The Necessary Evil: Income Tax

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It’s tax time. We hope your pockets are being lined with refunds (and that you have plans to invest that refund with us). We did some digging to learn why April 15 is Tax Day. Here’s what we found, including a history of income tax.

On Independence Day in 1861, President Abraham Lincoln called Congress into a special session to explore the legislative options for war. The country was at odds and the South was on the verge of secession. One of the biggest problems Congress faced was the financial implications of a war. In order to raise enough revenue to support the Union troops and a war, Congress levied a three-part tax and tariff plan.

That plan, the Revenue Act of 1861 was drafted by the Chairman of the Senate Finance Committee at the time, Senator William Fessenden of Maine, who would later became the 26th Secretary of the Treasury. The act was drafted, passed the Senate and the House, and signed into law by President Lincoln, but not without some fanfare. Representative Thaddeus Stevens, Chairman of the House Committee of Ways and Means noted that the bill was “a most unpleasant one” and that the taxes and tariffs levied were “necessary evils”.

Necessary evil, indeed. Only a year later, the Act was repealed only to be replaced by the broader Revenue Act of 1862. The new broader act called for the creation of the Office of the Commissioner of Internal Revenue, imposed the first progressive income tax on Americans,  and also expressly set forth an end date to income tax of 1866.

The government was still strapped for cash with the ongoing Civil War; and as a result Congress passed the Revenue Act of 1864 which increased the progressive tax rates. The Act ultimately expired in 1873. Two decades later, Congress again reformed tax law and passed the Wilson-Gorman Tariff Act of 1894. This act was challenged and found unconstitutional in the Supreme Court case Pollock v. Farmers’ Loan and Trust Company.

Flash forward almost another two decades to when the 16th Amendment was ratified giving Congress the legal authority to tax all incomes. The amendment was adopted February 3, 1913 and Congress chose March 1 as the filing deadline. Tax Day was moved to March 15 with the Revenue Act of 1918. And in 1955, Tax Day was moved to its current date, April 15.

We like to think of April 15 at GROUNDFLOOR as Investment Day rather than Tax Day. So, join the community of 3,200 and growing and celebrate Investment Day with us by funding a loan today.

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Meet Us in Times Square for LendIt 2015

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LendIt, the largest conference dedicated to the online lending community, is next week. We’ll be in New York to give a demo of our product and our CEO, Brian Dally, will be moderating a panel. We’d love to see you while we’re there.

LendIt promises to bring together more than 1,500 platforms, investors, bankers, and service providers from all around the world. This year, the conference is debuting the Real Estate and FinTech track. We are excited to be a part of this new track in its inaugural year.

The 3-day event takes place Monday, April 13 through Wednesday, April 15 in New York. We will demo our product on Wednesday, April 15 from 4:23-4:33PM EST at the Marriott Marquis in the Company Demo Room located on the 7th floor.

Following, our CEO Brian Dally will moderate a panel from 4:45-5:15PM EST in the Astor Ballroom located on the 6th floor. The panel, Real Estate Crowdfunding Property Types, will include panelists Haider Nazar from LendZoan, Allen Shayanfekr from Sharestates, Eric Siragusa from MHP Funds, and Bill Sipple from HVS. Brian and the panelist will highlight the broad diversity of the real estate crowdfunding market.

We’d love to see you while we’re in New York. To meet with Brian while he’s in New York, reach out via press@groundfloor.us.


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Yesterday’s SEC Reg A+ Ruling

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Yesterday was an important day for GROUNDFLOOR, for our growing community of microlenders and for the long-awaited eventuality when the full force of the Internet will be felt in finance.

In a public meeting in Washington, D.C., three years after passage by Congress of the 2012 JOBS Act, the Securities and Exchange Commission approved a much-needed amendment to a little-known and little-utilized corner of securities law known as Regulation A. Because Regulation A offerings are open to all, not just “accredited investors,” the amendment gives hope to many that the promise of broad-based “equity crowdfunding” can now start to be fulfilled. In the minds of many, this is a good thing for savers, investors, builders, entrepreneurs and the economy.

