Gen. 17] 17

HOUSING

CONSTITUTIONAL LAW – SEPARATION OF POWERS – FEDERAL

PREEMPTION – WHETHER “LOCAL APPROVAL”

REQUIREMENT IMPLEMENTED BY DEPARTMENT OFHOUSING

AND COMMUNITY DEVELOPMENT VIOLATES SEPARATION OF

POWERS PRINCIPLE OF STATE CONSTITUTION OR FEDERAL

LOW INCOME HOUSING TAX CREDIT LAW

April 13, 2011

The Honorable Jamie Raskin

Maryland Senate

You have asked for our opinion concerning part of the process

that the Department of Housing and Community Development

(“DHCD”) follows in administering two of its multi-family rental

housing programs. In particular, as a condition to the award of

program benefits, DHCD requires that a project have the

endorsement of the governing body of the jurisdiction in which it

will be located. You have posed the following two questions

concerning this local approval requirement:

1. To the extent that these requirements

effectively confer a veto power on the

executive and legislative governments of local

jurisdictions over the allocation of funding

from these statewide programs that are

administered by the Executive branch, do

these requirements violate the constitutional

separation of powers by delegating exercise of

an Executive function in state government to

the formal decision-making processes and

discretionary judgments of non-Executive

actors or by conditioning exercise of

Executive functions on the formal decisionmaking processes and discretionary judgments

of non-Executive actors, i.e., the executive

and legislative branches of the governments of

the local jurisdictions?

2. The federal Low Income Housing

Tax Credit program vests administrative
18 [96 Op. Att’y

authority over the Tax Credit to state housing

finance agencies. Do the state requirements

discussed above violate the federal law

governing the tax credit program by in essence

delegating effective state administrative

control over the federal programs to local

jurisdictions? Does this scheme defeat the

purposes of the program?

For the reasons discussed below, it is our opinion that the local

approval requirement, as designed by the General Assembly and

implemented by DHCD, does not violate the separation of powers

principle of the State Constitution. Moreover, in our view, the

requirement does not violate the federal law that is the basis for one

of the programs.

I

Background

Your inquiry concerns two programs administered by DHCD

to finance affordable multi-family rental housing projects. One

program, known as the Rental Housing Production Program

(“RHPP”), is established by State law. The other, called the Low

Income Housing Tax Credit Program (“Tax Credit Program”), is

based on federal tax law and is implemented by state agencies.

DHCD administers both housing programs, as well as others,

according to a comprehensive underwriting and approval process.

A. Rental Housing Production Program

RHPP is currently codified at Annotated Code of Maryland,

Housing and Community Development Article (“HCD”), §4-1501

et seq. The purpose of RHPP is, among other things, to “increase

the supply of decent, safe, and sanitary rental housing for occupancy

by families of lower income.” HCD §4-1503. The program

provides various types of financial assistance for projects that set

aside a minimum number of dwelling unitsfor families with incomes

below a certain threshold. HCD §§4-1504, 4-1505, 4-1506. RHPP

1

1 The program is also authorized to help finance the conversion of

office or commercial space to rental housing, although such projects are

relatively infrequent. See HCD §1-1504(a)(1).
Gen. 17] 19

is funded with special funds appropriated in the State budget. HCD

§4-504(c)(1)(ii).

The statute establishes a number of conditionsfor participation

in RHPP. For example, financing is limited to “development costs”

as defined by HCD §4-1501. Certain criteria must be applied in

determining the maximum income limits for qualifying families.

HCD §4-1505. The statute provides a formula for establishing the

minimum number of rental units that must be income restricted and

sets forth a minimum period of time that rental units must be

restricted to lower income families. HCD §4-1504.

Your inquiry concerns a requirement that a project have the

endorsement of the local government in order to be eligible for

RHPP financing. In particular, the statute providesthat DHCD “may

approve an application for a project only if the political subdivision

in which the project is to be situated has: (1) approved the project;

and (2) (i) contributed to reducing the development costs or

operating costs; or (ii) otherwise supported the project.” HCD §4-

1508(a) (emphasis added). In deciding whether to finance a project,

DHCD is to consider, among other relevant factors, the contribution

of the political subdivision for the project. HCD §4-1508(b).

