Discussion Paper

From Incentive to Impact: What Extended Tax Credits Mean for Community Development Finance

Abstract: In July 2025, H.R.1 (otherwise known as the One Big Beautiful Bill Act) was passed in the United States. Among other things, this legislation expanded three tax credit programs that are designed to spur economic development in disinvested places. Community development financial institutions (CDFIs) have historically participated in all three tax programs: the New Markets Tax Credit (NMTC), the Low-Income Housing Tax Credit (LIHTC), and Opportunity Zones (OZ). The Federal Reserve's 2025 CDFI Survey asked several questions about respondents' use of federal and state programs, including federal tax incentives. Twenty-two respondents independently noted that expanding one or more of these tax credit programs would help CDFIs support investment and credit access in underserved markets. Another nine respondents supported tax credit incentives generally. This post explores the three tax credit programs that were expanded under H.R.1 and how CDFIs leverage these programs.

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Regional Matters

Publication Date: 2026-02-18