[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2963 Introduced in Senate (IS)]

<DOC>






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.

    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 2023''.

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. 45BB. 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 (d)(3). 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)(D) by such 
        financial institution shall not exceed the portion of the 
        limitation amount allocated under subsection (d) 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)), or
            ``(2) 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 2023,
                    ``(B) $1,500,000,000 for 2024, and
                    ``(C) $2,000,000,000 for each year thereafter.
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of any calendar year 
                after 2025, 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 2024' 
                        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.
                            ``(viii) Such other criteria as determined 
                        appropriate by the Secretary.
                    ``(B) Requirement to provide an investment plan.--
                An application submitted to the Secretary under 
                subparagraph (A) shall include a plan that--
                            ``(i) 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, and
                            ``(ii) includes such other information as 
                        required by the Secretary.
            ``(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.
            ``(5) Authorization of user fees.--
                    ``(A) In general.--The Secretary may charge a user 
                fee for a request for an allocation of the limitation 
                under paragraph (3).
                    ``(B) Use of fees.--Any fees collected by the 
                Secretary pursuant to subparagraph (A) may be used to 
                contract with third parties to verify information 
                relating to the qualification of an entity as a 
                qualified community development financial institution.
                    ``(C) Limitation.--The fee charged under 
                subparagraph (A) shall not exceed 0.05 percent of the 
                amount of the allocation requested.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section, including 
regulations--
            ``(1) which limit the credit under this section for 
        investments which directly or indirectly receive a Federal tax 
        benefit (including a credit under section 42 or an 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 provide rules for allocations under subsection 
        (d)(3) to persons that have been certified as emerging 
        community development financial institutions under section 105 
        of the Community Development Banking and Financial Institutions 
        Act of 1994.''.
    (b) Part of General Business Credit.--Section 38(b) of such Code is 
amended by striking ``plus'' at the end of paragraph (40), by striking 
the period at the end of paragraph (41) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(42) the CDFI investment credit determined under section 
        45BB(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 
                45BB.''.
            (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:

``45BB. 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.

SEC. 3. COMMUNITY DEVELOPMENT EQUITY FUNDS.

    Section 105 of the Community Development Banking and Financial 
Institutions Act of 1994 (12 U.S.C. 4704) is amended by adding at the 
end the following:
    ``(d) Community Development Equity Funds.--
            ``(1) Definition.--In this subsection, the term `community 
        development equity fund' means a community development 
        financial institution with a management entity that manages 1 
        or more investment funds where a majority of both the number 
        and dollar volume of financial products are equity or near 
        equity investments in small businesses located in an investment 
        area or small businesses majority owned by a targeted 
        population.
            ``(2) Qualifications.--In an application for assistance 
        under this subtitle, an applicant that is a community 
        development equity fund shall demonstrate, to the satisfaction 
        of the Secretary, that the current or proposed management team 
        of the fund is qualified and has the knowledge, experience, and 
        capability necessary for investing in the types of businesses 
        contemplated by this Act, regulations implementing this Act, 
        and the business plan of the fund.
            ``(3) Treatment.--The management entity of the community 
        development equity fund and all of its current and future 
        managed investment funds shall be treated as one community 
        development financial institution, regardless of the separation 
        of the corporate structures, if the management entity maintains 
        control over the investment decisions of the managed funds and 
        has not made changes to its management team without approval of 
        the Secretary.''.

SEC. 4. EMERGING CDFIS.

    Section 105 of the Community Development Banking and Financial 
Institutions Act of 1994 (12 U.S.C. 4704), as amended by section 3 of 
this Act, is amended by adding at the end the following:
    ``(e) Emerging Community Development Financial Institutions.--
            ``(1) In general.--An entity may submit to the Fund an 
        application to be certified as an emerging community 
        development financial institution.
            ``(2) Business plan.--The application described in 
        paragraph (1) shall include a business plan that demonstrates 
        that, during the 18-month period beginning on the date on which 
        the business plan is approved, the entity will meet the 
        requirements of subparagraph (A) of section 103(5) or 
        subsection (d) of this section.''.
                                 <all>