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Qualified Active Low-Income Community Business [Tax]
Understanding Qualified Active Low-Income Community Business [Tax]: A Comprehensive Guide
Definition & Meaning
A qualified active low-income community business is defined under the Internal Revenue Code as a corporation or partnership that meets specific criteria related to its operations in low-income communities. These businesses must derive at least fifty percent of their total gross income from activities conducted within these communities, utilize a significant portion of their tangible property there, and ensure that a substantial part of their employee services are performed in the same areas. Additionally, they must have minimal investments in collectibles and nonqualified financial property.
Table of content
Legal Use & context
This term is primarily used in tax law, particularly in relation to tax credits and incentives aimed at encouraging business development in economically disadvantaged areas. Businesses that qualify may benefit from various tax credits, which can significantly reduce their tax liabilities. Users can manage related documentation and applications through legal forms and templates available on platforms like US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A nonprofit organization that operates a community health clinic in a low-income neighborhood qualifies as a qualified active low-income community business if it meets the income and property use criteria.
Example 2: A for-profit retail store that sells goods primarily to residents of a low-income area and derives most of its income from that location may also qualify (hypothetical example).
Relevant laws & statutes
The primary statute governing qualified active low-income community businesses is found in 26 USCS § 45D. This section outlines the eligibility requirements for businesses seeking tax credits in relation to their operations in low-income communities.
Common misunderstandings
What to do if this term applies to you
If you believe your business qualifies as a qualified active low-income community business, consider the following steps:
Review your business's income sources and property usage to ensure compliance with the criteria.
Consult with a tax professional to understand the potential tax benefits available to your business.
Explore legal form templates on US Legal Forms to help with any necessary documentation.
If your situation is complex, seeking professional legal assistance may be beneficial.
Find the legal form that fits your case
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