AccountAbility Minnesota
Minneapolis, Minnesota. August 2007.
Good RALs
Refund Anticipations Loans (RALs) may be expensive and unnecessary, but low-income taxpayers want them.
To meet the demand, Bonnie Esposito, executive director of AccountAbility Minnesota, partnered with U.S. Federal Credit Union to create a free RAL based on the Refund Express program pioneered by Alternatives Federal Credit Union.
AccountAbility’s Refund Loan and Savings program
requires taxpayers to open a savings account with the credit union
while at the tax site. All of the client’s tax refunds (federal, state
and renter’s rebate) are then direct deposited into the account. The
day after completing their tax return, the client goes to the credit
union to take out a loan up to the full value of their federal refund.
The goal is not just to provide instant loans, but also to draw customers into mainstream financial services. The loan serves as an incentive to get the client in the door at the credit union.
In 2007:
- 361 savings accounts were opened at sites
- 243 taxpayers received loans at the credit union
- 88% of accounts were were still open by the end of May
Funding for the program is provided by the McKnight Foundation and the Annie E. Casey Foundation, which cover program planning and evaluation, staff time for direct service, and fees and interest for the loans ($30 per loan).
The 3-year pilot program will result in a service that can be brought to the whole market. AccountAbility Minnesota is looking at fees, how financial institutions can be involved, and how it can be connected to VITA sites anywhere.
In 2008, AccountAbility Minnesota hopes to open the program up to of its 35 tax sites. In 2009, the model should be available to all free tax preparation sites around country.
More Funding Success
After a year of research into the Earned Income Tax Credit (EITC) and the best way to mount a campaign, Greater Twin Cities United Waycalled in November 2005 asking, “What would it take to double your numbers for the tax season?” United Way realized it was too close to the 2006 tax season, so on February 1, 2006, they started planning with AccountAbility Minnesota for 2007.
With a capacity building grant from United Way, AccountAbility doubled its office space, added staff and increased site hours, so they could be open 5 days a week, from 10 a.m. to 9 p.m. The general approach is to consolidate sites but to keep them open longer. At present, there are 13 sites in the 9-county area.
In this first year of the United Way grant, IRS data shows there are 2,000-plus new EITC recipients in those 9 counties. AccountAbility Minnesota increased the number of clients served by 40%.
So far this year, the program has:
- assisted over 14,000 taxpayers
- generated refunds totaling almost $20 million
Another remarkable achievement has been a 40% increase in direct deposits. Having discovered that clients often don’t understand what “direct deposit” means, Bonnie modified the the volunteer training curriculum and paperwork so that direct deposit is explained to the taxpayer at ever step of the process. That success may offer a lesson for promoting split refunds as well.
State and Local Funding
Eight years ago, Bonnie’s predecessor Family at tax clinic approached her state legislator to ask why the state didn’t fund free tax preparation. 
As a result, the state began to offer competitive grants for free tax preparation. Initially they allocated $50,000; the figure now totals $400,000. Every 2 years, Bonnie and other nonprofit leaders testify before state legislative committees to ensure funding is continued. In the last round, 29 organizations received grants, of which $23,000 went to Bonnie’s program; 13 of the grantees are community partners.
To secure funding from counties or cities, Bonnie meets with city council members to discuss the economic benefits to the local economy of increasing federal refunds and also describes RALs and how they can victimize taxpayers. The grants of $7,000 or $10,000 are relatively small, but they add up.
Congressional testimony
Advocating at the federal level, Bonnie has testified before a Congressional Subcommittee of the Ways and Mean Committee investigating unclaimed EITC. Along with former NCTC Steering Committee member John Wancheck from the Center on Budget and Policy Priorities, she also testified at a Senate hearing exploring ways to increase the number of taxpayers that claim EITC.
Partnerships
Bonnie is co-chair of a Financial Literacy Network called Minnesota Saves. She's partnering with nonprofits like Lutheran Social Services, financial institutions like the Federal Reserve Bank of Minneapolis, the statewide association of Credit Unions, and the University of Minnesota. The goal is to share best practices of comprehensive financial literacy programs, while educating and advocating on asset development. As part of this effort, they are trying to determine how best to coordinate the services of other agencies—something they have yet to accomplish.
While AccountAbility Minnesota has always worked with accountants, Bonnie is excited about a new partnership with the Minnesota branch of the Financial Planners Association. Volunteers come to AccountAbility Minnesota tax clinics, pull credit reports and FICO scores, and offer appointments for people interested in further information on financial planning. She hopes eventually to build a core of volunteers to offer the service at more tax sites. Bonnie is on the advisory committee of the Itasca Project of Minnesota, which is taking on asset development as its next initiative. She is among 40-plus community leaders on the committee, including CEOs, the governor, the mayors of Minneapolis and St. Paul, and the president of the University.
