Read more at the Washington Credit Union Daily
President Biden proposed Friday to increase the National Credit Union Administration’s Community Development Revolving Loan Fund program by $500,000 in FY22.
The proposed boost is contained in the president’s FY22 budget request; it would bring CDRLF funding to $2 million if Congress agrees to that funding level.
The budget is a blueprint for the administration’s spending preferences. Funding for individual programs is decided by Congress in appropriations bills, which the president may sign or veto.
The Biden budget also includes estimates of how much tax revenue is lost through tax expenditures, such as the credit union tax exemption. The Biden administration estimated that the credit union tax exemption cost $2.14 billion in lost revenue in FY20 and that the tax exemption will cost the federal government $24.564 billion between 2021 and 2030.
The Trump Administration had estimated that in FY2019 the tax exemption cost the federal government $1.911 billion. The Trump administration estimated that between 2020 and 2029, the exemption would cost the federal government $21.878 billion.
The Biden Administration did not offer an explanation of how it arrived at its estimates.
The estimated cost of the credit union tax exemption is small compared with other tax breaks. For instance, the capital gains tax break is estimated to cost the federal government $1.27 trillion between 2021 and 2030. The deduction for charitable contributions is estimated to cost $683 billion during the same time period.
Still included in Biden’s budget proposal is a 22.2% increase for the Community Development Financial Institution program, which had been unveiled last month in a preview of Biden’s budget. That would bring FY22 funding for the CDFI program to $330 million.
The CDFI and Minority Depository Institutions programs received $9 billion in emergency capital investments in the end-of-year economic stimulus bill enacted in December. The programs also received $3 billion in emergency support.
In recent testimony before the House Financial Services Appropriations Subcommittee, Treasury Secretary Janet Yellen said that CDFIs are highly effective at injecting capital into areas that the financial sector has not served. That position differs sharply with the stance taken by the Trump Administration, which proposed eliminating the CDFI program in each of its budgets.
In her testimony, Yellen warned that as funding for the program increases, increased administrative funding is needed as well. “It is challenging for the CDFI Fund to distribute greater resources and scale these programs without additional administrative funding,” she told the subcommittee.