As has been reported publicly, for almost a year we have been patiently working our way through the regulatory process to offer securities under Regulation A. All of us who are a part of GROUNDFLOOR, the first and only community of its kind that is 100% open to all, therefore enjoy a huge head start. In fact, our efforts have already yielded state-level approval in Georgia and eight other jurisdictions. We expect to receive federal approval by the SEC soon. That approval will enable us to begin expanding nationwide.

We have long anticipated this action by the SEC. It raises the limit on securities we will be allowed to sell under Regulation A by twenty times compared to what we have been allowed to sell in Georgia during our pilot program here. We had expected to benefit from an expansion of the limit–but not this much!

Even while we cheer what this development does, it is also important to take note of what it does not do. Specifically, yesterday’s action does not “de-regulate” the marketing and sale of financial securities. Far from it. Gaining the requisite regulatory approval to use Regulation A still demands a deservedly lengthy and exhaustive process of disclosure, scrutiny and compliance review. We had to register our offering with the federal government, as will those who may eventually follow us. That requirement means issuers like GROUNDFLOOR must sweat the details to comply with highly specified rules and to weather intense scrutiny by auditors, legal advisors, and regulators.

Despite knowing the costs, the time and the uncertainty that would be imposed on us, we embraced the process because we believe in transparency and disclosure. We believe you and all investors deserve that, and more. You deserve a world of financial opportunity that is as broad and accessible as you are informed and discerning. The very architecture of the Web enables and even demands it.

Yesterday, the SEC outlined a pathway that heads in the right direction of history and progress. As a community, it is now upon us to take it. Are you ready? Join us, tell us what you think at founders@groundfloor.us or feel free to continue the discussion in the comments below.


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Find Your Pot o’Gold at the End of Our Rainbow

We haven’t downed enough pints to perfect our Irish accents, though we did stumble upon a list of the Top 50 Irish Sayings and Proverbs. Here’s one of our favorites:

May you always have a clean shirt, a clear conscience, and enough coins in your pocket to buy a pint!

We’re delighted that the Irish think the same way we do – about coins in your pocket, at least. And when you invest with GROUNDFLOOR, those coins add up quickly. It’s simple to find your pot of gold with us. Create an account. Study our loans. Say an Irish blessing. Choose a loan and invest. Watch your pot of gold grow.

Want to know if GROUNDFLOOR is for you? We’ve added some Irish cheer to our “Is this for me?” infographic.

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Still need more information? Follow our How It Works map and see how your money can work for you. If you’re convinced, grab a pint, find a four-leaf clover, and invest in a loan today.

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Our Appearance on AM Biz 1190 with Dana Barrett

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In case you missed it, on Thursday this week our co-founder and CEO Brian Dally appeared as a guest on Dana Barrett’s popular Atlanta morning radio show on AM Biz 1190. Dana interviewed Brian for 11 minutes. Listen to the segment here:

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Behavioral economist Don Barden was also on the show, and the conversation about GROUNDFLOOR continued throughout portions of the hour. Dana and Don both expressed their enthusiasm and support, and asked some great questions along the way too. Interested in hearing some of our backstory and where the dialogue went? Listen to the full 1-hour show.


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Milestones, Progress & What’s to Come

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It was just over one year ago that this community of microlenders started funding our first loan. Back then, we funded one or two small loans at a time. By law, because we offer the opportunity to invest to everyone not just accredited investors, every loan had to be based in Georgia. We could accept only lenders who were too. It started small, but we had high hopes for our pilot program and big aspirations for what our borrowers and lenders would create, and for what it all could become.

