help members become and stay financially independent. MCUCD staff and AmeriCorps*VISTA members working on VITA have taken the comprehensive three month H&R Block tax preparation course, and have attended the weeklong IRS Train the Trainer course on the TaxWise software. We are certified by the IRS as a Volunteer Tax Preparer in the advanced course, and MCUCD is an IRS authorized e-file provider. MCUCD is a member of the National Community Tax Coalition, and staff attends their annual conferences. At the very start of each VITA program, MCUCD makes it clear to participating credit unions what roles MCUCD will assume, and what responsibilities will be left to the credit unions. In general these roles are broken down as follows: MCUCD responsibilities:  Recruit, train and certify VITA volunteers  Develop procedures and train credit union staff on their roles and responsibilities  Develop and coordinate marketing of the VITA site  Perform quality review and electronic transmittal of tax returns  Assist in ongoing technical assistance and support for VITA volunteers on computer/software issues in addition to tax questions through the tax season  Be the fiscal agent for VITA project, including creating a detailed report of expenditures with receipts provided by MCUCD to the credit union  Prepare project summary at the conclusion of tax season Credit Union responsibilities:  Provide space for VITA site  Assist MCUCD with volunteer recruitment  Make appointments and send Interview and Intake Sheets and cover letters to clients  Field calls/questions – MCUCD will train staff and provide a list of Frequently Asked Questions to help staff respond to inquiries about program eligibility, etc.  Send e-file documentation to MCUCD after each tax day  Promote the VITA program including:  Hang posters around town (churches, grocery stores, senior centers, etc.)  Contact community groups to request announcements of VITA services during meetings and other communications with members  Deliver public service announcements to local media  Mail statement stuffers

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Above: MCUCD VITA Program Manager Robert Coble poses with IRS and Montana Department of Revenue staff at the post-tax season VITA Volunteer Appreciation Luncheon in Butte, May 2009.

8. How many Montana credit unions offer VITA sites or provide tax preparation services? During the first year (in 2006), MCUCD supported two credit union VITA sites, with volunteers preparing 92 returns. In 2009, MCUCD supported 13 credit unions and 16 sites, with volunteers preparing 1,886 returns. Trying to support sixteen VITA sites across the state of Montana could be a logistical nightmare, especially since the site furthest from MCUCD (located in Helena) is 412 miles away and the closest was just over 60 miles from Helena. To bridge this gap, MCUCD utilizes technology to provide excellent services to these credit unions and volunteers. A tax server purchased by MCUCD allows both staff and volunteers to view and control a tax return simultaneously during a tax appointment. Each tax return is quality reviewed by the volunteer and also by a member of the MCUCD team in Helena.

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For the upcoming tax season, MCUCD is expanding to include seven additional VITA sites with financial assistance from the National Credit Union Administration’s Technical Assistance Grant Program for low-income designated credit unions. We believe our model for a statewide credit union VITA project is one that is sustainable and replicable. MCUCD has the experience and training on how to set up and run a VITA site, taking the burden off of the individual credit union. All of the intricate details of tax training, electronic transmittal, tax software usage, and working with the Internal Revenue Service is daunting. Having this extensive knowledge in one central location, and administering the program for and with credit unions, makes a large project such as this feasible. The credit union can focus on what it does best – helping its members. Lessons learned from each tax site are then used to make all other credit union VITA sites run better and more efficiently, and allows more credit unions to participate. Each year more credit unions indicate an interest in participating in VITA. Early in our VITA history we had to approach credit unions to sponsor a site. Now MCUCD has a waiting list of credit unions wanting a site. A survey of the credit unions and volunteers participating in VITA during the last tax season demonstrates MCUCD’s success at providing excellent technical assistance:  77% of credit unions rate MCUCD’s support as “excellent;” 23% rate it “very good.”  62% of credit unions are “extremely satisfied” with their VITA experience; 38% are “very satisfied.”  94% of volunteers rate MCUCD’s support as “very strong;” 6% rate it “strong.”  44% of volunteers are “extremely satisfied” with their VITA experience, while 37% are “very satisfied,” and 19% are ‘mostly satisfied.” The volunteer retention rate is excellent, and every credit union that has started a VITA site with MCUCD has continued with the program.

