ATTORNEY GENERAL OF TEXAS 

GREG ABBOTT 

December 22,2006 

The Honorable Ismael “Kino” Flores 

Chair, Committee on Licensing and 

Opinion No. GA-0497 

Administrative Procedures Re: Whether the 2006 Qualified Allocation 

Texas House of Representatives Plan of the Texas Department of Housing and 

Post Office Box 2910 Community Affairs complies with Government 

Austin, Texas 78768-2910 Code section 2306.6710(b) (RQ-0515GA) 

Dear Representative Flores: 

You ask about the Texas Department of Housing and Community Affairs (“TDHCA”) and 

whether its 2006 Qualified Allocation Plan complies with Government Code section2306.6710@).’ 

The federal government offers tax credits to private developers to stimulate investment in 

and construction of low-income housing. See generally 26 U.S.C.A. 3 42 (West Supp. 2006). These 

federal tax credits are allocated among the states and awarded at the state level by a designated 

housing credit agency. See id. 5 42(h), (m). In Texas, the legislature, under Government Code 

chapter 2306, subchapter DD, has designated the TDHCA to administer the state’s low-income 

housingtax-creditprogram. &~TEx.Gov’TCODEANN. @2306.6701-.6734(VernonSupp. 2006); 

see also id. 5 2306.053(b)(lO) (V ernon 2000) (authorizing TDHCA to “administer federal housing, 

community affairs, or community development programs, including the low income housing tax 

credit program”). 

The Internal Revenue Code requires TDHCA, as administrator of this tax-credit program, 

to allocate tax credits according to selection criteria laid out in a “qualified allocation plan” 

(a “QAP”): See 26 U.S.C.A. 5 42(m)(l)(B)-(C) (West Supp. 2006). Texas law implements the 

federal law by requiring the TDHCA board to annually adopt a QAP, see TEX. GOV’T CODE ANN. 

5 2306.67022 (Vernon Supp. 2006), which, among other things, provides the threshold, scoring, and 

underwriting criteria and procedures for applicants seeking low-income housing tax credits. See id. 

5 2306.6702(a)(lO). While TDHCA has discretion to determine the number of points to assign the 

underwriting criteria and to score and rank the applications for tax credits, ,numerous provisions in 

the Government Code require TDHCA to consider specific funding priorities, information, and 

‘See Letter from Nonarable lsmael “Kino” Flares, Chair, Committee on Licensing and Administrative 

Procedures, Texas House of Representatives, to Honorable Greg Abbott, Attorney General of Texas, at 1-2 (June 13, 

2006) (on file with the Opinion Committee, a/so available at http:/i~.oag.state.tx.us) [hereinafter Request Letter]. 
The Honorable Ismael “Kino” Flares - Page 2 (GA-0497) 

preferences in doing so? And it is these prescriptive provisions that give rise to your question. See 

Request Letter, supra note 1, at l-2. 

Specifically, you ask about Government Code section 2306.6710(b), see id., which requires 

TDHCA to score and rank tax-credit applications using a point system that prioritizes certain criteria 

over others. See TEX. GOV’T CODE ANN. 5 2306.6710(b) (Vernon Supp. 2006). Subsection 

(b)(l)(B) of this section, which is at the crux of your question, requires TDHCA to consider and rank 

quantifiable community participation with respect to the 

development, evaluated on the basis of written statements from any 

neighborhood organizations on record with the state or county in 

which the development is to be located and whose boundaries contain 

the proposed development site[.] 

Id. § 2306,6710(b)(l)(B) (Vernon Supp. 2006) (emphasis added). “Neighborhood organization” is 

not defined in the statute. See id 5s 2306.67OlL.6734. 

TDHCA, however, has defined the term in its 2006 QAP: 

A “neighborhood organization” is defined as an organization 

of persons living near one another within the organization’s defined 

boundaries that contain the proposed Development site and that has 

a primary purpose of working to maintain or improve the general 

welfare of the neighborhood. “Neighborhood organizations” include 

homeowners associations, property owners associations, and resident 

councils (only for Rehabilitation or demolition with New 

Construction applications in which the council is commenting on the 

rehabilitation OY demolition/ New Construction of the property 

occupied by the residents). “Neighborhood organizations” do not 

include broader based “community” organizations; organizations that 

have no members other than board members; chambers of commerce; 

community development corporations; churches; school related 

organizations; Lions, Rotary, Kiwanis, and similar organizations; 

Habitat for Humanity; Boys and Girls Clubs; charities; public housing 

authorities; or any governmental entity. Organizations whose 

boundaries include an entire county or larger area are not 

“neighborhood organizations.” Organizations whose boundaries 

include an entire city are generally not “neighborhood organizations.” 