DHCD has incorporated the statutory local approval

requirement in its regulations. Those regulations require that local

approval “shall be evidenced by a certified copy of an ordinance or

resolution duly adopted by the appropriate governing body of the

political subdivision and approved by the chief executive officer of

the political subdivision, if any, setting forth: (1) The identity of the

sponsor; (2) The location and nature of the project; and (3) Approval

of the loan.” COMAR 05.05.01.07C.

B. Tax Credit Program

The Tax Credit Program has its origins in the federal Low

Income Housing Tax Credit Law, which was part of the federal Tax

Reform Act of 1986. Pub.L. 99-514, Title II, §252(a), 100 Stat.

2189 (October 21, 1986), codified at 26 U.S.C. §42. The Low

Income Housing Tax Credit Law uses federal tax credits to create

incentives for developers to construct and renovate low income

rental housing. See Ballard, Profiting from Poverty: The

Competition Between For-Profit and Nonprofit Developersfor LowIncome Housing Tax Credits, 53 Hastings L. J. 211, 216-19 (2003);

Shah, Having Low Income Housing Tax Credit Qualified Allocation

Plans Take into Account the Quality of Schools at Proposed Family
20 [96 Op. Att’y

Housing Sites: A Partial Answer to the Residential Segregation

Dilemma, 39 Ind. L. Rev. 691 (2006).

Administration of the program is delegated by the federal

statute to state and local housing agencies – referred to as “housing

credit agencies.” See 26 U.S.C. §42(h). In Maryland, DHCD acts

as the housing credit agency and allocates tax credits for residential

rental properties in the State. Within DHCD, the Tax Credit

Program is the responsibility of the Community Development

Administration (“CDA”), which is authorized by State law to carry

out housing and community development programs. HCD §4-211.

CDA’s powers are subject to various constraints under State

law. Its agreements must be approved by the Secretary of Housing

and Community Development (“Secretary”) and, in some cases, by

the Board of Public Works. HCD §4-213(a). A project financed by

CDA must comply with applicable zoning and building codes. HCD

§4-213(c). CDA’s enabling law also directs it to “work closely,

consult, and cooperate with local elected officials” and “give

primary consideration to local needs and desires.” HCD §4-

213(f)(i)-(ii). In carrying out this legislative direction, CDA has

long required explicit approval of a project by the local governing

body. The Court of Special Appeals has held that the agency has

2

correctly construed the legislative intent of this statute in requiring

local approval of projects. Forestville Park Ltd. v. State, 50 Md.

App. 570, 539 A.2d 46 (1981).

In Forestville, CDA entered into an agreement with a

developer to provide financing for limited income purchasers of

homes built by the developer. As required by a CDA regulation, the

agreement was contingent on a resolution by the local governing

body, endorsed by its chief executive, approving the project and

acknowledging CDA’s participation. Although the county council

passed a resolution approving the project, the county executive

declined to endorse it and CDA withdrew from the agreement. The

developer sued to enforce the agreement, arguing that the local

2 For projects that fit the description of “community development

projects” in HCD §4-217, and for which CDA provides financing under

HCD §4-225(a)(1), there is an additional local approval requirement. 

CDA must obtain approval of the land use for the project by a resolution

of the local government for the jurisdiction in which a project is to be

located. HCD §4-213(b).
Gen. 17] 21

approval was required solely with respect to land use and should not

3

have been required as to the agreement generally.

The Court of Special Appeals held that CDA had reasonably

construed the statutory mandate to cooperate with local jurisdictions.

