II 

118TH CONGRESS 

1ST SESSION S. 2963 

To amend the Internal Revenue Code of 1986 to provide a credit for 

investment in Community Development Financial Institutions. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 28 (legislative day, SEPTEMBER 22), 2023 

Mr. WARNER (for himself, Mr. WICKER, Mr. PETERS, Mrs. HYDE-SMITH, Mr. 

MORAN, and Mr. VAN HOLLEN) introduced the following bill; which was 

read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

a credit for investment in Community Development Financial Institutions. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Community Develop5 ment Investment Tax Credit Act of 2023’’. 

6 SEC. 2. COMMUNITY DEVELOPMENT FINANCIAL INSTITU7 TION INVESTMENT TAX CREDIT. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 is amended by adding at the end the following new 

2 section: 

3 ‘‘SEC. 45BB. COMMUNITY DEVELOPMENT FINANCIAL INSTI4 TUTION INVESTMENT TAX CREDIT. 

5 ‘‘(a) ALLOWANCE OF CREDIT.— 

6 ‘‘(1) IN GENERAL.—For purposes of section 38, 

7 in the case of a taxpayer who holds a qualified 

8 CDFI investment on a credit allowance date of such 

9 investment which occurs during the taxable year, the 

10 CDFI investment credit determined under this sec11 tion for such taxable year is an amount equal to the 

12 applicable percentage of the amount paid to the 

13 qualified community development financial institu14 tion for such investment at its original issue. 

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

16 of paragraph (1)— 

17 ‘‘(A) IN GENERAL.—The applicable per18 centage is— 

19 ‘‘(i) 3 percent with respect to the first 

20 10 credit allowance dates, and 

21 ‘‘(ii) 4 percent with respect to the 10 

22 credit allowance dates following the last 

23 credit allowance date to which clause (i) 

24 applies. 


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1 ‘‘(B) INCREASED AMOUNT FOR CERTAIN

2 INVESTMENTS.—In the case of a qualified 

3 CDFI investment which does not have a fixed 

4 term or duration, the applicable percentage for 

5 any credit allowance date shall be increased by 

6 one percentage point. 

7 ‘‘(3) CREDIT ALLOWANCE DATE.— 

8 ‘‘(A) IN GENERAL.—For purposes of para9 graph (1), the term ‘credit allowance date’ 

10 means, with respect to any qualified CDFI in11 vestment— 

12 ‘‘(i) the date which is one year after 

13 the date on which such investment is ini14 tially made, and 

15 ‘‘(ii) each of the 19 anniversary dates 

16 of such date thereafter. 

17 ‘‘(B) LIMITATION.—Notwithstanding sub18 paragraph (A), a date shall not be treated as a 

19 credit allowance date with respect to any quali20 fied CDFI investment if such date occurs after 

21 any date on which— 

22 ‘‘(i) the financial institution in which 

23 such CDFI investment is made ceases to 

24 be a qualified community development fi25 nancial institution, or 


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1 ‘‘(ii) such investment is redeemed, re2 purchased, or otherwise repaid by the 

3 qualified community development financial 

4 institution which issued such investment. 

5 ‘‘(b) QUALIFIED CDFI INVESTMENT.—For purposes 

6 of this section— 

7 ‘‘(1) IN GENERAL.—The term ‘qualified CDFI 

8 investment’ means any investment in a qualified 

9 community development financial institution if— 

10 ‘‘(A) such investment is acquired by the 

11 taxpayer at its original issue (directly or 

12 through an underwriter) solely in exchange for 

13 cash, 

14 ‘‘(B) such investment is in the form of— 

15 ‘‘(i) non-voting stock or an equity 

16 equivalent investment, 

17 ‘‘(ii) an interest in an entity which is 

18 a partnership, or 

19 ‘‘(iii) an obligation described in sec20 tion 279(b)(2) which has a term of 10 

21 years or longer, 

22 ‘‘(C) such investment has not been des23 ignated as a qualified equity investment for 

24 purposes of section 45D, and 


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1 ‘‘(D) such investment is designated for 

2 purposes of this section by the qualified com3 munity development financial institution. 

4 Such term shall not include any investment issued 

5 by a qualified community development financial in6 stitution more than 5 years after the date that such 

7 financial institution receives an allocation under sub8 section (d)(3). Any allocation not used within such 

9 5-year period may be reallocated by the Secretary 

10 under subsection (d). 

11 ‘‘(2) LIMITATION.—The maximum amount of 

12 investments issued by a qualified community devel13 opment financial institution which may be des14 ignated under paragraph (1)(D) by such financial 

15 institution shall not exceed the portion of the limita16 tion amount allocated under subsection (d) to such 

17 financial institution. 

18 ‘‘(3) TREATMENT OF SUBSEQUENT PUR19 CHASERS.—The term ‘qualified CDFI investment’ 

20 includes any investment which would (but for para21 graph (1)(A)) be a qualified CDFI investment in the 

22 hands of the taxpayer if such investment was a 

23 qualified CDFI investment in the hands of a prior 

24 holder. 


