Van Hollen, Warner, Colleagues Introduce Bill to Boost Economic Growth in Underserved Communities
June 17, 2022
Bipartisan legislation will create a new tax credit to promote private investment in community lenders
Today, U.S. Senator Chris Van Hollen (D-Md.), Mark R. Warner (D-Va.),Roger Wicker (R-Miss.), and Cindy Hyde-Smith (R-Miss.) introduced bipartisan legislation to promote lasting economic prosperity in underserved 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.
“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.
“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.
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.
To combat the economic harm of the pandemic, Senator Van Hollen has advocated for greater investments in Congress for CDFIs and Minority Depository Institutions (MDIs). As Chairman of the Appropriations Subcommittee on Financial Services and General Government, Senator Van Hollen is promoting economic growth and small business development in disadvantaged and low-income communities in Maryland by fighting for greater investments in CDFIs. In April of 2022, he announced $170,699 directed to Harbor Bank of Maryland, a Baltimore-based CDFI and MDI, to help spur economic growth and support minority-owned businesses in communities and industries most impacted by the COVID-19 pandemic. Previously, in August of 2020, Senator Van Hollen teamed up with Senator Brian Schatz (D-Hawai’i) to introduce a new bill to create the CDFI Crisis Fund to provide aid during natural disasters and economic crises during the COVID-19 pandemic.
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.