# Plain Language Summary: Community Development Investment Tax Credit Act of 2023

This bill creates a new tax credit that rewards investors who put money into Community Development Financial Institutions (CDFIs)—specialized lenders that serve low-income communities and underserved areas. If you invest in one of these institutions, you can claim a tax credit (a direct reduction in your taxes) worth 3 to 4 percent of your investment each year for up to 20 years. The credit is slightly higher—4 to 5 percent—if your investment has no fixed end date, meaning the institution can use your money indefinitely.

To qualify for this credit, your investment must be in cash, take the form of stock, a partnership stake, or a long-term loan (at least 10 years), and the CDFI must officially designate it for this program. You can't use this credit if the same investment already qualifies for another federal tax benefit. The government will allocate a limited pool of investments that can receive this credit each year—starting at $1 billion in 2023, growing to $1.5 billion in 2024, and $2 billion from 2025 onward, with adjustments for inflation after that.

The bill also strengthens the rules around what counts as a CDFI, creating new categories for "community development equity funds" that focus on investing in small businesses in underserved areas, and establishing a path for newer institutions to become certified as "emerging CDFIs." The goal is to encourage private investment in financial institutions that lend to small businesses, entrepreneurs, and communities that traditional banks often overlook, while preventing the same investment from getting multiple federal tax benefits simultaneously.

Community Development Investment Tax Credit Act of 2023

Thanedar, Shri

Community Development Investment Tax Credit Act of 2023 This bill allows investors a business-related tax credit for investment in a Community Development Financial Institution (CDFI). The applicable percentage of such credit is 3% for the first 10 years of investment in a CDFI with a 1% increase after the initial credit allowance date and for investments without a fixed term or duration. The tax credit is available to investors who invest in various CDFIs to provide financial support for increasing wealth in low- and moderate-income communities. The national limitation on the credit is $1 billion for 2022, $1.5 billion for 2023, and $2 billion for 2024 and each year thereafter, with adjustments for inflation.