What is the first step in determining a building's applicable fraction?

To determine a building's applicable fraction, which is crucial for understanding the portion of a building that qualifies for tax credits, the first step involves assessing both the unit and square footage percentages to see how they relate to one another. The applicable fraction is typically derived by comparing these two percentages, as it measures the proportion of low-income housing units in a building relative to the total number of units or total square footage.

This approach recognizes that the building's compliance with low-income housing requirements can vary significantly depending on whether you consider the number of units or their square footage. Therefore, calculating both the unit percentage and square footage percentage simultaneously provides the necessary context to determine the applicable fraction accurately. This comparative analysis ultimately aids in identifying which percentage reflects the building's qualifications more effectively for tax credit purposes. This is why starting with the comparison of unit and square footage percentages is essential in the process.