Since then, as we wrap up this phase of GROUNDFLOOR‘s development and prepare to expand nationwide, here’s what’s happened:

  • More than 3,000 people in Georgia signed up to participate
  • Our lenders have funded 22 loans ranging from $8,000 to $100,000
  • The average lender has invested more than $2,300 and earned an annualized return of 11.5%
  • Our borrowers have repaid 6 loans to date, and announced repayment for another 2 this week

Those results matter to the growing number of people who are benefitting from them. Our average lender earns interest sufficient to pay off the average U.S. credit card balance1 in fewer than four years or to afford a down payment on his or her first home sooner. Taking advantage of the newly opened market for private lending, our lenders are now beating the average return on the S&P 500 since 19702, while taking less risk, with greater control than has ever been available to them before.

Last month, record lender demand took us by surprise. Five loans worth $280,000 funded in February. We sold out, i.e. ran out of actively funding loans! Fortunately, we’ve built a rich pipeline of loans that are working their way through the application process and are on their way to being listed on the site. We have good news for those who might have missed out or are looking to invest more:

  1. You’ll see a handful of new loans offered over the next week. These will be the last to be offered exclusively in Georgia. If you haven’t signed up for an account yet, do it today. Watch your email inbox for the opportunity to join the groundbreakers who made real estate microlending successful in our home state before it reached a national spotlight.
  2. More significantly, in the coming months we’ll be able to offer more loans in more places as we invite borrowers and lenders from more states beyond Georgia to join us. We are in the homestretch of completing the necessary regulatory legwork, and hope to announce approval soon.

Every month now, we continue to be flattered by the response to and demand for GROUNDFLOOR’s role in the wave of Internet finance now reaching its first beachheads. We owe a special thanks to our community, investors, and supporters for their help along the way to reaching today’s milestones. It is only because of their backing that we can look forward to such a promising future. If you live in Georgia, please join in today to become a part of that–and let us know what you think by using the comments below or writing us at founders@groundfloor.us. We love hearing your comments, critiques, questions, and votes of confidence.


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Say Hello While We’re at SXSW in Austin, TX

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SXSW, the annual music, film, and interactive festival, is two weeks away, and we’d love to meet you while we’re in Austin for it.

We’re going because GROUNDFLOOR has been named as a finalist in the Innovative World Technologies category for the SXSW Accelerator, a startup pitch competition where leading startups from around the world will showcase their technology innovations to a panel of judges and a live audience.

The two-day event takes place Saturday, March 14 and Sunday, March 15. Our category begins pitching at 3:30PM on the 14th. The pitch competition culminates with the Awards Ceremony on Sunday evening on the 6th floor of the Downtown Austin Hilton.

Did you know “Texas” comes from the Caddo word tejas meaning friends? We’re always happy to make new friends. To meet us while we’re in Texas, reachout via email to press@groundfloor.us See you there!


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Loan #17: 31 Stratford Drive NW

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Today marks day 17 of our #17loans17days blog retrospective. It would have been the most recently funded GROUNDFLOOR loan. But in the days since we started the series, hundreds of you have funded four more (and, very soon, will have funded fifth one!). Funding is accelerating. We’ll have more to say about that in a future post.

But first, to wrap it all up, allow us to introduce borrower Wilford Vales and his project in west Atlanta at 31 Stratford Drive NW. Wilford is a native Atlantan and has more than 15 years experience in real estate investment in the Atlanta market.  His company, WillBuySell is both a rehab-renovation and hard money lending company working all aspects of the in-town market. He came to GROUNDFLOOR with the Stratford project in the fall of last year. Another investor had purchased the property with plans to flip it. That investor lost the property to foreclosure. Wilford and his team acquired it for $15,000 and now plan to rehab and flip it quickly.

The $25,000 loan offered GROUNDFLOOR lenders an annual rate of 13.2% over 12 months. It was used in part to acquire the property and also to support rehab efforts. 60 lenders fully funded this loan in January of this year within one month after it went live. The rehab work, mostly cosmetic, has already begun. Where traditional financing options aren’t available or viable on their own for properties like Stratford; the scope and scale of the Internet bring borrowers like Wilford and microlenders together to restore blighted properties more quickly than they would be otherwise.