3 1 Tex. Reg. 105,144 (2006) (to be codified at 10 TEX. ADMM CODE 5 50.9(i)(2)(A)(iv)) (emphasis 

added) (TDHCA “2006 Housing Tax Program Qualified Allocation Plan and Rules”). You express 

%ee TEX. GOV’TCODEANN. 5 2306,6725(a) (Vernon Supp. 2006); Tex. Att’y Gen. Op. No. GA-0208 (2004) 

at 9 n.13 (discussing the discretion Government Code section 2306.6725(a) p emits TDHCA in assigning points to 

underwriting criteria);seeako, e.g., TEx. GOV’TCODEANN. $5 2306.11 l(d),(g), .6704(b), .6710(b), .6718(b) (Vernon 

supp. 2006). 
The Honorable Ismael “Kino” Flores - Page 3 (GA-0497) 

concern that TDHCA’s rule, by limiting resident councils to commenting only on the rehabilitation 

of or demolition with new construction of the property occupied by the residents, conflicts with 

Government Code section 2306.6710(b). See Request Letter, supra note 1, at 2. 

Based on this information, you first ask: 

Whether Section 2306.6710(b) is a mandatory provision that 

requires the 2006 QAP to rank applications for Low Income Housing 

Tax Credits by a point system that includes as a factor quantifiable 

community participation with respect to the development, evaluated 

on the basis of written statements from any neighborhood 

organizations on record with the state or county in which the 

development is to be located and’whose boundaries contain the 

proposed development site? 

Id. This office has, on two occasions, determined that Government code section 2306.6710(b) is a 

mandatory provision that requires TDHCA to rank applications using a point system that gives the 

greatest number of points, in descending order, to the nine factors listed in that section. See Tex. 

Att’y Gen. Op. Nos. GA-0455 (2006) at 2-3; GA-0208 (2004) at 10. 

You next ask “[wlhether TDHCA has discretionary authority to impose additional limiting 

criteria for quantifiable community participation by neighborhood organizations under Section 

2306.6710(b)?” Request Letter, supra note 1, at 2. As this of&e has already said, section 

2306,6710(b) does not permit TDHCA to adopt additional criteria for that section. See Tex. Att’y 

Gen. Op. No. GA-0208 (2004) at 6-7. Therefore, TDHCA may not impose additional limits on 

quantifiable community participation by neighborhood organizations under section 2306.6710(b). 

Third, you ask: 

Whether the TDHCA implemented language in Section 

[50,9(i)(2)(A)(iv)] of the 2006 Qualified Allocation Plan that limits 

quantifiable community participation by a Resident Council, a 

qualified neighborhood organization, is in compliance with Section 

2306.6710(b) of the Texas Government Code .~. that requires 

quantifiable community participation with respect to the 

development, evaluated on the basis of written statements from any 

neighborhood organizations on record with the state or county in 

which the development is to be located and whose boundaries contain 

the proposed development site? 

Request Letter, supra note 1, at 2, 

Because the term “neighborhood organization” in section 2306,6710(b)(l)(B) is not defined 

by statute, TDHCA has construed the term by an interpretive rule under the general authority granted 

to it by the legislature to adopt an annual QAP. See TEX. GOV’T CODE ANN. § 2306.67022 (Vernon 
The Honorable Ismael “Kino” Flares - Page 4 (GA-0497) 

Supp. 2006). Interpretive rules are those rules that interpret and apply the provisions of an applicable 

statute. See FirstFed SCIV. & LounAss’n. v. VandygrifJ; 639 S.W.2d. 492,498 (Tex. App.-Austin 

1982, writ dism’d). Construction of a statute in agency rules by the administrative agency charged 

with the statute’s enforcement is entitled to serious consideration, so long as the construction is 

reasonable and does not contradict the plain language of the statute. See Turrant Appraisal Dist. v. 

