Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices 9961 

Total Estimated Burden Hours: 

11,723. 

Status: Revision of a currently 

approved collection. 

Authority: Section 3507 of the Paperwork 

Reduction Act of 1995, 44 U.S.C. 35, as 

amended. 

Dated: February 28, 2007. 

Lillian L. Deitzer, 

Departmental Paperwork Reduction Act 

Officer, Office of the Chief Information 

Officer. 

[FR Doc. E7–3805 Filed 3–5–07; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–4889–N–09] 

Statutorily Mandated Designation of 

Difficult Development Areas and 

Qualified Census Tracts for Section 42 

of the Internal Revenue Code of 1986: 

Revision of Definition of Effective Date 

AGENCY: Office of the Assistant 

Secretary for Policy Development and 

Research, HUD. 

ACTION: Notice. 

SUMMARY: This notice revises the 

definition of ‘‘effective date’’ in a notice 

published in the Federal Register on 

September 28, 2006, designating 

‘‘Difficult Development Areas’’ (DDAs) 

and ‘‘Qualified Census Tracts’’ (QCTs) 

for purposes of the Low-Income 

Housing Tax Credit (LIHTC) under 

section 42 of the Internal Revenue Code 

of 1986 (the Code) (26 U.S.C. 42). HUD 

is responsible for designating DDAs and 

QCTs annually. The September 28, 

2006, notice provided a definition of 

‘‘effective date’’ that is revised by this 

notice to define ‘‘multiphase’’ LIHTC 

projects and to specify how such 

projects are to be treated when DDA or 

QCT designations change between 

phases. 

FOR FURTHER INFORMATION CONTACT: For 

questions on how areas are designated, 

on geographic definitions, and on the 

new provisions for multiphase projects, 

contact Michael K. Hollar, Economist, 

Economic Development and Public 

Finance Division, Office of Policy 

Development and Research, Department 

of Housing and Urban Development, 

451 Seventh Street, SW., Washington, 

DC 20410–6000, telephone (202) 402–

5878, or send an e-mail to 

Michael_K._Hollar@hud.gov. For 

specific legal questions pertaining to 

Section 42, contact Branch 5, Office of 

the Associate Chief Counsel, 

Passthroughs and Special Industries, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington, 

DC 20224, telephone (202) 622–3040. 

For questions about the ‘‘HUB Zones’’

program, contact Michael P. McHale, 

Assistant Administrator for 

Procurement Policy, Office of 

Government Contracting, Small 

Business Administration, 409 Third 

Street, SW., Suite 8800, Washington, DC 

20416, telephone (202) 205–8885, fax 

(202) 205–7167, or send an e-mail to 

hubzone@sba.gov. A text telephone is 

available for persons with hearing or 

speech impairments at (202) 708–9300. 

(These are not toll-free telephone 

numbers.) Additional copies of this 

notice are available through HUD User 

at (800) 245–2691 for a small fee to 

cover duplication and mailing costs. 

Copies Available Electronically: This 

notice and additional information about 

DDAs and QCTs are available 

electronically on the Internet at http:// 

www.huduser.org/datasets/qct.html. 

SUPPLEMENTARY INFORMATION:

This Document 

This notice revises the definition of 

‘‘effective date’’ in a notice published in 

the Federal Register on September 28, 

2006 (71 FR 57234). That notice 

designated DDAs and QCTs for 

purposes of the LIHTC, as governed by 

section 42 of the Code (Section 42). 

HUD is responsible for designating 

DDAs and QCTs annually, and, at this 

time, is revising the definition of 

‘‘effective date’’ provided in the 

September 28, 2006, notice (see 71 FR 

57238) to define ‘‘multiphase’’ LIHTC 

projects and specify how such projects 

are to be treated when DDA or QCT 

designations change between phases. In 

addition, this notice clarifies what is 

meant by ‘‘certified in writing’’ for 

purposes of demonstrating compliance 

with effective dates for DDA and QCT 

designations. This notice does not 

change the designations of DDAs and 

QCTs in the September 28, 2006, notice. 

Background 

The U.S. Department of the Treasury 

(Treasury) and its Internal Revenue 

Service (IRS) are authorized to interpret 

and enforce the provisions of the 

Internal Revenue Code (the Code), 

including the LIHTC found at Section 

42 of the Code. The requirement for 

HUD to designate DDAs and QCTs is 

found in Section 42(d)(5)(C) of the Code. 

State and local LIHTC-allocating 

agencies are responsible for allocating 

LIHTC to eligible projects according to 

approved Qualified Allocation Plans 

(QAPs). Most LIHTC-allocating agencies 

include in their QAPs a limitation on 

the amount of LIHTC that may be 

awarded to a particular applicant, 

project, and/or location in any year. 

When applicants plan LIHTC-financed 

developments that would require 

amounts of LIHTC in excess of the 

individual allocation limits defined in 

the applicable QAP (or in smaller states, 

that are larger than the annual per 

capital credit allocation authority), they 

are forced to divide their developments, 

and their LIHTC applications, into 

phases over 2 or more years in order to 

obtain all the tax credits needed to 

complete the project. If such 

developments are located in DDAs or 

QCTs, there is a possibility that the 

location of the development may lose its 

DDA/QCT status after the first phase has 

been allocated LIHTC, but before 

subsequent phases have received their 

allocation or applied for LIHTC. As the 

financing for developments in these 

situations is generally predicated on the 

additional LIHTC available because of 

the developments’ location in DDAs/ 

QCTs, the subsequent phases may 

become infeasible. 

