WASHINGTON — On June 16, 2022, U.S. Senator Mark R. Warner (D-VA) was joined by the senses. Roger Wicker (R-MS), Chris Van Hollen (D-MD) and Cindy Hyde-Smith (R-MS) by introducing bipartisan legislation to promote sustainable economic prosperity in black, brown and low-income communities. This bill would help unlock more equity and long-term financial capital for community development financial institutions (CDFIs). CDFIs often serve as the backbone of low-income or minority-owned businesses, which tend to have fewer banking relationships and less access to traditional forms of financing.
“As a former entrepreneur and venture capitalist, I know talent and ambition aren’t limited to an income bracket or zip code. Unfortunately, access to start-up capital is. CDFIs and MDIs do invaluable work in bridging the gap and reaching small businesses in our most vulnerable communities – a role that has become even more critical during the pandemic,” said Senator Warner. the historic investments we were able to make through the COVID-19 Emergency Relief Program, CDFIs still need additional equity and capital to continue serving their communities.This legislation will create a new tax credit, helping stimulate significant private sector investment and allow these community lenders to grow.
“Small businesses, including those in low-income and minority communities, are a mainstay of the economy of Mississippi and the entire country,” said Senator Wicker. “CDFIs and MDIs help support businesses, individuals and entrepreneurs by providing access to capital and alternatives to predatory lending in low-access areas. I am pleased to join my colleagues on this bipartisan measure to create an additional tax credit to support and grow this private sector investment.
“CDFI investments are a critical source of capital for small business growth in many communities in Mississippi and across the country. This bill would create a tax credit structure to attract more private sector investment into CDFIs, which would increase their ability to drive longer-term growth in disadvantaged areas,” said Senator Hyde- Smith.
“Investing in our small businesses generates more shared prosperity in our communities and CDFIs are a key force multiplier, especially in funding businesses and projects in economically underserved communities. This legislation will leverage long-term investments from the private sector to support their good work and help them expand their efforts to support new and growing small businesses,” said Senator Van Hollen.
This bill will help directly support lenders who focus on underserved communities by creating a CDFI tax credit for private sector investors who make equity, equity-equivalent investments available to CDFIs. or long-term patient capital. The bill would benefit CDFIs of all types, including bank CDFIs, credit union CDFIs, venture capital CDFIs and CDFI loan funds, while providing institutions with the maximum flexibility and financial support they need to increase the wealth of low- and moderate-income communities.
The text of the invoice is available here. A page of the bill is available here.
This legislation has the support of a number of organizations, including the Community Development Bankers Association, National Association of Affordable Housing Lenders, Community Development Venture Capital Alliance, LISC, Opportunity Finance Network, CDFI Coalition, Inclusiv and the Enterprise Community Loan Fund, among others. .
“CDFI and its members strongly support the CDFI Investment Tax Credit Act. Credit will provide an invaluable tool for mobilizing private investment in underserved markets. It will be a game changer,” said Jeannine Jacokes, chief executive of the Community Development Bankers Association.
“The CDFI Tax Credit Act is a practical, bipartisan way to raise the long-term capital that struggling urban and rural communities need. It will create jobs, grow small businesses and strengthen families by providing health and childcare services. It’s a smart investment in America’s future,” said Buzz Roberts, president and CEO, National Association of Affordable Housing Lenders.
“CDVCA strongly supports the CDFI Investment Tax Credit Act. This will incentivize investors to provide flexible, long-term venture capital to create good jobs, productive wealth and entrepreneurial capacity in underinvested communities across the country,” said Kerwin Tesdell, President of Community Development Venture. Capital Alliance.
“The Local Initiatives Support Corporation (LISC) applauds Senators Warner and Wicker for introducing the Community Development Tax Credit Act of 2022. Community Development Financial Institutions (CDFIs) have repeatedly proven their ability to mobilize public and private capital to support investments in some of the most underserved communities in the country. This tax credit, by encouraging long-term investment in CDFIs, will enable CDFIs to in turn provide longer-term, lower-cost loans to finance affordable housing, small businesses, home property and essential community amenities in their neighborhoods,” said Matt Josephs, Senior Vice President. Policy Chair, LISC.