It stated:

[w]e think that when the Legislature provided

in [HCD §4-213(f)] that the CDA “shall work

closely, consult and cooperate with local

elected officials” it meant precisely what it

said, and that [HCD §4-213(f)] applies to all

phases of a CDA undertaking in any political

subdivision of the State. It is difficult to

understand how CDA can “work closely,

consult and cooperate” with the local elected

government officials if that language were

construed to mean that CDA possessed the

authority to put the project in the county or

municipality, notwithstanding the opposition

of local elected officials. Indeed, if CDA

could, as [the developer] would have it, say

that “we have consulted and cooperated and

now we are going to put the project in your

area irrespective of your opposition,” the

directive mandated in [HCD §4-213(f)]

would amount to a hollow expression devoid

of real meaning.... To arrive at any other

result would require the Court to rewrite the

statute and thwart the legislative will.

50 Md. App. at 577-78. The Court also concluded that the CDA

regulation requiring the endorsement of the chief executive of local

government was within the agency’s authority to adopt regulations

and was an accurate interpretation of legislative intent. Id.

4

3 Land use approval is required by statute for projects designated

as “community development projects.” See footnote 2 above.

4 The regulation at issue in Forestville was later repealed and

replaced with new regulations that incorporate the local approval

requirement. In particular, COMAR 05.05.06.04A requires CDA to

administer the Tax Credit Program in accordance with the State’s

Qualified Allocation Plan (the “QAP”), created pursuant to 26 U.S.C.

(continued...)
22 [96 Op. Att’y

C. DHCD Process

DHCD has incorporated the local approval requirement in its

procedures for applications for financing under various programs,

including RHPP and the Tax Credit Program. Those procedures are

set forth in DHCD’s Multifamily Rental Financing Program Guide

(January 24, 2011) (the “Guide”). Competition for financing

assistance is high and, pursuant to the process outlined in the Guide,

DHCD conducts a comprehensive underwriting and construction

review process to assess applications.

DHCD first determines whether a project meets certain

threshold requirements. Guide at pp. 9-24. Among the threshold

factors is “Local Government Support and Contribution.” Id. at pp.

11-12. In particular, the Guide indicates that an application for

funding include either a final resolution of support, or a letter of

support from the highest elected official of the local jurisdiction

indicating his or her favorable support of the project in the current

funding round. After DHCD approves the application for financing,

the Guide states that the project sponsor is to submit a resolution

supporting the project from the local governing body and its highest

elected official prior to closing. Id. In addition, a “local

contribution” is to be made to the project by the local governing

body from local resources to reduce development or operating costs

of the project. Id.

5

If a project satisfies the threshold criteria, DHCD rates it

according to the nature and character of the development, and then

ranks it against the other projects included in that funding round.

Guide at pp. 25-45. To establish the ranking, DHCD evaluates each

project and awards points, up to a maximum of 315, based on

various criteria. Id. at pp. 25-26. DHCD’s evaluation criteria

4 (...continued)

§42(m). The QAP incorporates by reference DHCD’s MultifamilyRental

FinancingProgram Guide, which includes the local approval requirement.

See Part I.C. of this opinion. 

5 The Tax Credit Program and RHPP are not the only DHCD 

programs for which applicants must obtain local approval. For example,

DHCD’s Division of Neighborhood Revitalization (“NR”) must obtain

local approval prior to funding a small business loan or grant under the

Neighborhood Business Development Program and prior to financing a

loan or grant under the CommunityLegacyProgram. HCD §§6-306(b)(4),

6-207(b).
Gen. 17] 23

include: (i) the capacity of the project’s development team (e.g.,

experience, financial capacity and minority participation); (ii) the

project’s public purpose (e.g., income targeting, family housing,

housing for individuals with disabilities, and tenant services); (iii)

the project’s location and marketability (e.g., housing in certain

designated impacted areas and projects in rural areas); (iv) the

project’s development quality (i.e., amenities, design criteria, and

sustainability); (v) the project’s construction or rehabilitation cost

limits; and (vi) the amount of non-State resources and long-term

operating subsidies supporting the project.

