What businesses qualify as Active Low-income Community Businesses for purposes of the New Markets Tax Credits?
Businesses eligible to receive NMTC financing are corporations, partnerships, sole-proprietorships and non-profits that are active and located in a low-income community, as defined by the NMTC regulations. In general, a Low-Income Community is defined as a Census tract with a poverty rate of at least 20%, or with median income of up to 80% of the area or statewide median, whichever is greater. For a non-metropolitan census tract, 80% of the statewide median is acceptable. Furthermore, a Qualified Active Low-Income Community Business must derive at least half its gross income from business in the eligible area and must have a “substantial portion” (40%) of its tangible property located in a low-income community. Finally, the business must perform a substantial portion (40%) of its services in any low-income community. Banks, Credit Unions and other financial institutions are excluded from the definition of Qualified Active Low-Income Community Business.
