This week the DC Council had the first reading of B24-0798 - New Markets Tax Credit Real Property Tax Exemption Amendment Act of 2022. B24-0798, if enacted, would provide a property tax exemption for a Qualified Low-Income Community Business (QLICB)property that qualifies for the federal New Markets Tax Credit. The New Markets Tax Credit provides an incentive for investment in low-income communities. The US Department of the Treasury competitively allocates tax credit authority to intermediaries that select investment projects. Investors receive a tax credit against their federal income tax, which makes the program especially attractive to business owners. A QLICB is a business, non-profit or for-profit, that meets the following criteria (source):
at least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community,
a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income community,
a substantial portion of the services performed for such entity by its employees are performed in any low-income community,
less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to collectibles other than collectibles that are held primarily for sale to customers in the ordinary course of such business, and
less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to nonqualified financial property.
Currently, DC nonprofit organizations can apply for a property tax exemption. Some nonprofits will create an LLC so they can participate in the New Markets Tax Credit program, but this could potentially complicate their real property tax exemption process.
Sometimes, nonprofit organizations will incorporate LLCs in order to carry out certain charitable goals in the most efficient way. An LLC is a type of business structure.2 For example, some nonprofits may create an LLC in order to participate in the federal New Markets Tax Credit program. However, this sometimes complicates their real property tax exemption process. Bill 24-0798 makes it clear that nonprofits solely operating as an LLC and as an owner of local real estate that will serve a charitable purpose can also receive a real property tax exemption.
Bill 24-0798 would also mandate that the nonprofit's Chief Financial Officer(CFO) tell the organization if they have been granted the exemption within 60 days of receiving a complete application. The CFO is also responsible for visiting and inspecting the property within three years to ensure the property is being used for a charitable purpose as intended and stated in the application.
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Vote Report: B24-0798 - New Markets Tax Credit Real Property Tax Exemption Amendment Act of 2022
Councilmember | Vote (Yes/No/Absent) |
Charles Allen | Yes |
Anita Bonds | Yes |
Mary M. Cheh | Yes |
Janeese Lewis George | Yes |
Vincent C. Gray | Absent |
Christina Henderson | Yes |
Kenyan R. McDuffie | Yes |
Phil Mendelson | Yes |
Brianne K. Nadeau | Yes |
Brooke Pinto | Yes |
Elissa Silverman | Yes |
Robert C. White, Jr. | Yes |
Trayon White, Sr. | Yes |
Status: Approved.
Next step in the legislative process: Final vote