“The OFN applauds the continued leadership of Senators Warner and Wicker in supporting Community Development Financial Institutions (CDFIs). The CDFI Tax Credit Investment Act will help attract more private capital to CDFIs that provide affordable and responsible financing to low-wealth urban, rural and Indigenous communities across the country,” said Jennifer A. Vasiloff, Director of External Affairs, Opportunity Finance Network.
“The CDFI Coalition is pleased to add its voice in support of the legislation sponsored by Sens. Warner and Wicker to establish a tax credit for community development financial institutions (CDFIs). CDFIs provide financial products and services in urban neighborhoods and rural areas underserved by traditional financial institutions, especially communities with high rates of poverty and unemployment. Throughout the last economic downturn, CDFIs served as economic shock absorbers, providing flexible and patient capital, rigorous risk management, and a commitment to projects in their communities and the sustainability of their borrowers. As traditional lenders fled economically struggling communities, CDFIs stepped in to fill the void. Since the onset of the economic crisis caused by the pandemic, CDFIs have been on the front lines of providing financial and technical assistance to small businesses and minority-owned businesses. CDFIs fill a vital niche in the country’s financial service delivery system by serving communities and market sectors that conventional lenders cannot – with the ultimate goal of bringing CDFI customers into the mainstream economy by as bank customers, owners and / or entrepreneurs. The proposed CDFI Tax Credit will provide CDFIs with a new way to raise capital that will be deployed to finance small businesses, build affordable housing, and support community facilities in disadvantaged communities across the country. CDFIs leverage more than $12 of private capital for every dollar of federal support, so the resources allowed by the tax credit will extend well beyond the authorized amount and help CDFIs fill the funding gap. growing credit experienced by economically disadvantaged communities across the country,” Ceyl said. Prinster, President and CEO, Colorado Enterprise Fund and Chair of the CDFI Coalition.
“CDFI credit unions provide responsible credit and banking services to communities long excluded from the financial system. Loans from credit unions range from helping households access small emergency loans to meet their basic needs; to fix; buying that first home or starting or expanding a small business. Together, CDFI credit unions are able to channel and recycle billions of dollars in loans into local economies across the country. In order to increase their reach and impact, these impact lenders need long-term, equity-like investments. The legislation proposed by Senators Warner and Wicker to establish a CDFI tax credit is groundbreaking. This bill will incentivize private sector investors to make flexible, long-term investments that will allow our institutions to grow, expand their lending, and build wealth in low- and moderate-income communities,” said Cathie. Mahon, President and CEO, Inclusiv.
“Senators Warner and Wicker’s innovative proposal to direct more resources to our communities is groundbreaking and much needed. CDFIs, whose mission is to create economic opportunity for all, are already tapping sources of private capital to develop community-focused investments and support the communities they serve. Unfortunately, the needs of the community exceed the resources available to the CDFIs. Additional investment options like the CDFI Tax Credit will be a game-changer for the industry across the country. The VA CDFI Coalition is excited about the opportunities these investments could create throughout Virginia and hopes to see this success,” said Leah Fremouw, Chair of the VA CDFI Coalition Board of Directors.
“Enterprise enthusiastically supports the CDFI tax credit legislation introduced by Senators Warner and Wicker. The legislation exponentially builds on the power of CDFIs to mobilize private capital and energizes their work to address systemic inequalities in access to capital in low-income communities. Over three decades, we have invested $2.4 billion in underserved communities, and we know that CDFI investments are critical to equitable development and broad-based economic growth,” said Elise Balboni, President, Enterprise Community Loan Fund.
To combat the haemorrhage of jobs and economic opportunity during the pandemic, Senator Warner has been a congressional leader for CDFIs and MDIs. In July 2020, he teamed up with Sen. Kamala Harris (D-CA), Sen. Cory Booker (D-NJ) and a bipartisan group of colleagues to introduce the Neighborhood Employment and Investment Act – an effort that has won the endorsement of a host of other advocacy organizations and civil rights groups.
Senator Warner was then able to obtain provisions of the bill in the Coronavirus Response and Relief Supplementary Appropriations Act of 2021which was signed into law on December 27, 2020, providing an unprecedented $12 billion in funding to CDFIs.