According to a one-page summary of the legislation, S.4418 would do the following:

• Credit: The bill provides a credit of 3% for the first 10 years of an eligible investment in a CDFI, 4% for the following years, up to a maximum of 10 years. There is a 1% credit increase for investments in shares or share equivalents.
• Qualified placements: The bill provides the tax credit for qualified investments in CDFIs, including equity investments, loans with a minimum term of 10 years and equivalent equity investments for CDFI loan funds. The institutions receiving the investment must be a qualified CDFI.
• Limitation: 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.
• Allocation: To receive a grant, eligible CDFIs must apply through the Fund. The bill directs the fund to allocate credit based on CDFIs’ past performance and ability to attract private capital. It also ensures that small CDFIs and institutions and rural areas will benefit from the new resources.

Sen. Wicker said small businesses, including those in low-income and minority communities, are a mainstay of the economy of Mississippi and the entire country.

“CDFIs 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,” Wicker said.

Senator Hyde-Smith noted that 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,” Hyde-Smith said. .

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.

“The OFN applauds the continued leadership of Senators Warner and Wicker in supporting Community Development Financial Institutions (CDFIs). The CDFI Investment Tax Credit Act will help attract more private capital to CDFIs providing affordable and responsible financing to low-income urban, rural and Indigenous communities across the country,” said Jennifer A. Vasiloff, Director of External Affairs, Opportunity Finance Network.

“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’s going to be a game-changer.” said Jeannine Jacokes, Managing Director, 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.

“Senators Warner and Wicker’s innovative proposal to get 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 Board, Coalition VA CDFI.