Community Development Investment Tax Credit Act of 2022
Bill: S.4418 | Sponsor: Sen. Warner, Mark R. (D-VA)
Policy area: Taxation

Summary:
Community Development Investment Tax Credit Act of 2022
This bill allows a new tax credit for investment in Community Development Financial Institutions (CDFIs) to benefit underserved communities. The credit amount is a specified percentage of investment in a CDFI during successive ten year periods. The total credit amount is capped at $1 billion in 2022, $1.5 billion in 2023, and $2 billion in 2024 and each year thereafter, adjusted for inflation.

To amend the Internal Revenue Code of 1986 to provide a credit for 
      investment in Community Development Financial Institutions.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Community Development Investment Tax 
Credit Act of 2022''.

SEC. 2. COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION INVESTMENT TAX 
              CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 45U. COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION INVESTMENT TAX 
              CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, in the case 
        of a taxpayer who holds a qualified CDFI investment on a credit 
        allowance date of such investment which occurs during the 
        taxable year, the CDFI investment credit determined under this 
        section for such taxable year is an amount equal to the 
        applicable percentage of the amount paid to the qualified 
        community development financial institution for such investment 
        at its original issue.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The applicable percentage is--
                            ``(i) 3 percent with respect to the first 
                        10 credit allowance dates, and
                            ``(ii) 4 percent with respect to the 10 
                        credit allowance dates following the last 
                        credit allowance date to which clause (i) 
                        applies.
                    ``(B) Increased amount for certain investments.--In 
                the case of a qualified CDFI investment which does not 
                have a fixed term or duration, the applicable 
                percentage for any credit allowance date shall be 
                increased by one percentage point.
            ``(3) Credit allowance date.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `credit allowance date' means, with respect to 
                any qualified CDFI investment--
                            ``(i) the date which is one year after the 
                        date on which such investment is initially 
                        made, and
                            ``(ii) each of the 19 anniversary dates of 
                        such date thereafter.
                    ``(B) Limitation.--Notwithstanding subparagraph 
                (A), a date shall not be treated as a credit allowance 
                date with respect to any qualified CDFI investment if 
                such date occurs after any date on which--
                            ``(i) the financial institution in which 
                        such CDFI investment is made ceases to be a 
                        qualified community development financial 
                        institution, or
                            ``(ii) such investment is redeemed, 
                        repurchased, or otherwise repaid by the 
                        qualified community development financial 
                        institution which issued such investment.
    ``(b) Qualified CDFI Investment.--For purposes of this section--
            ``(1) In general.--The term `qualified CDFI investment' 
        means any investment in a qualified community development 
        financial institution if--
                    ``(A) such investment is acquired by the taxpayer 
                at its original issue (directly or through an 
                underwriter) solely in exchange for cash,
                    ``(B) such investment is in the form of--
                            ``(i) non-voting stock or an equity 
                        equivalent investment,
                            ``(ii) an interest in an entity which is a 
                        partnership, or
                            ``(iii) an obligation described in section 
                        279(b)(2) which has a term of 10 years or 
                        longer,
                    ``(C) such investment has not been designated as a 
                qualified equity investment for purposes of section 
                45D, and
                    ``(D) such investment is designated for purposes of 
                this section by the qualified community development 
                financial institution.
        Such term shall not include any investment issued by a 
        qualified community development financial institution more than 
        5 years after the date that such financial institution receives 
        an allocation under subsection (e). Any allocation not used 
        within such 5-year period may be reallocated by the Secretary 
        under subsection (d).
            ``(2) Limitation.--The maximum amount of investments issued 
        by a qualified community development financial institution 
        which may be designated under paragraph (1)(C) by such 
        financial institution shall not exceed the portion of the 
        limitation amount allocated under subsection (e) to such 
        financial institution.
            ``(3) Treatment of subsequent purchasers.--The term 
        `qualified CDFI investment' includes any investment which would 
        (but for paragraph (1)(A)) be a qualified CDFI investment in 
        the hands of the taxpayer if such investment was a qualified 
        CDFI investment in the hands of a prior holder.
            ``(4) Redemptions.--A rule similar to the rule of section 
        1202(c)(3) shall apply for purposes of this subsection.
            ``(5) Equity equivalent investment.--For purposes of this 
        paragraph, the term `equity equivalent investment' means an 
        obligation of a qualified community development financial 
        institution which--
                    ``(A) is carried as an investment on the investor's 
