Warner, Colleagues Introduce Bill to Boost Economic Growth in Black, Brown & Low-Income Communities
Jun 16 2022
WASHINGTON – Today, U.S. Sen. Mark R. Warner (D-VA) was joined by Sens. Roger Wicker (R-MS), Chris Van Hollen (D-MD), and Cindy Hyde-Smith (R-MS) in introducing bipartisan legislation to promote lasting 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 a backbone for low-income or minority-owned businesses, which tend to have fewer banking relationships and less access to traditional forms of funding.
“As a former entrepreneur and venture capitalist, I know that talent and ambition is not confined by income bracket or zip code. Unfortunately, access to start-up capital often is. CDFIs and MDIs do the invaluable work of bridging the gap and reaching small businesses in our most vulnerable communities – a role that became even more critical during the pandemic,” said Sen. Warner. “Despite the historic investments we were able to deliver through the emergency COVID-19 relief package, CDFIs remain in need of additional equity and capital to continue serving their communities. This legislation will create a new tax credit, helping spur important private-sector investments and allowing these community lenders to grow."
“Small businesses, including those in low-income and minority communities, are a pillar of the economy in Mississippi and across the nation,” said Sen. Wicker. “CDFIs and MDIs help support businesses, individuals, and entrepreneurs by providing access to capital and alternatives to predatory loans in low-access areas. I am glad to join my colleagues on this bipartisan measure to create an additional tax credit to support and expand this private-sector investment.”
“CDFI investments are a critical source of capital for small business growth in many Mississippi communities and around the country. This bill would create a tax credit structure to attract greater private-sector investments in CDFIs, which would increase their ability to spur more long-term growth in disadvantaged areas,” said Sen. Hyde-Smith.
“Investing in our small businesses generates more shared prosperity in our communities and CDFIs are a key force multiplier, particularly in financing businesses and projects in economically underserved communities. This legislation will leverage long-term, private sector investments to support their good work and help them expand their efforts to support new and growing small businesses,” said Sen. Van Hollen.
This bill will help direct support to lenders that focus on underserved communities by creating a 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, while providing institutions with the maximum flexibility and financial support they need to increase wealth in low- and moderate-income communities.
Bill text is available here. A one-pager of the bill is available here.
This legislation has the support of a number of organizations, including 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.
“CDBA and its members strongly support the CDFI Tax Credit Investment Act. The credit will provide an invaluable tool for leveraging private investment into underserved markets. This will be a game changer,” said Jeannine Jacokes, Chief Executive Officer, Community Development Bankers Association.
“The CDFI Tax Credit Act is a practical, bipartisan way to marshal the long-term capital that struggling urban and rural communities need. It will create jobs, grow small businesses, and strengthen families by providing health services and child care. It's a smart investment in America's future,” said Buzz Roberts, President & CEO, National Association of Affordable Housing Lenders.
“CDVCA strongly supports the CDFI Tax Credit Investment Act. It will give incentive for investors to provide flexible, long-term risk capital to create good jobs, productive wealth, and entrepreneurial capacity in underinvested communities throughout the nation,” said Kerwin Tesdell, President, 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 time and time again proven their ability to leverage public and private capital to support investments in some of the most underserved communities in the country. This tax credit, by incentivizing long term investments in CDFIs, will allow CDFIs to in turn provide longer term, lower cost loans to finance affordable housing, small businesses, homeownership and essential community facilities in their neighborhoods,” said Matt Josephs, Senior Vice President for Policy, LISC.
“OFN applauds Senators Warner and Wicker’s continued leadership in supporting community development financial institutions (CDFIs). The CDFI Tax Credit Investment Act will help drive more private capital to CDFIs offering affordable, responsible financing to low-wealth urban, rural, and Native communities across the country,” said Jennifer A. Vasiloff, Chief External Affairs Officer, Opportunity Finance Network.
“The CDFI Coalition is pleased to add its voice in strong support for 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, particularly those 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 commitment to the projects in their communities and the sustainability of their borrowers. While traditional lenders fled economically distressed communities, CDFIs stepped in to fill the void. Since the advent of the economic crisis prompted by the pandemic, CDFIs have been on the frontlines of providing financial and technical assistance to small and minority-owned businesses. CDFIs fill a vital niche in the nation's financial services delivery system by serving communities and market sectors that conventional lenders cannot - with the ultimate goal of bringing CDFI customers into the mainstream economy as bank customers, homeowners and/or entrepreneurs. The proposed CDFI Tax Credit will provide a new avenue for CDFIs to raise capital that will be deployed to finance small businesses, construct affordable housing, and support community facilities in disadvantaged communities across the country. CDFIs leverage over $12 in private capital to every $1 in federal support, so the resources authorized by the tax credit will extend far beyond the amount authorized and help CDFIs to fill the widening credit gap encountered by economically disadvantaged communities across the country,” said Ceyl Prinster, President and CEO, Colorado Enterprise Fund and Chair of the CDFI Coalition.
“CDFI credit unions deliver credit and responsible banking services in communities long-excluded by the financial system. Credit union lending runs the gamut from helping households access small emergency loans to meet basic needs; to repairing; to purchasing that first home or starting or expanding a small business. Together CDFI credit unions are able to channel and recycle billions of dollars of loans in local economies across the country. In order to grow reach and impact, these high-impact lenders need long-term equity like investment. The proposed legislation by Senators Warner and Wicker to establish a CDFI Tax Credit is groundbreaking. This bill will provide an incentive for private sector investors to make flexible long-term investments that enable our institutions to grow, expand their lending and increase wealth in low- and moderate-income communities,” said Cathie Mahon, President and CEO, Inclusiv.
“Senators Warner and Wicker's innovative proposal to drive more resources into our communities is forward-thinking and much needed. CDFIs, whose missions are to create economic opportunity for all, already leverage private capital sources to develop community-centered investments and sustain the communities they serve. Unfortunately, the community need is outpacing the resources available to 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 by the possibilities these investments could create across Virginia and hope to see this pass,” said Leah Fremouw, Board President, VA CDFI Coalition.
“Enterprise enthusiastically supports the CDFI Tax Credit Act introduced by Senators Warner and Wicker. 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. 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,” said Elise Balboni, President, Enterprise Community Loan Fund.
To combat the hemorrhaging of jobs and economic opportunities during the pandemic, Sen. Warner has been a leader in Congress for CDFIs and MDIs. In July of 2020, he teamed up with then-Sen. Kamala Harris (D-CA), Sen. Cory Booker (D-NJ), and a bipartisan group of colleagues to introduce the Jobs and Neighborhood Investment Act – an effort that secured endorsements from a host of other advocacy organizations and civil rights groups.
Sen. Warner was later able to secure provisions from the bill in the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, which was signed into law on December 27, 2020, providing an unprecedented $12 billion in funding for CDFIs.