II 

117TH CONGRESS 

2D SESSION S. 4418 

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 

JUNE 16, 2022 

Mr. WARNER (for himself, Mr. WICKER, Mrs. HYDE-SMITH, 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 2022’’. 

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. 45U. 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 (e). Any allocation not used within such 5- 

9 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)(C) by such financial in15 stitution shall not exceed the portion of the limita16 tion amount allocated under subsection (e) 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)), 

12 ‘‘(2) any partnership in which a community de13 velopment financial institution (as so defined) owns, 

14 directly or indirectly, 50 percent or more of the cap15 ital interest or the profits interest, or 

16 ‘‘(3) any partnership that is controlled, for pur17 poses of section 482, or any investment vehicle the 

18 investment activities of which are otherwise substan19 tially entirely managed and directed, by one or more 

20 community development financial institutions (as so 

21 defined). 

22 ‘‘(d) NATIONAL LIMITATION ON AMOUNT OF INVEST23 MENTS DESIGNATED.— 


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

2 credit limitation for each calendar year. Such a limi3 tation is— 

4 ‘‘(A) $1,000,000,000 for 2022, 

5 ‘‘(B) $1,500,000,000 for 2023, and 

6 ‘‘(C) $2,000,000,000 for each year there7 after. 

8 ‘‘(2) INFLATION ADJUSTMENT.— 

9 ‘‘(A) IN GENERAL.—In the case of any cal10 endar year after 2024, the $2,000,000,000 in 

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

12 amount equal to— 

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

14 ‘‘(ii) the cost-of-living adjustment de15 termined under section 1(f)(3) for the cal16 endar year in which the taxable year be17 gins, determined by substituting ‘calendar 

18 year 2023’ for ‘calendar year 2016’ in sub19 paragraph (A)(ii) thereof. 

20 ‘‘(B) ROUNDING.—If any increase deter21 mined under subparagraph (A) is not a multiple 

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

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

24 ‘‘(3) ALLOCATION OF LIMITATION.— 


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

2 paragraph (1) shall be allocated by the Sec3 retary among qualified community development 

4 financial institutions selected by the Secretary 

5 based on the following criteria: 

6 ‘‘(i) Financial and compliance per7 formance. 

8 ‘‘(ii) Demonstrated ability to attract 

9 private capital. 

10 ‘‘(iii) The diversity of business model 

11 types. 

12 ‘‘(iv) The diversity of population den13 sity served. 

14 ‘‘(v) Impact generation capacity. 

15 ‘‘(vi) The information contained in the 

16 investment plan described in subparagraph 

17 (B). 

18 ‘‘(vii) Whether the investment term 

19 will exceed 10 years. 

20 ‘‘(B) REQUIREMENT TO PROVIDE AN IN21 VESTMENT PLAN.—An application submitted to 

22 the Secretary under subparagraph (A) shall in23 clude a plan that describes how the qualified 

24 community development financial institution 

25 will expand or maintain its lending and investVerDate Sep 11 2014 00:25 Jun 18, 2022 Jkt 029200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4418.IS S4418

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1 ing activity in its target market as a result of 

2 qualified CDFI investments. 

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

10 such regulations as may be appropriate to carry out this 

11 section, including regulations— 

12 ‘‘(1) which limit the credit for investments 

13 which are directly or indirectly subsidized by other 

14 Federal tax benefits (including the credit under sec15 tion 42 and the exclusion from gross income under 

16 section 103), 

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

18 this section, 

19 ‘‘(3) which impose appropriate reporting re20 quirements, and 

21 ‘‘(4) which apply the provisions of this section 

22 to newly formed entities.’’. 

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

24 38(b) of such Code is amended by striking ‘‘plus’’ at the 

25 end of paragraph (32), by striking the period at the end 


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1 of paragraph (33) and inserting ‘‘, plus’’, and by adding 

2 at the end the following new paragraph: 

3 ‘‘(34) the CDFI investment credit determined 

4 under section 45U(a).’’. 

5 (c) CONFORMING AMENDMENTS.— 

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

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

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

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

10 and by adding at the end the following new subpara11 graph: 

12 ‘‘(D) such investment has not been des13 ignated as a qualified CDFI investment for 

14 purposes of section 45U.’’. 

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

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

17 amended by adding at the end the following new 

18 item: 

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

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

20 this section shall apply to investments made after the date 

21 of the enactment of this Act. 

Æ 


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