Tax Credits: The Right Tool for Sandy Recovery

Published by Michael Novogradac on Friday, December 7, 2012 - 12:00am

As the nation has come together to assist in Hurricane Sandy recovery efforts, many proposals involving tax credits have been put forth such as providing temporary higher historic tax credit percentages and an additional targeted allocation of low-income housing tax credits.

In addition, the NMTC Coalition is proposing an emergency supplemental new markets tax credit allocation be made available for community development entities working in communities impacted by Hurricane Sandy. It’s important to note that the NMTC Coalition is proposing this emergency allocation in addition to the annual NMTC allocation authority it is seeking in the tax extender bill.

The group used the GO Zone legislation passed in 2005 as a model for proposed legislative language. If enacted, the emergency supplemental tax credit allocation would provide:

  • $1 billion in NMTC allocation authority for each of the next three allocation rounds: years 2012; 2013; and 2014, for CDEs making qualified low income community investments, or QLICIs, in communities impacted by Hurricane Sandy; and
  • To be eligible for a QLICI made available through the emergency supplemental allocation, a business would have to be located in a NMTC qualified low income community in a designated disaster area as a result of Hurricane Sandy.

This emergency allocation is the right tool to help the areas affected by the storm. The NMTC Coalition reviewed income and poverty rates of census tracts within the counties deemed to be disaster areas after Hurricane Sandy, and found that more than 38% of the census tracts qualify for the new markets tax credit.

  • More than 21% of the census tracts qualify for new markets tax credits because 20 percent or more of the residents are living in poverty and 13% of the census tracts have poverty rates at or above 30 percent.
  • In addition, 37% of the census tracts in the disaster counties have median incomes that are at or below 80 percent of the area median income and 22% of the census tracts have median incomes at or below 60 percent of the AMI.

Click here to learn more about the proposal, which includes a list of FEMA-designated disaster areas in the three states hit hardest by Hurricane Sandy. Click here to access Novogradac’s NMTC Mapping Tool to review additional data about the areas in question.