When you invest with GROUNDFLOOR, you become a part of our growing community of borrowers and lenders; and can invest in real estate like never before. From the moment you invest, your money starts earning. And when you invest $500 or more before midnight tonight, we’ll add $100 to your investment for a total of $600 as part of our Cheers to 2 Years! promotion.

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Loan #16: 146 Ericson Street

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In the next to last installment of #17loans17days, we head to Atlanta’s historic Edgewood neighborhood for a special project with the Atlanta Police Foundation.

You may have already read about our partnership with Atlanta Police Foundation from an earlier post by Nicole, our VP of Marketing or in another post when the loan funded in January of this year.

And if not, here’s your chance. We met with Jenna from the Atlanta Police Foundation last Fall. She was excited about the prospect of a partnership. After telling us about the APF’s Secure Neighborhoods Program, we all agreed that GROUNDFLOOR was a great fit to help bring the program to life.

The Secure Neighborhood initiative empowers sworn police officers to become homeowners by making housing affordable in communities where officers serve and protect. Through our partnership with APF, our growing community of lenders has the opportunity to earn big on their investments and make a big impact on the community.

The property in Edgewood at 146 Ericson Street was acquired by the Fulton County City of Atlanta Land Bank for just $10. The FCCA Lank Bank supplies properties to the APF for the Secure Neighborhood initiative. And that’s where GROUNDFLOOR and its community of lenders step in.

We took the Ericson loan live on November 23rd of last year; and many of you were quick to lend. The $75,000 loan at 7% over 12 months was funded by 101 of you. With the loan funded, renovation has begun; the home should be ready for a house warming this spring.

When you invest with GROUNDFLOOR, it’s more than just yield, it’s making an impact on the communities right in your back yard. Lending with GROUNDFLOOR is simple and transparent. You, the lender, browse our loans, select one (or more) that interest you, examine the accompanying details, and decide to invest with just a few clicks. We make it easy to earn high yields while doing some good.

Invest today before you miss our Cheers to 2 Years! promotion. We’ll add $100 to any investment of $500 or more today and tomorrow.

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Loan #15: 1949 Sosebee Drive NE

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In today’s installment of our #17loans17days blog retrospective, we meet with borrower Dustin Cole again. This time for a project in Dalton, GA.

Did you know…? Dalton is the “Carpet Capital of the World”. More than 150 carpet manufacturers call Dalton home. In fact, more than 90% of the functional carpet in the world today is produced within a 65-mile radius of the city.

Producing nearly all of the world’s carpet is no small feat. And you might be interested to know that it all started with a wedding gift given in the late 1800s by a young woman who lived in Dalton, Catherine Evans Whitener. Her gift, a tufted bedspread, sparked an entire tufting industry which later morphed into the carpet industry. A mechanized carpet making process entered the marketplace after WWII and Dalton’s residents proved the perfect fit with all of their specialized tufting skills; and the “Carpet Capital of the World” was born.

Much like Catherine, we hope our idea for a new kind of finance can play a part in changing our industry forever. Borrowers like Dustin play an important role in that process. For his 4th project with us, he used GROUNDFLOOR to acquire a distressed property, 1949 Sosebee Drive NE, and flip it quickly for cash. Our lenders saw that vision, too; and fully funded the $8,000 loan at 13.5% for 12 months in just 1 day! Everything about this project was quick.

That’s just one way GROUNDFLOOR makes real estate finance and investing different. We offer borrowers an alternative to banks and traditional hard money lenders using a streamlined process that makes borrowing simple, reliable, fast, and efficient. In return, lenders find an increasingly large variety of loans to choose from–from different borrowers, in different places, with different loan letter grades, terms and interest rates.

Our platform opens real estate investing to everyone, not just accredited investors (financially sophisticated investors with high net worth). With just $10, you can become a GROUNDFLOOR lender. When you invest, you earn. And when you invest $500 or more, we’ll add $100 to your investment for a total of $600 as part of our Cheers to 2 Years! promotion until February 22nd.

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