                balance sheet in accordance with Generally Accepted 
                Accounting Principles,
                    ``(B) is not secured by any of the assets of the 
                qualified community development financial institution,
                    ``(C) is fully subordinated to the right of 
                repayment of all of the other creditors of the 
                qualified community development financial institution,
                    ``(D) does not give the investor the right to 
                accelerate payment unless the qualified community 
                development financial institution ceases its normal 
                operations,
                    ``(E) carries an interest rate or dividend that is 
                not tied to any income received by the qualified 
                community development financial institution, and
                    ``(F) has an indeterminate maturity.
    ``(c) Qualified Community Development Financial Institution.--For 
purposes of this section, the term `qualified community development 
financial institution' means--
            ``(1) any community development financial institution (as 
        defined in section 103 of the Community Development Banking and 
        Financial Institutions Act of 1994 (12 U.S.C. 4702)),
            ``(2) any partnership in which a community development 
        financial institution (as so defined) owns, directly or 
        indirectly, 50 percent or more of the capital interest or the 
        profits interest, or
            ``(3) any partnership that is controlled, for purposes of 
        section 482, or any investment vehicle the investment 
        activities of which are otherwise substantially entirely 
        managed and directed, by one or more community development 
        financial institutions (as so defined).
    ``(d) National Limitation on Amount of Investments Designated.--
            ``(1) In general.--There is an investment tax credit 
        limitation for each calendar year. Such a limitation is--
                    ``(A) $1,000,000,000 for 2022,
                    ``(B) $1,500,000,000 for 2023, and
                    ``(C) $2,000,000,000 for each year thereafter.
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of any calendar year 
                after 2024, the $2,000,000,000 in paragraph (1)(C) 
                shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2023' 
                        for `calendar year 2016' in subparagraph 
                        (A)(ii) thereof.
                    ``(B) Rounding.--If any increase determined under 
                subparagraph (A) is not a multiple of $1,000,000, such 
                increase shall be rounded to the nearest multiple of 
                $1,000,000.
            ``(3) Allocation of limitation.--
                    ``(A) In general.--The limitation under paragraph 
                (1) shall be allocated by the Secretary among qualified 
                community development financial institutions selected 
                by the Secretary based on the following criteria:
                            ``(i) Financial and compliance performance.
                            ``(ii) Demonstrated ability to attract 
                        private capital.
                            ``(iii) The diversity of business model 
                        types.
                            ``(iv) The diversity of population density 
                        served.
                            ``(v) Impact generation capacity.
                            ``(vi) The information contained in the 
                        investment plan described in subparagraph (B).
                            ``(vii) Whether the investment term will 
                        exceed 10 years.
                    ``(B) Requirement to provide an investment plan.--
                An application submitted to the Secretary under 
                subparagraph (A) shall include a plan that describes 
                how the qualified community development financial 
                institution will expand or maintain its lending and 
                investing activity in its target market as a result of 
                qualified CDFI investments.
            ``(4) Carryover of unused limitation.--If the new 
        investment tax credit limitation for any calendar year exceeds 
        the aggregate amount allocated under paragraph (2) for such 
        year, such limitation for the succeeding calendar year shall be 
        increased by the amount of such excess.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section, including 
regulations--
            ``(1) which limit the credit for investments which are 
        directly or indirectly subsidized by other Federal tax benefits 
        (including the credit under section 42 and the exclusion from 
        gross income under section 103),
            ``(2) which prevent the abuse of the purposes of this 
        section,
            ``(3) which impose appropriate reporting requirements, and
            ``(4) which apply the provisions of this section to newly 
        formed entities.''.
    (b) Part of General Business Credit.--Section 38(b) of such Code is 
amended by striking ``plus'' at the end of paragraph (32), by striking 
the period at the end of paragraph (33) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(34) the CDFI investment credit determined under section 
        45U(a).''.
    (c) Conforming Amendments.--
            (1) Section 45D(b)(1) of the Internal Revenue Code of 1986 
        is amended by striking ``and'' at the end of subparagraph (B), 
        by striking the period at the end of subparagraph (C) and 
        inserting ``, and'', and by adding at the end the following new 
        subparagraph:
                    ``(D) such investment has not been designated as a 
                qualified CDFI investment for purposes of section 
                45U.''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

``45U. Community development financial institution investment tax 
                            credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to investments made after the date of the enactment of this Act.
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