|On June 16, Senators Mark Warner (D-VA), Roger Wicker (R-MS), Chris Van Hollen (D-MD), and Cindy Hyde-Smith (R-MS) introduced bipartisan legislation to create a Community Development Financial Institutions (CDFI) Tax Credit for private sector investors that make equity, equity-equivalent investments, or long-term patient capital available to CDFIs. The bill would benefit CDFIs of all types including bank CDFIs, credit union CDFIs, venture capital CDFIs, and CDFI loan funds to address the strong demand and oversubscription for funding of CDFI Fund programs.
The CDFI Tax Credit would provide a three percent credit for the first 10 years of a qualified investment in a CDFI and four percent for the following years, up to a maximum of 10 years, with a one percent increase in the credit for equity or equity equivalent investments. The total credit available is capped, starting at $1 billion for 2022, $1.5 billion for 2023, and $2 billion for 2024 and each year thereafter adjusted for inflation. In order to receive an allocation of funding, eligible CDFIs must apply through the CDFI Fund, which will allocate the credit based on a CDFIs’ past performance and ability to attract private capital. It also ensures small CDFIs and institutions and rural areas will benefit from the new resources.
This proposal by Sens. Warner, Wicker, Van Hollen, and Hyde-Smith would support and strengthen CDFIs. “The legislation exponentially builds on the power of CDFIs to leverage private capital and supercharges their work to address systemic inequities in access to capital in low-income communities,” says Elise Balboni, President, Enterprise Community Loan Fund. “Over three decades, we’ve invested $2.4 billion in under-served communities, and we know that CDFI investments are key to equitable development and broad-based economic growth.” To learn more about the legislation, check out Senator Warner’s press release here.