After the projects are rated and ranked, recommendations for

funding are submitted to the Director of DHCD’s Division of

Development Finance, who in turn submits a detailed written

presentation of the recommended projects to DHCD’s Housing

Finance Review Committee (the “Loan Committee”), an advisory

committee that has a majority of members from outside DHCD. See

HCD §4-208. DHCD staff presents information and

6

recommendations to the Loan Committee concerning projects

applying for RHPP and Tax Credit Program financing. After those

presentations, the Loan Committee decides whether to recommend

approval of the projects to the Secretary.

The Secretary approves (or disapproves) each project in

writing. The Secretary typically also provides DHCD staff with

specific parametersfor possible modifications of the financing terms

and conditions of approved projects, depending on individual project

needs and circumstances. The approvals also delegate authority

among DHCD staff to perform the necessary tasks and to execute

documents to complete transactions.

6 The Loan Committee’s members are appointed by the Governor

on the recommendation of the Secretary. HCD §4-208. The Loan

Committee is comprised of three employees of DHCD; one employee of

the Executive Branch of State government who is not employed by

DHCD; and three members of the public. Id. 
24 [96 Op. Att’y

II

Analysis

A. Whether the Local Approval Requirement Violates

Separation of Powers

You first ask whether the local approval requirement

improperly delegates to local governments a function of the

executive branch of State government and thereby violates the

separation of powers principle of the State Constitution.

1. Separation of Powers

The Maryland Constitution states, in relevant part, “That the

Legislative, Executive, and Judicial powers of Government ought to

be forever separate and distinct from each other ....” Maryland

Declaration of Rights, Article 8. A core function of the Legislature

under the Constitution is its power to make laws. See Christ v.

Department of Natural Resources, 335 Md. 427, 441-45, 644 A.2d

34 (1994). In carrying out its law-making function, the Legislature

frequently authorizes both executive branch agencies and political

subdivisions to carry out various governmental functions. We

understand your reference to “separation of powers” to be whether

the Legislature intruded on the sphere of the Executive Branch by

delegating certain authority to local governments with respect to

these housing finance programs.

2. State Laws Contingent on Local Government Action

It has long been established that the General Assembly has

broad latitude in placing contingencies on the effectiveness of

legislation. See State v. Kirkley, 29 Md. 85, 102 (1868); Baltimore

v. Clunet, 23 Md. 449, 469-470 (1865). “A valid law may be passed,

to take effect upon the happening of a future contingent event, even

where that event involves the assent to its provisions by other

parties.” Clunet, supra. Making one governmental entity’s action

contingent on approval by another governmental entity is a common

way of creating checks and balances in government and, indeed,

appears in the State Constitution itself. See, e.g., Maryland

Constitution, Article II, §10 (allowing for Senate confirmation of

gubernatorial appointees).
Gen. 17] 25

The required assent may be that of a local government. There

are numerous examples of laws in which the Legislature has

conferred powers on an executive branch agency, but made those

powers contingent on, or constrained them by, powers exercised by

a local government. See, e.g., Annotated Code of Maryland, Courts

& Judicial Proceedings Article, §2-309 (providing for staffing and

compensation of sheriffs’ offices,subject to various county laws and

procedures); Annotated Code of Maryland, Criminal Procedure

Article, §2-102(b) (defining statewide arrest powers of police

officers that depend in part on local government approval of mutual

aid agreements); Annotated Code of Maryland, Education Article,

§5-202(d) (eligibility of local school system for State financial

assistance made contingent on extent of county funding of local

schools).

To our knowledge, none of these legislative enactments has

been found to violate the principle of separation of powers. For

example, in assessing the constitutionality of proposed legislation

that would have authorized commercial gambling, subject to the

enactment of a local ordinance approving gambling within a locality,

this Office concluded that the proposal “raise[d] no separation of

powers concerns.” 80 Opinions of the Attorney General 151, 152,

158 (1995). There appears to be no basis for reaching a different

conclusion when the implementation of a State law in a locality is

subject to approval, on a case by case basis, by the local government

through an ordinance or resolution.

