Final Regs Issued on Low-Income Community Businesses and New Markets Tax Credit


On Friday, the IRS issued final regulations on how entities serving certain targeted populations can qualify as active low-income community businesses for purposes of the Sec. 45D new markets tax credit (T.D. 9560).

The new markets tax credit encourages capital investment in economically depressed areas by private investors in exchange for federal income tax credits. A qualified low-income community investment includes an investment in a “qualified active low-income community business” (defined in Sec. 45D(d)(2)).

The final regulations incorporate guidance first issued in Notice 2006-60 and then in proposed regulations (REG-142339-05) in 2008. Under the final regulations, certain targeted populations can qualify as low-income communities for purposes of the rules governing qualified active low-income community businesses. Targeted populations that will be treated as a low-income community are individuals, or an identifiable group of individuals, including an Indian tribe, who are low-income persons as defined in the regulations or who are individuals who otherwise lack adequate access to loans or equity investments as defined in the regulations.

Under the regulations, an individual will be considered low income if the individual’s family income, adjusted for family size, is not more than (1) for metropolitan areas, 80% of the area median family income; and (2) for nonmetropolitan areas, the greater of (a) 80% of the area median family income or (b) 80% of the statewide nonmetropolitan area median family income.

For more on the new markets tax credit, see Lovinger, “Revisiting the New Markets Tax Credit,” in The Tax Adviser (Nov. 2011).

More from the JofA:

 Find us on Facebook  |   Follow us on Twitter  |   View JofA videos

RESOURCES

Keeping you informed and prepared amid the coronavirus crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.

SPONSORED REPORT

Getting leases in line

ASC Topic 842 is a relatively simple standard that can mean profound changes for organizations with leases. This report examines what makes this standard challenging and describes new ways for CPAs to add value.