Defining the Low-Income Community: Primary and Secondary Eligibility Requirements
The New Markets Tax Credit (NMTC) program offers investors an incentive to invest in “low-income communities” or LICs. Communities must meet specific primary and secondary eligibility requirements to qualify as LICs for NMTC program funding.
LIC: Primary Eligibility Requirements
A U.S. census-designated neighborhood or census tract must be located in a LIC that meets at least one of the following criteria:
- A poverty rate of at least 20%
- If within a metropolitan area, the median family income is no more than 80% of the statewide median income
- If within a metropolitan area, the median family income is no more than 80% of the greater of the statewide median income or the metropolitan area median income
- A population under 2,000 is contiguous to one or more low-income communities and is within an empowerment zone
- A “high-out migration rural county,” or a tract within a county with a net out-migration of at least 10% when compared to the last census to two decades before and not greater than 85% of the statewide median income
- Consists of a targeted population, or certain individuals or an identifiable group of individuals, including an Indian tribe, who are low-income persons or those who otherwise lack adequate access to loans or equity investments
- Consists of a “GO Zone Targeted Population,” or individuals, or an identifiable group of individuals, including an Indian tribe, who otherwise lack adequate access to loans or equity investments and that were displaced from their principal residences and/or principal source of employment as a result of Hurricane Katrina
LIC: Secondary Eligibility Requirements
The NMTC program also gives higher application scores to applicants whose investments cover areas with greater investment needs. These census tracts meet secondary eligibility requirements and the primary eligibility requirements for LICs. Applicants can receive these enhanced scores if more than 75% of their NMTCs are allocated to at least one of the following targets:
- “Severely distressed” tracts, or tracts with one of the following:
- A poverty rate of at least 30%
- An unemployment rate of at least 1.5 times the national average, or
- Median family income that is at or below 60% of the statewide median family income (for nonmetropolitan-area projects) or the greater of the statewide or metro area median family income (for metropolitan area projects)
- Census tracts in a nonmetropolitan area that meet the regular eligibility criteria
- Projects that serve “targeted populations,” which are those that are:
- 60% owned by low-income persons
- At least 60% of employees are low-income persons, or
- At least 60% of the qualified active low-income community business’s gross income comes from customers who are low-income persons
Other designated areas also can lead to higher scores for NMTC project applications, such as Small Business Administration HUB zones, brownfield sites, Indian reservations, Colonias areas, and State Enterprise Zone areas, to name a few.
Allow Savage & Associates to Help You Develop Your Vision
We are an economic development law firm dedicated to offering complex and innovative legal and transactional advice to developers, investors, nonprofit organizations, entrepreneurs, and changemakers in society. We are not a traditional law firm. Instead, we are a small boutique law firm that focuses on what you need to develop the strategies necessary to impact communities.
We have worked with clients to obtain all types of tax credits and other government programs to finance the revitalization of communities. Savage & Associates has handled over a billion dollars in New Markets Tax Credit financing transactions and more than 300 commercial real estate closings. As a result, we know how to leverage the available tax credit tools to transform your communities.
You can contact our offices by calling 215.880.9441 in Philadelphia or 202.817.3941 in Washington D.C. to discuss your ideas with us. You also can find out more about our services online. We look forward to working with you to build your communities through traditional and alternative investment mechanisms based on your individual needs.