3. Application to Local Approval Requirement

The Legislature exercised a core legislative function in

enacting the laws governing RHPP and the Tax Credit Program. It

imposed various conditions for those programs, which DHCD has

implemented in the comprehensive loan underwriting and approval

process detailed above. It made local approval an explicit condition

for assistance under RHPP and an implicit condition, as interpreted

by CDA and the courts, for assistance under the Tax Credit Program.

The inclusion of the local approval contingency in those laws was

well within the Legislature’s prerogative. In enforcing that local

approval requirement, DHCD is administering the law in accordance

with legislative intent – a core executive function. See Friedman,

The Maryland State Constitution: A Reference Guide (2006) at 19.

If DHCD were to ignore the requirement, it arguably would be

intruding on the legislative branch by effectively rewriting the law.
26 [96 Op. Att’y

B. Whether the Local Approval Requirement Violates Federal

Law

You ask whether the local approval requirement in State law

is at odds with the federal law governing the Tax Credit Program.

You also ask if the local approval requirement “defeat[s] the

purposes of the [Tax Credit] program.”

1. Federal Preemption of State Law

Your question raises the issue whether the federal law

governing the Tax Credit Program preempts the State law requiring

local approval. Under the Supremacy Clause of the federal

constitution, federal law prevails over a conflicting State law.

United States Constitution, Article VI, cl. 2. However, federal

statutes are not generally deemed to preempt State law unless it is

“the clear and manifest purpose of Congress.” Rice v. Santa Fe

Elevator Corp., 331 U.S. 218, 230 (1947); see also Lorillard

Tobacco Co. v. Reilly, 533 U.S. 525, 541 (2001). The congressional

purpose may be manifested either explicitly in the federal statute

(“express preemption”) or implicitly in the federal scheme (“implied

preemption”).

Express preemption occurs when the federal government has

explicitly foreclosed state action and acted to completely regulate a

certain area by expresslanguage. See Lorillard Tobacco Co.,supra.;

see also 94 Opinions of the Attorney General 3, 5-10 (2009)

(analyzing express preemption provision of the federal Health

Insurance Portability and Accountability Act). Implied preemption

occurs when Congress intends federal law to “occupy the field” or

if State law conflicts with federal law such that the state law “stands

as an obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.” Crosby v. National Foreign

Trade Council, 530 U.S. 363, 372-73 (2000). Congressional intent

to “occupy a given field can be inferred from the pervasiveness of

federal regulation and/or the dominance of the federal interest in a

particular area of legislative activity.” Massachusetts Ass'n of Health

Maintenance Orgs. v. Ruthardt, 194 F.3d 176, 179 (1 Cir. 1999).

st

It may be drawn from the text of the federal statute, as well as the

surrounding regulatory scheme and the federal government’s intent

in adopting the federal law. Id. at 179-180.
Gen. 17] 27

In the absence of federal preemption, state law may

complement or supplement a federal statutory scheme. “[M]atters

left unaddressed in such a [federal statutory] scheme are presumably

left subject to the disposition provided by state law.” O’Melveny &

Myers v. FDIC, 512 U.S. 79, 85 (1994) (finding that California state

laws on fraudulent conduct in banking matters were not preempted

by the federal Financial Institutions, Reform, Recovery and

Enforcement Act).

2. Federal Low Income Housing Tax Credit Law

As noted earlier, the federal Low Income Housing Tax Credit

Law is part of the Internal Revenue Code. Under that law, a state

housing credit agency must adopt a Qualified Allocation Plan

(“QAP”) prior to allocating any federal tax credits. 26 U.S.C.

