California Insurance Investments in Underserved Areas Improves
California Insurance Commissioner Dave Jones announced today that since he took office in January, insurance companies and other investors have made $23.6 million in investments in under-served communities.
Commissioner Jones sent a letter in February to insurance company CEOs encouraging them to make these types of investments and noting the availability of tax credits for such investments through the California Organized Investment Network (COIN), administered by the California Department of Insurance (CDI).
Each year, the California Department of Insurance allocates $2 million in tax credits to support $10 million in community development investments. Since companies haven’t taken advantage of this program in the last few years, in 2001 CDI’s COIN had $4.7 million in tax credits available to support $23.6 million in community development investments.
Jones announced today that all of the tax credits have been allocated and the program is closed to new applications until January 1, 2012. Insurance company investors comprised 85% of the 2011 investments in the program – a marked improvement from recent years.
Under the COIN tax credit program, investors invest a minimum of $50, 000 in zero interest loans with a Community Development Financial Institution (CDFI) for 60 months. In exchange, the investor receives a 20% state tax credit, which is approximately a 4.3% annual percentage rate of return.
CDFIs use these funds to bridge the growing gap between the loans and services available to the economic mainstream and those offered to low-income people and communities. These CDFIs include community development loan funds, credit unions, banks, microenterprise funds, corporation-based lenders and venture funds.
Recently, 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 child care 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 low 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.
Assembly Bill 624, by Assembly Speaker John A. Pérez, would extend the law authorizing the CDFI Tax Credit Program, which is set to expire at the end of 2011.
Source: California Department of Insurance.
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