California Insurance Commissioner Dave Jones is offering insurance companies $4.67 million in tax credits to invest in underserved communities.
In a letter to company CEOs, Jones pushed for insurers to place a portion of the $4 trillion in investments they hold into the California Organized Investment Network (COIN), administered by the California Department of Insurance (CDI).
Each year, the DOI allocates $2 million in tax credits to support $10 million in community development investments. Because this program has been underutilized in recent years, CDI’s COIN currently has $4.67 million in tax credits available to support $23.7 million in community development investments. Insurers have until July 1, 2011 to place investments in the program. After that date, the program is open to other investors as well.
Under the program, investors place a minimum of $50,000 on deposit with a Community Development Financial Institution (CDFI) for 60 months at zero percent interest. In exchange, the investor receives a 20 percent state tax credit, with an approximately 4.5 percent annual percentage rate of return.
The CDFIs then provide loans to small businesses and non-profits that serve economically disadvantaged communities. CDFIs help bridge the growing gap between the loans and services available to the economic mainstream and those offered to low-income people and communities. They provide access to credit in economically disadvantaged communities by providing development services or technical assistance along with the loans and investments they make.
These CDFIs include community development loan funds, credit unions, banks, microenterprise funds, corporation-based lenders and venture funds.
“This is a critical program that benefits some of California’s most underserved communities, and so I want to encourage insurance companies to give back by investing in these communities,” Commissioner Jones said. “The state tax credit to encourage these investments has been underutilized in recent years, and it is long overdue that we get this program back on track. I call on all California insurers to examine their investment portfolios and invest in this program before June 30.”
There are 81 CDFIs certified by COIN and eligible to participate in the tax-credit program. Through the CDFI Tax Credit Program these CDFIs have invested more than $100 million into some of California’s most underserved communities from 1997 through 2009. In the recent past, CDFIs across the state have made notable investments, including:
• A mortgage loan for a nonprofit residential alcohol treatment facility;
• Micro-loans of $500 to $5,000 to self-employed business owners;
• Loans for six childcare centers to serve 500 low-income children;
• Pre-development loans to Habitat for Humanity to construct affordable homes;
• A loan to a church to build a child care center for lower income residents;
• A loan for 953 water hook-ups in two small, rural communities; and
• A short-term loan to close escrow on housing for low-income foster youth.
For information, visit www.insurance.ca.gov/coin.