§42(m). A QAP is defined as:

... any plan

(i) which sets forth selection

criteria to be used to determine housing

priorities of the housing credit agency

which are appropriate to local

conditions,

(ii) which also gives

preference in allocating housing credit

dollar amounts among selected projects

to

(I) projects serving

the lowest income tenants,

(II) projects obligated

to serve qualified tenants for the longest

periods, and

(III) projects which are

located in qualified census tracts (as

defined in [§42(d)(5)(C)]) and the

development of which contributes to a

concerted community revitalization

plan, and
28 [96 Op. Att’y

(iii) w h i c h p r o v i d e s a

procedure that the agency (or an agent

or other private contractor of such

agency) will follow in monitoring the

noncompliance with the provisions of

this section and in notifying the Internal

R e v e n u e S e r v i c e o f s u c h

noncompliance which such agency

becomes aware of and in monitoring for

noncompliance with habitability

standards through regular site visits.

26 U.S.C. §42(m)(1)(B). The federal statute also provides standards

for the selection criteria applied by a state housing credit agency. It

states:

The selection criteria set forth in a

qualified allocation plan must include

(i) project location,

(ii) housing needs characteristics,

(iii) project characteristics,

including whether the project includes

the use of existing housing as part of a

community revitalization plan,

(iv) sponsor characteristics,

(v) tenant populations with

special housing needs,

(vi) public housing waiting

lists,

(vii) tenant populations with

individuals with children,

(viii) projects intended for

eventual tenant ownership,
Gen. 17] 29

(ix) the energy efficiency of

the project, and

(x) the historic nature of the

project.

26 U.S.C. §42(m)(1)(C). These are the only selection criteria

imposed by the federal law. Nothing in the statute prohibits state

housing credit agencies from including additional selection criteria

in their QAPs.

3. Relation of Federal Statute to Local Approval

Requirement

As is evident, the federal statute does not expressly preempt

states from imposing additional selection criteria for projects

assisted under the Tax Credit Program. Nor, in our view, does it

implicitly preclude a state from adopting additional state criteria,

such as the local approval requirement. The federal law establishing

the program lacks the “pervasiveness” and “dominance” in the area

of legislative activity that would lead a court to find implied

preemption.

In certain respects, the local approval requirement in State

law implements a factor expressed in the federal statute. In

developing selection criteria that projects must meet to be eligible

for federal tax benefits, a state is to look to the local needs of its

jurisdictions – the selection criteria are to be applied “to determine

housing priorities... appropriate to local conditions.” 26 U.S.C.

§42(m)(1)(B)(i). Moreover, under the federalstatute, assistance may

not be provided without obtaining at least the views of the local

jurisdiction. The statute prohibits allocation of tax credits to a

project unlessthe housing credit agency notifies “the chief executive

officer (or the equivalent) of the local jurisdiction within which the

building is located of such project and provides such individual a

reasonable opportunity to comment on the project.” 26 U.S.C.

§42(m)(1)(A)(ii).

In sum, the federal law requires that (1) the local government

is aware of the proposed project; (2) the local government has an

opportunity to comment on the proposed project; (3) the proposed

project is appropriate to local conditions; and (4) the proposed

project meets the needs of the local jurisdiction and local tenant

populations. The local approval requirement in State law appears
30 [96 Op. Att’y

consistent with those objectives and, in our view, does not defeat the

purpose of the Low Income Housing Tax Credit Law.

III

Conclusion

In our opinion, the local approval requirement, as designed by

the General Assembly and implemented by DHCD, does not violate

the separation of powers principle of the State Constitution.

Moreover, the requirement is not at odds with the federal Low

Income Housing Tax Credit Law and is not preempted by that law.

7

Douglas F. Gansler

Attorney General

Anthony J. Mohan

Assistant Attorney General

Honora W. Sutor

Assistant Attorney General

Robert N. McDonald

Chief Counsel

Opinions and Advice

7 You have not asked about, and we do not address, the impact, if

any, of the federal Fair Housing Act in relation to these programs. See In

re Adoption of the 2003 Low Income Housing Tax Credit Qualified

Allocation Plan, 848 A.2d 1, 17-18 (N.J. App. Div.), cert. denied, 861

A.2d 846 (2004) (state agency’s administration of Low Income Housing

Tax Credit program did not violate federal Fair Housing Act).