Community Affairs:
CDFI Fund Certification and New Markets Tax Credits

The CDFI Fund provides relatively small infusions of capital to institutions that serve distressed communities and low-income individuals. CDFIs are specialized financial institutions that work in market niches that have not been adequately served by traditional financial institutions. CDFIs provide a wide range of financial products and services, including mortgage financing for first-time home-buyers, financing for needed community facilities, commercial loans and investments to start or expand small businesses, loans to rehabilitate rental housing, and financial services needed by low-income households and local businesses. In addition, CDFIs provide services that help ensure that credit is used effectively, such as technical assistance to small businesses and credit counseling to consumers. More information is available at: http://www.cdfifund.gov/overview/index.asp.

CDCs can also request to become CDFI Fund designated Community Development Entities (CDEs), which would allow them to apply for New Markets Tax Credits (NMTC) [see: http://www.cdfifund.gov/programs/programs.asp?programID=5]. CDEs that have applied to and received NMTC allocations from the Fund may offer tax credits to investors in exchange for equity investments in the CDE. All CDEs are eligible to receive loans and investments from, or sell certain loans to, CDEs that have been issued tax credit allocations by the Fund. Finally, a CDC subsidiary can be useful in helping bank affiliates to design and implement community development finance programs. For example, a CDC may provide technical assistance, advisory services, equity investments, or debt financing to affiliate banks and their community development loan programs.