Moore, 845 S.W.2d 820,823 (Tex. 1993). But a rule may be invalid if the rule’s language exceeds 

the agency’s statutory authority. See R.R. Comm ‘n v. Arco Oil & Gas Co., 876 S.W.2d 473,477-78 

(Tex. App.-Austin 1994, writ denied). In deciding whether an administrative agency has exceeded 

its rule-making powers, the determinative factor is whether the rule’s provisions are “in harmony” 

with the general objectives of the statute. See Edgewoodlndep. Sch. Dist. v. Meno, 917 S.W.2d 717, 

750 (Tex. 1995) (citing Gerst v. Oak ClifSuv. &Loan Ass’n,,432 S.W.2d 702,706 (Tex. 1968)). 

Here, section 2306,6710(b)(l)(B) establishes two requirements that neighborhood 

organizations must meet in order to have their input count as quantifiable community support for or 

against a particular low-income housing project: (1) the organization~must be on record with the 

state or county in which the development is to be located; and (2) the organization must represent 

an area whose boundaries contain the proposed development site. TEX. GOV~T CODE ANN. 

5 2306,6710(b)(l)(B) (Vernon Supp. 2006). TDHCA interprets these requirements by defining 

“neighborhood organization” in the 2006 QAP to include, among other things, a resident council, 

but only to the extent the resident council is commenting on “the rehabilitation or demolition/ New 

Construction of the property occupied by the residents.” 31 Tex. Reg. 105, 144 (2006) (to be 

codified at 10 TEX. ADMEV. CODE 5 50.9(i)(2)(A)(iv)) (TDHCA “2006 Housing Tax Credit 

Program Qualified Allocation Plan and Rules”). That is, for the resident council to satisfy section 

2306,6710(b)(l)(B)‘s requirementthat aneighborhood organizationrepresent an area boundingthe 

proposed development, the proposed development must occur on the property that the resident 

council represents. A resident council, by definition, represents only the property occupied by its 

residents? A resident council cannotrepresentproperty not yet constructed, unlike existing property 

to be rehabilitated or to be demolished and then reconstructed. TDHCA is not, therefore, limiting 

the meaning of neighborhood organization or adding criteria to section 2306.6710(b); rather, 

TDHCA’s rule for resident councils merely restates the statute’s requirements in terms specific to 

a resident council. Thus, in answer to your third question, TDHCA’s rule for resident councils is 

in harmony with Government Code section2306,6710(b)(l)(B). 

Finally, you ask, if any of our above answers would require the TDHCA to modify its 2006 

QAP, “what steps .must TDHCA take to ensure the 2006 application cycle is conducted in 

accordance with the law?’ Request Letter, supra note 1, at 2. Because we have determined that 

TDHCA has not, with respect to your questions, interpreted section 2306.671 O(b) inconsistent with 

the statute, we need not address this issue. 

j&e, e.g., 12 U.S.C.A $4119(1 l)(A) (West 2001) (applying to federal low-income housing preservation and 

defining the term “resident council” as “any incorporated nonprofit organization or association that, is representative 

of the residenls ofthe housing”) (emphasis added). 
The Honorable Ismael “Kino” Flores - Page 5 (GA-0497) 

SUMMARY 

Government Code section 2306,6710(b) is a mandatory 

provision that requires the Texas Department of Housing and 

Community Affairs to rank applications using a point system that 

gives the greatest number of points, in descending order, to the nine 

factors listed in that section. Section 2306.6710(b) does not permit 

the department to adopt additional criteria. 

Government~Code section 2306,6710(b)(l)(B) requires the 

department to score proposed development projects based on input 

from “neighborhood organizations,” which must be on record with 

the state or county in which the development is to be located and 

which must represent an area that contains the proposed development 

site. The 2006 Qualified Allocation Plan from the department 

defining “neighborhood organization” to include resident councils, 

but only to the extent the proposed project is located on property 

occupied by their residents, is in harmony with section 

2306,6710(b)(l)(B). 

Attorney M era1 of Texas 

KENT C. SULLIVAN 

First Assistant Attorney General 

ELLEN L. WITT 

Deputy Attorney General for Legal Counsel 

NANCY S. FULLER 

Chair, Opinion Committee 

Daniel C. Bradford 

Assistant Attorney General, Opinion Committee