How does a business calculate the requirement that 35 % of its employees be RC residents?
The tax regulations relating to tax-exempt bonds permit calculation either on a per-employee fraction or an employee actual work-hour fraction. In the per-employee fraction method, the business would compare the number of RC resident employees in a taxable year to the total number of employees during the same taxable year. Employees include persons employed for at least 90 days and who work at least 15 hours per week. The employee actual work-hour fraction seeks to accommodate businesses with full-and part-time workers and compares actual hours worked by RC residents to total employee hours worked in a taxable year. A business must apply the same method consistently over the period of the tax incentive once a method is selected. The same methods of determining whether the 35% test is met may apply for the incentives that require a Renewal Community Business, but the Internal Revenue Service (IRS) has not formally extended the rules.