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1 ‘‘(4) REDEMPTIONS.—A rule similar to the rule 

2 of section 1202(c)(3) shall apply for purposes of this 

3 subsection. 

4 ‘‘(5) EQUITY EQUIVALENT INVESTMENT.—For 

5 purposes of this paragraph, the term ‘equity equiva6 lent investment’ means an obligation of a qualified 

7 community development financial institution 

8 which— 

9 ‘‘(A) is carried as an investment on the in10 vestor’s balance sheet in accordance with Gen11 erally Accepted Accounting Principles, 

12 ‘‘(B) is not secured by any of the assets of 

13 the qualified community development financial 

14 institution, 

15 ‘‘(C) is fully subordinated to the right of 

16 repayment of all of the other creditors of the 

17 qualified community development financial in18 stitution, 

19 ‘‘(D) does not give the investor the right to 

20 accelerate payment unless the qualified commu21 nity development financial institution ceases its 

22 normal operations, 

23 ‘‘(E) carries an interest rate or dividend 

24 that is not tied to any income received by the 


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1 qualified community development financial in2 stitution, and 

3 ‘‘(F) has an indeterminate maturity. 

4 ‘‘(c) QUALIFIED COMMUNITY DEVELOPMENT FINAN5 CIAL INSTITUTION.—For purposes of this section, the 

6 term ‘qualified community development financial institu7 tion’ means— 

8 ‘‘(1) any community development financial in9 stitution (as defined in section 103 of the Commu10 nity Development Banking and Financial Institu11 tions Act of 1994 (12 U.S.C. 4702)), or 

12 ‘‘(2) any partnership that is controlled, for pur13 poses of section 482, or any investment vehicle the 

14 investment activities of which are otherwise substan15 tially entirely managed and directed, by one or more 

16 community development financial institutions (as so 

17 defined). 

18 ‘‘(d) NATIONAL LIMITATION ON AMOUNT OF INVEST19 MENTS DESIGNATED.— 

20 ‘‘(1) IN GENERAL.—There is an investment tax 

21 credit limitation for each calendar year. Such a limi22 tation is— 

23 ‘‘(A) $1,000,000,000 for 2023, 

24 ‘‘(B) $1,500,000,000 for 2024, and 


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1 ‘‘(C) $2,000,000,000 for each year there2 after. 

3 ‘‘(2) INFLATION ADJUSTMENT.— 

4 ‘‘(A) IN GENERAL.—In the case of any cal5 endar year after 2025, the $2,000,000,000 in 

6 paragraph (1)(C) shall be increased by an 

7 amount equal to— 

8 ‘‘(i) such dollar amount, multiplied by 

9 ‘‘(ii) the cost-of-living adjustment de10 termined under section 1(f)(3) for the cal11 endar year in which the taxable year be12 gins, determined by substituting ‘calendar 

13 year 2024’ for ‘calendar year 2016’ in sub14 paragraph (A)(ii) thereof. 

15 ‘‘(B) ROUNDING.—If any increase deter16 mined under subparagraph (A) is not a multiple 

17 of $1,000,000, such increase shall be rounded 

18 to the nearest multiple of $1,000,000. 

19 ‘‘(3) ALLOCATION OF LIMITATION.— 

20 ‘‘(A) IN GENERAL.—The limitation under 

21 paragraph (1) shall be allocated by the Sec22 retary among qualified community development 

23 financial institutions selected by the Secretary 

24 based on the following criteria: 


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1 ‘‘(i) Financial and compliance per2 formance. 

3 ‘‘(ii) Demonstrated ability to attract 

4 private capital. 

5 ‘‘(iii) The diversity of business model 

6 types. 

7 ‘‘(iv) The diversity of population den8 sity served. 

9 ‘‘(v) Impact generation capacity. 

10 ‘‘(vi) The information contained in the 

11 investment plan described in subparagraph 

12 (B). 

13 ‘‘(vii) Whether the investment term 

14 will exceed 10 years. 

15 ‘‘(viii) Such other criteria as deter16 mined appropriate by the Secretary. 

17 ‘‘(B) REQUIREMENT TO PROVIDE AN IN18 VESTMENT PLAN.—An application submitted to 

19 the Secretary under subparagraph (A) shall in20 clude a plan that— 

21 ‘‘(i) describes how the qualified com22 munity development financial institution 

23 will expand or maintain its lending and in24 vesting activity in its target market as a 

25 result of qualified CDFI investments, and 


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1 ‘‘(ii) includes such other information 

2 as required by the Secretary. 

3 ‘‘(4) CARRYOVER OF UNUSED LIMITATION.—If 

4 the new investment tax credit limitation for any cal5 endar year exceeds the aggregate amount allocated 

6 under paragraph (2) for such year, such limitation 

7 for the succeeding calendar year shall be increased 

8 by the amount of such excess. 

