Frequent Questions
 What are Renewal Communities?
Renewal Communities are distressed area in urban and rural communities that the Federal government has targeted for development and where businesses are eligible for billions of dollars in tax incentives. These incentives help to spur business and job growth in communities that have been suffering from high levels of poverty and unemployment. Businesses can claim the tax incentives by operating in and hiring residents of these areas.
What is the geography of an Renewal Community?
1990 census tracts define RC areas. The Census Bureau defines these areas to collect data and make generalizations for an area. A census tract on average has about 4,000 residents, but can have much more or no residents at all. They bear no relationship to Zip Codes, which are simply a number assigned to postal routes that change on demand.
How do businesses know if they are located in Renewal Communities Areas or if their employees live in these areas?
HUD has developed an Address Locator on their website to determine if specific addresses are located in these designated areas.
What are the dates of the designation for Renewal Communities?
The designation began January 1, 2002 and continues through December 31, 2009.
Do all businesses qualify for the RC incentives?
No. A business, which operates as a private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other gambling facility, or store whose principal business is the sale of alcoholic beverages for consumption off premises do not qualify for the RC incentives.
Can a business benefiting from RC tax credits transfer those credits to another business entity, i.e., a flow-through entity?
No. There is no provision in the Internal Revenue Code that allows on entity to transfer an unused RC employment credit to another entity.
Can a business use the RC Wage Credit for current employees?
Yes. The RC Wage Credit is an incentive to hire and retain individuals who live in a RC.
What if the employee works part-time?
The RC Wage Credit is available for both part-time and full-time employees as long as they have been employed for at least 90 days. The amount of the credit is tied to the amount of wages paid rather than number of hours worked.
Is there a limit on the number of employees for which a business can take the RC Wage Credit?
No. An employer can take the credit for as many employees as qualify.
Can an employer receive the RC Wage Credit for an employee who lives in one RC and works in another, or lives in an RC and works in a different designated zone, or vice versa?
No. Wages must be paid to a qualified zone employee to qualify for the credit. To be a “qualified zone employee,” the employee must live in the RC in which substantially all (80%) of the services are performed for the employer. (See Internal Revenue Code section 1396(d)(1)).
In what manner can national or international corporations participate in this program if they have a plant or plants located in the RC?
To qualify as an RC business, a large business can set up a separate legal entity (e.g., a subsidiary or partnership). Activities of legally separate (even if related) parties are not aggregated for purposes of determining whether an entity qualifies as an RC business. (See Public Law 103-66, House Committee Report).
With respect to the RC Wage Credit, is the 90-day period calculated based on the calendar or on days works:
The 90-day test is based on calendar days, not days worked.
What documentation is required if an employer wants to claim the RC wage Credit?
There’s no pre-screening for the RC Wage Credit. The taxpayer files would need a signed statement by the employee attesting to residence, which is usually found in the employment application. At some point, the taxpayer would have to determine if the residence is in the zone, but the IRS would only check this during an audit.
Can both WOTC and Welfare to Work (WtW) credits be claimed for the same employee:
If an employer takes the WtW credit, that individual does not qualify as a member of a WOTC-targeted group. An employer cannot claim both credits with respect to the same individual in any 1 taxable year. The WtW credit may be claimed for the second year wages of a qualifying individual regardless of whether the employer took WOTC or WtW for the first year wages.
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