How To Tell if You’re in a Low Income Community for EIDL Qualification

The new stimulus program, signed into law in the last days of 2020, reopens the door for some aid for independent contractors such as with Doordash, Uber Eats, Lyft, Instacart, Grubhub etc.

But it also has contractors scrambling to figure out how to tell out if they're in a low income community.

That's because the EIDL has added a couple of qualifications. In the original round of EIDL loans, independent contractors were able to take advantage of a $1,000 grant. That was the advance that was given when businesses applied that doesn't have to be repaid.

Under this new round of funding, many contractors can apply for a second EIDL grant. However, there are two new stipulations:

• Your business has to demonstrate a 30% or greater loss of income due to the pandemic
• Your business has to be located in a low income community.

This article focuses on the low income community qualification. You can learn more here about the 30% economic loss qualification.

3 Steps: How to tell out if you qualify as being in a low income community under EIDL requirements

What does it mean to be in a low income community? How do you know if your business is located in a low income community? Is it different for an independent contractor with gig economy apps like Doordash, Uber Eats, Lyft, Instacart, Grubhub or any of the others?

The following steps are meant to help you identify if your business is indeed in a low income community.

1. Understand your business location.

It seems a lot easier if you're operating a brick and mortar business to identify your business location. You have a store front or an office. That's your business location.

It's a little trickier as an independent contractor, isn't it? We drive passengers all around or deliver food. Does it matter if most of your rides or delvieries are in lower or higher income?

It's not really that tricky. You're going to identify your location in the same way you identify it for your taxes. It's your home address.

Most of us don't really work at home though. Our work is out where we're delivering. Wouldn't that mean we work in the places we perform our tasks?

Maybe the best way to explain it is to compare it to a a service business. When I was in telecom we hardly spent any time at the office, we were always out at customer locations.

None of that mattered though. Our business location was still where our office was. Even though we were never there, that served as our headquarters.

As an independent contractor, if you haven't leased or purchased an external location for your business, your business address is going to be your home address.

2. Understand what “low income community” means.

In the new stimulus act, Section 332 section (a) provides some definitions. Item (6) states that “The term ‘‘low income community’’ has the meaning given the term in section 45D(e) of the Internal Revenue Code of 1986.”

So let's look at that section:

The term “low-income community” means any population census tract if-

(A) the poverty rate for such tract is at least 20 percent, or

(B)(i) in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or

(ii) in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.

Internal Revenue Code of 1986 section 45D(e)(1).

What does this mean?

It mans there are three ways that you can measure if you're in a low-income community. You qualify if you meet any of those three.

If more than 20% of families in your community are below the poverty level, you're in a low income community

If the median family income in your community is 80% of that of your metro area or lower, you're in a low income area.

Or, If the median family income in your community is 80% of that of your state or lower, you're in a low income community.

Median stands for middle (not average). If you the income for 99 families and listed them in order from high to low, the income for the 50th family is the medium. 49 families had higher income, 49 had lower.

If the median family income in your state or your metro area is $100,000, then the median family income in your community needs to be less than $80,000 to qualify.

But what do they mean by “community?”

Is this about the city? But how is that different than a metro area? Can you just pick what your community is?

You can't just pick an area. Your community is based on your address as we disucssed earlier.

We go back to that first line in the definition quoted above. “The term ‘low-income community' means any population census tract…”

Your community is the census tract that your address is located in.

The Census Bureau divides counties up into smaller zones called tracts. According to their glossary, a tract is usually made up of about 1,200 to 8,000 people. The boundaries are set and can be found on many government maps.

Your address fits specifically within a particular census tract. Your eligibility depends on the income characteristics of families in that area or tract.

3. Here's how to tell if demographics in your tract qualify as a low income community.

This video can show you how. Or you can read the instructions below it.

The SBA recently released this tool that allows you to look up an address and identify if it is a low income community per their definitions.

The map is pretty simple. If the zone is purple, it is a low income community. If it is yellow, the zone is not a low income community.

When you find your zone and click on the map, it will show you the pertinent details including poverty rate and percent of median family income compared to the state and the metro area.

You access the tool at PolicyMap. From there you can enter an address, a zip code, or zoom in and navigate to your address.

Things to double check when using the PolicyMap.

If you entered an address, double check that the spot it takes you to puts you at the right spot on the map. You may have to manually readjust if it did not completely understand your address.

For example, I entered the address to the White House. It told me immediately the area was a low income area, but when looking at the map, it didn't take me to the White House.

If you live on a street that serves as a boundary between two census tracts, make sure you're clicking on the side of the street that matches your address. For example, if you live on the south side of an east/west street, make sure you're looking at the tract that is south of the line.

Double check the data. There's a comment to this article that says they were told they don't qualify but the data that it shows was within parameters. There may be glitches that read this wrong.

I've seen a couple of anomalies. I found one zone where 64% were below poverty rate but median family income was 229% of California's MFI. I see my neighborhood is 26% poverty rate on another tool but only 12% on this particular tool. It's possible some data may be off.

If something does seem off, you can cross check your information.

When I first published this article, the SBA had not listed the tool mentioned above. I was able to identify this geomap tool created by the FFIEC. This tool will let you look up a census tract and pull up income information.

You will need to select 2020 in the upper left hand corner. Then type in an address or zip code and press Search.

Click on the button that says “Census Demographic Data.”

A Box will pop up with a table of information and four tabs across the top. Click on the tab that says Income.

Here you have the following information:

• The percent of people below poverty level (#3)
• The percent of the median family income in the tract compared to the median family income in the metro area (#4).
• The estimated Tract Median Family Income (#5).

I notice that the numbers that this tool pulls up are slightly different than the numbers on the SBA's Targeted EIDL address lookup tool. I am assuming that there are differences in what years the tools are based on.

It's an imperfect system, but it's the one we get.

There's so much that is luck of the draw.

You could live or have your business on the north side of a street and not qualify while the address directly across the street qualifies. Personally I'm one block away from a zone that doesn't qualify.

The other thing is, the SBA is going to mess some things up. That's just a part of the deal.

Some folks were able to breeze through the PPP 2.0 application process, others got hung up. You can expect the same thing with the targeted EIDL advance. It's the same folks who administer it.

If you think you should qualify but the SBA tool says you don't, do some research. It's not easy to figure it all out but you can actually pull the census data for your tract and start running the numbers.

I haven't seen if there will be an appeal process if they determine you don't qualify. My guess is, by the time they get around to being able to take appeals (if ever) the money will have run out. If I find out anything further though on the process, I'll update this article.

In the meantime, check out the tools, get to know your census tract information, and if it seems like you're close to qualifying, dig a little deeper to identify the data that's out there.