CA Insurance Commissioner Calls on Insurers to Invest in Community Development
Dave Jones, the California Insurance Commissioner, has offered the insurance industry $4.67 million worth of tax credits to invest in under-served communities.
In a letter he sent to the CEOs of insurance companies doing business in California, Jones encouraged insurers to place part of their $4 trillion in investments into COIN – the California Organization Investment Network, administered by the California Department of Insurance (CDI).
Every year, the DOI (Department of Insurance) allocates $2 million in tax credits to support community development investments in the amount of $10 million. Because this program has not been fully exploited in recent years, CDI’s COIN program currently has $4.67 million available tax credits to support $23.7 million in community development investments. There is a deadline of July 1, 2011 to place investments into the program; after that other investors also have access to the pool of tax credits.
Under the COIN program, insurers put at least $50,000 on deposit with a designated Community Development Financial Institution (CDFI) for five years at zero percent interest. In exchange, the investor receives a state tax credit of 20% with an annual percentage rate of return of roughly 4.5 percent.
In turn, the CDFI’s then provide loans to non-profit organizations and small businesses that serve economically disadvantaged communities. The CDFIs serve as a bridge across the ever-expanding gap between loans and services available to those who are “economically mainstream” and those people and communities who are considered low-income. These loans help provide development services and technical assistance in these communities, as well as the money from the loans themselves.
These CDFIs include community development loan funds, credit unions, banks, microenterprise funds, corporation-based lenders and venture funds.
In a statement, Commissioner Jones said, “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. 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.”
Since 1997, 81 CDFIs have been certified by COIN as eligible for the tax credit program. Some of their investments in the past fourteen years include:
• 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.