They provide a range of financial products and services in economically distressed markets, such as mortgage financing for low-income and first-time homebuyers and not-for-profit developers, flexible underwriting and risk capital for needed community facilities, technical assistance, and commercial loans and investments to small start-up or expanding businesses in low-income areas. CDFIs include regulated institutions, such as community development banks and credit unions, and nonregulated institutions, such as loan and venture capital funds. This report begins by describing the Community Development Financial Institutions Fund's (Fund's) history, current appropriations, and each of its programs. The next section of the report analyzes four policy considerations of congressional interest regarding the Fund and the effective use of federal resources to promote economic development. CDEs are eligible for the NMTC. QOFs are eligible for Opportunity Zone (OZ) tax incentives. Certified Community Development Financial Institutions (CDFIs)

CDFI certification is a designation conferred by the Fund and a requirement for accessing financial award assistance from the Fund through the CDFI program, Native American CDFI Assistance (NACA) programs, and certain benefits under the BEA program to support an organization's established community development financing programs. To carry out this mission, the Fund is composed of several programs that address multiple needs of distressed communities. These programs encourage qualified entities to provide financial and technical assistance to meet the needs of local businesses, potential homebuyers, community developers, and potential investors in low-income and distressed communities. To be eligible for an FA award, a CDFI must be certified by the Fund before it applies for the award. The organizations were headquartered in 46 states and the District of Columbia. FDIC-insured financial institutions that are dedicated to financing and supporting economic development in qualified communities are eligible for the BEA. Opportunity Zone Tax Incentives

The 2017 tax revision ( P.L. First, it analyzes the debate on targeting development assistance toward people versus places. Second, it examines the debate on targeting economic development policies toward labor or capital. Third, it analyzes whether the Fund plays a unique role in promoting economic development or whether it duplicates, complements, or competes with the goals and activities of other federal, state, and local programs. Fourth, it examines assessments of the Fund's management. In addition, some studies indicate that geographically targeted policies may shift activity from a comparative area toward the targeted zone, rather than create new economic activity. Do the Fund's Programs Duplicate Other Government Efforts? Although certain CDFIs may be eligible for similar forms of assistance from other federal programs (e.g., guaranteed loans from SBA), the Fund's limitations to activities in distressed communities allows CDFIs to compete with other entities that face similar economic, environmental, and geographic challenges. Third, some argue that the Fund's programs complement, not compete with, the goals and programs of other federal initiatives. Concerns over the Fund's management primarily involve questions over the transparency and consistency of the Fund's award evaluation processes. Some maintained that TARP's temporary funds were not intended to target regional banks and that the program functionally resulted in a bypass of the typical appropriations process for the Fund.
As communities face a variety of economic challenges, some are looking to local banks and financial institutions for solutions that address the specific development needs of low-income and distressed communities. Community development financial institutions (CDFIs) provide financial products and services, such as mortgage financing for homebuyers and not-for-profit developers; underwriting and risk capital for community facilities; technical assistance; and commercial loans and investments to small, start-up, or expanding businesses. CDFIs include regulated institutions, such as community development banks and credit unions, and nonregulated institutions, such as loan and venture capital funds.
The Community Development Financial Institutions Fund (Fund), an agency within the Department of the Treasury, administers several programs that encourage the role of CDFIs and similar organizations in community development. Nearly 1,000 financial institutions located throughout all 50 states and the District of Columbia are eligible for the Fund's programs to provide financial and technical assistance to meet the needs of businesses, homebuyers, community developers, and investors in distressed communities. In addition, the Fund certifies entities and designates areas that are eligible for the New Markets Tax Credit and Opportunity Zone (OZ) tax incentives, which were recently enacted by the 2017 tax revision (P.L. 115-97).
This report begins by describing the Fund's history, current appropriations, and each of its programs. A description of the Fund's process of certifying certain financial institutions to be eligible for the Fund's program awards follows. The next section provides an overview of each program's purpose, use of award proceeds, eligibility criteria, and relevant issues for Congress.
The final section analyzes four policy considerations of congressional interest regarding the Fund and the effective use of federal resources to promote economic development. First, it analyzes the debate on targeting development assistance toward particular geographic areas or low-income individuals generally. Prior research indicates that geographically targeted assistance, like the Fund's programs, may increase economic activity in the targeted place or area. However, this increase may be due to a shift in activity from an area not eligible for assistance.
Second, it analyzes the debate over targeting economic development policies toward labor or capital. The Fund's programs primarily rely on the latter, such as encouraging lending to small businesses rather than targeting labor, such as wage subsidies. Research indicates the benefits of policies that reduce capital costs in a targeted place may not be passed on to local laborers in the form of higher wages or increased employment.
Third, it examines whether the Fund plays a unique role in promoting economic development and if it duplicates, complements, or competes with the goals and activities of other federal, state, and local programs. Although CDFIs are eligible for other federal assistance programs and other agencies have a similar mission as the Fund, the Fund's programs have a particular emphasis on encouraging private investment and building the capacity of private financial entities to enhance local economic development
Fourth, it examines assessments of the Fund's management. Some argue that the Fund's programs are not managed in an effective manner and are not held to appropriate performance measures. Others contend that the Fund is fulfilling its mission and achieving its performance measures.