Wicker bill offers tax credit supporting private-sector investment in underserved communities

U.S. Sen. Roger Wicker (R-MS) recently introduced a bipartisan bill focused on promoting economic development for small businesses in America’s low-income, rural and minority communities.

“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, who introduced the Community Development Investment Tax Credit Act, S. 4418, alongside bill sponsor U.S. Sen. Mark Warner (D-VA) on June 16.

The legislation, if enacted, would create a new tax credit for private investments in qualified community development financial institutions (CDFIs), which provide affordable credit and investment to underserved communities and individuals, according to a bill summary provided by Sen. Wicker’s office.

The additional private-sector investment in CDFIs would unlock more equity and long-term financial capital for small businesses and individuals in underserved areas that have less access to traditional banks or loans, the summary says.

“CDFIs support businesses, individuals and entrepreneurs by providing access to capital and alternatives to predatory loans in low-access areas,” said Sen. Wicker. “I am glad to join my colleagues on this bipartisan measure to create an additional tax credit to support and expand private-sector investment.”

Among several provisions, S. 4418 would help to 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, according to the summary.

The bill would provide a 3 percent credit for the first 10 years of a qualified investment in a CDFI, 4 percent for the following years, up to a maximum of 10 years, and there would be a one percent increase in the credit for equity or equity equivalent investments.

Additionally, the total credit available would be capped, starting at $1 billion for 2022, $1.5 billion for 2023, and $2 billion for 2024 and each year thereafter adjusted for inflation, the summary says.

S. 4418 has been endorsed by numerous organizations, including the Community Development Bankers Association, the National Association of Affordable Housing Lenders, the Community Development Venture Capital Alliance, the Opportunity Finance Network, the CDFI Coalition, and the Enterprise Community Loan Fund, among others.