9. How many taxpayers benefited from VITA sites? How much money did VITA site participation save them? How much EITC (Earned Income Tax Credit) or other earned credits did taxpayers receive? During the 2008 tax season, 1,886 tax returns were completed by volunteers working at MCUCD’s sites. The 1,886 returns represent 2,215 individuals when counting married couples separately. The 1,886 returns were completed at 13 credit union sites and 3 additional sites located at community centers that were also supported by credit unions. All but two of the sites are operated by appointment only where scheduling is handled by the credit union staff. The two walk-in sites are hosted in Butte and receive heavy traffic, but they also require more work and preparation to handle the large crowds. According to an H&R Block press release, the average fee charged for tax preparation during the 2008 season was $187. This does not include additional fees charged for Refund

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Anticipation Loans. Using the average cost of $187, Montana’s credit union VITA sites saved taxpayers a total of $352,682 in tax preparation fees. At these tax sites, $396,000 in Earned Income Tax Credit was returned to the taxpayers. In addition, $161,000 in Child Tax Credit and $22,000 in Hope and Lifetime Learning Credit were returned.

10. Are your credit unions able to convince taxpayers to save a portion of their refund? If so, how much? If not, was this a program focus? While we are not able to track the proportion of refunds that are placed in savings accounts, the VITA program helps Montanans of modest means keep more of their tax refund by avoiding paid tax preparers and refund anticipation loans.

Above: MCUCD VISTA member Abby Wolf poses with Bear Paw Credit Union VITA volunteers at a post-tax season party in Havre, May 2009. Volunteer Income Tax Assistance Programs – The Montana Story

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11. How did your credit unions benefit by offering VITA sites? Credit unions benefit from VITA by strengthening their commitment to social responsibility and concern about the community. VITA sites serve individuals and families of modest means and at no cost. The 13 credit unions that offer these free tax services in their buildings invest equipment, staff time and space to make this possible. By actively participating in this program, credit unions have enhanced their image in the communities they serve and remind everyone of their purpose. VITA tax sites help save taxpayers in their community thousands of dollars in tax preparation and refund anticipation loan fees. VITA sites provide a great opportunity to increase credit union membership as well. The VITA program is available to members and non-members and is promoted to the entire community. Many non-members use the services and later establish a relationship. Volunteers who serve at the credit union are often lifetime members and use the tax preparation time to educate clients on how credit unions work and about their non-profit status. Since 2006, when credit unions and MCUCD began the VITA program, the image and awareness of credit unions has been on the rise in these communities. The VITA program can help transcend the idea by some that credit unions are just another place to “store money” into a place of trust and community. MCUCD hopes that one day every credit union in the state will offer this service both to its members and the greater community.

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Credit Union Payday Loan Alternatives

Webinar Training Series About the Training Series. . . Low wealth and under-banked households often turn to the alternative financial services market (payday and title lenders) for financial products because they believe they have few other alternatives. Offering an affordable alternative to payday loans represents a Good Business Decision because it grows a loyal membership. It underscores Credit Union Philosophy, because it improves the quality of life for members. And, it Develops Political Goodwill because it demonstrates the credit union difference. Whether your credit union is just thinking about offering a payday loan alternative product or you’re already offering one, this training series is for you! For more details, see the next page.

Training Series Schedule 

November 15: Understanding The Payday Lending Problem and the Credit Union Solution



December 11: Staff Sensitivity Training—Developing Compassion and Understanding While Preparing for Disappointment



January 17: Mitigating Risk, Collection Techniques, and Breaking the Cycle



February 14: Marketing Tools, Complete with Marketing Products and a Marketing Plan



March 13: Financial Counseling



April 10: Partnerships to Enhance Your Loan Product



May 15: Wealth Building Products and Services

Brought to you by:

Montana Credit Unions for Community Development — A nonprofit organization with a mission to implement programs through credit unions that improve the social and economic well-being of Montanans.