9 ‘‘(5) AUTHORIZATION OF USER FEES.— 

10 ‘‘(A) IN GENERAL.—The Secretary may 

11 charge a user fee for a request for an allocation 

12 of the limitation under paragraph (3). 

13 ‘‘(B) USE OF FEES.—Any fees collected by 

14 the Secretary pursuant to subparagraph (A) 

15 may be used to contract with third parties to 

16 verify information relating to the qualification 

17 of an entity as a qualified community develop18 ment financial institution. 

19 ‘‘(C) LIMITATION.—The fee charged under 

20 subparagraph (A) shall not exceed 0.05 percent 

21 of the amount of the allocation requested. 

22 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

23 such regulations as may be appropriate to carry out this 

24 section, including regulations— 


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1 ‘‘(1) which limit the credit under this section 

2 for investments which directly or indirectly receive a 

3 Federal tax benefit (including a credit under section 

4 42 or an exclusion from gross income under section 

5 103), 

6 ‘‘(2) which prevent the abuse of the purposes of 

7 this section, 

8 ‘‘(3) which impose appropriate reporting re9 quirements, and 

10 ‘‘(4) which provide rules for allocations under 

11 subsection (d)(3) to persons that have been certified 

12 as emerging community development financial insti13 tutions under section 105 of the Community Devel14 opment Banking and Financial Institutions Act of 

15 1994.’’. 

16 (b) PART OF GENERAL BUSINESS CREDIT.—Section 

17 38(b) of such Code is amended by striking ‘‘plus’’ at the 

18 end of paragraph (40), by striking the period at the end 

19 of paragraph (41) and inserting ‘‘, plus’’, and by adding 

20 at the end the following new paragraph: 

21 ‘‘(42) the CDFI investment credit determined 

22 under section 45BB(a).’’. 

23 (c) CONFORMING AMENDMENTS.— 

24 (1) Section 45D(b)(1) of the Internal Revenue 

25 Code of 1986 is amended by striking ‘‘and’’ at the 


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1 end of subparagraph (B), by striking the period at 

2 the end of subparagraph (C) and inserting ‘‘, and’’, 

3 and by adding at the end the following new subpara4 graph: 

5 ‘‘(D) such investment has not been des6 ignated as a qualified CDFI investment for 

7 purposes of section 45BB.’’. 

8 (2) The table of sections for subpart D of part 

9 IV of subchapter A of chapter 1 of such Code is 

10 amended by adding at the end the following new 

11 item: 

‘‘45BB. Community development financial institution investment tax credit.’’. 

12 (d) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to investments made after the date 

14 of the enactment of this Act. 

15 SEC. 3. COMMUNITY DEVELOPMENT EQUITY FUNDS. 

16 Section 105 of the Community Development Banking 

17 and Financial Institutions Act of 1994 (12 U.S.C. 4704) 

18 is amended by adding at the end the following: 

19 ‘‘(d) COMMUNITY DEVELOPMENT EQUITY FUNDS.— 

20 ‘‘(1) DEFINITION.—In this subsection, the term 

21 ‘community development equity fund’ means a com22 munity development financial institution with a 

23 management entity that manages 1 or more invest24 ment funds where a majority of both the number 

25 and dollar volume of financial products are equity or 


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1 near equity investments in small businesses located 

2 in an investment area or small businesses majority 

3 owned by a targeted population. 

4 ‘‘(2) QUALIFICATIONS.—In an application for 

5 assistance under this subtitle, an applicant that is a 

6 community development equity fund shall dem7 onstrate, to the satisfaction of the Secretary, that 

8 the current or proposed management team of the 

9 fund is qualified and has the knowledge, experience, 

10 and capability necessary for investing in the types of 

11 businesses contemplated by this Act, regulations im12 plementing this Act, and the business plan of the 

13 fund. 

14 ‘‘(3) TREATMENT.—The management entity of 

15 the community development equity fund and all of 

16 its current and future managed investment funds 

17 shall be treated as one community development fi18 nancial institution, regardless of the separation of 

19 the corporate structures, if the management entity 

20 maintains control over the investment decisions of 

21 the managed funds and has not made changes to its 

22 management team without approval of the Sec23 retary.’’. 


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1 SEC. 4. EMERGING CDFIS. 

2 Section 105 of the Community Development Banking 

3 and Financial Institutions Act of 1994 (12 U.S.C. 4704), 

4 as amended by section 3 of this Act, is amended by adding 

5 at the end the following: 

6 ‘‘(e) EMERGING COMMUNITY DEVELOPMENT FINAN7 CIAL INSTITUTIONS.— 

8 ‘‘(1) IN GENERAL.—An entity may submit to 

9 the Fund an application to be certified as an emerg10 ing community development financial institution. 

11 ‘‘(2) BUSINESS PLAN.—The application de12 scribed in paragraph (1) shall include a business 

13 plan that demonstrates that, during the 18-month 

14 period beginning on the date on which the business 

15 plan is approved, the entity will meet the require16 ments of subparagraph (A) of section 103(5) or sub17 section (d) of this section.’’. 

Æ 


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