HUD’s intent in revising designations 

of DDAs and QCTs is to direct scarce 

public resources, in the form of 

additional LIHTC subsidy, to projects in 

those locations with the greatest need 

for this additional subsidy as defined by 

statute. However, HUD does not intend 

for these changes in designations to 

ultimately prevent the development of 

affordable housing, particularly in cases 

where developments have been required 

to be done in phases by LIHTCallocating agency limits on annual 

allocation amounts to individual 

applicants. 

HUD, therefore, is establishing in this 

notice a definition of ‘‘multiphase 

projects’’ and specifying how effective 

dates in its notices designating DDAs 

and QCTs are to be applied to such 

projects. In addition, HUD is clarifying 

what is meant by ‘‘certified in writing’’

for purposes of demonstrating 

compliance with effective dates for DDA 

and QCT designations. 

Definition of ‘‘Multiphase Projects’’ and 

Applicability of Effective Date 

For purposes of this notice, a 

‘‘multiphase project’’ is defined as a set 

of buildings to be constructed or 

rehabilitated under the rules of the 

LIHTC and meeting the following 

criteria as certified in writing by the 

applicable LIHTC-allocating agency: 

(1) In the first application for tax 

credit, the applicant must include an 

indication of the multiphase nature of 

the project (i.e., the applicant’s intent to 

make future applications for LIHTC 

because of QAP limitations, or agency 

allocation authority ceilings, for 

buildings located on a site, as defined 


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9962 Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices 

below). For purposes of applications 

made in calendar year 2007 only, the 

preceding sentence will be met if an 

applicant who previously submitted a 

complete application for an earlier 

phase of a multiphase project (when 

such earlier phase was in a QCT or 

DDA), but failed to properly identify all 

phases of the multiphase project in the 

earlier application, submits a complete 

application for the present phase of the 

same project and all phases of the 

project occur on a contiguous parcel of 

land; 

(2) At the time credits are allocated to 

the first phase of the project, there must 

be common control (ownership, 

leasehold, or option to buy or lease) of 

all land where the buildings shall be 

constructed or rehabilitated (the site); 

(3) The aggregate amount of LIHTC 

applied for on behalf of, or that would 

eventually be allocated to, the buildings 

on the site exceeds the one-year 

limitation on credits per applicant, as 

defined in the QAP of the LIHTCallocating agency, or the annual per 

capita credit authority of the LIHTCallocating agency, and is the reason the 

applicant must request multiple 

allocations over 2 or more years; and 

(4) All applications for LIHTC for 

buildings on the site are made in 

immediately consecutive years. 

In the case of a multiphase project, 

the applicable DDA or QCT status of the 

site of the project for all phases of the 

project is that which was applicable 

when the project received its first 

allocation of LIHTC, as certified in 

writing by the LIHTC-allocating agency. 

For purposes of Section 42(h)(4)(B) of 

the Internal Revenue Code, the 

applicable DDA or QCT status of the site 

of the project for all phases of the 

project is that which was applicable 

when the building(s) in the first phase 

were placed in service or when the 

bonds were issued as certified in writing 

by the LIHTC-allocating agency. 

For purposes of demonstrating that 

the effective date provisions in HUD 

DDA and QCT notices are met, 

‘‘certified in writing’’ means that the 

LIHTC-allocating agency has provided a 

signed letter to the applicant stating that 

the LIHTC-allocating agency has found 

that the applicant meets the conditions 

set forth in HUD’s notice. 

Under this definition and application 

of effective date, a multiphase project 

located in a DDA or QCT when the first 

allocation of credit is made would be 

treated as if in a DDA or QCT 

throughout all phases of the project 

even if the DDA or QCT designation 

were subsequently changed. Under 

clause one of the definition, the 

applicant’s first application notice must 

include the multiphase nature of the 

project. If the applicant failed to identify 

all phases of the multiphase 

development in the first application, 

then solely for purposes of applications 

made in 2007, a project that otherwise 

meets clauses 2 through 4 will qualify 

if all phases of the development occur 

on a contiguous parcel of land. 

Applications made by a different 

applicant after the DDA or QCT status 

of the site has been removed would not 

be eligible even if the applicants had 

obtained control of part of a site that 

would otherwise be eligible under the 

definition. Under clause 2 of the 

definition of a multiphase project, any 

buildings on land where control was 

obtained after the allocation of credit to 

the first phase of the project would not 

be eligible for treatment as in a DDA or 

QCT. Under clause 3 of the definition, 

if a project is built in phases to 

accommodate the capacity of the 

developer or some other reason, and not 

because the aggregate amount of credit 

required to fund the development 

exceeds annual limitations specified in 

the QAP (or the annual per capita credit 

authority of the LIHTC-allocating 

agency), the project is not eligible for 

continued treatment as in a DDA or 

QCT. Under clause 4, if an intervening 

year passes between application phases, 

the subsequent phase(s) of the project is 

(are) not eligible for continued treatment 

as in a DDA or QCT. 

Revisions to the September 28, 2006, 

Notice 

The section entitled ‘‘Effective Date’’

of the notice designating DDAs and 

QCTs for 2007 published in the Federal 

Register on September 28, 2006 (71 FR 

57234), is hereby revised to read as 

follows: 

For DDAs designated by reason of 

being in areas determined by the 

President to warrant individual or 

individual and public assistance from 

the federal government under the 

Stafford Act by reason of Hurricanes 

Katrina, Rita, or Wilma (the GO Zone 

Designation), the designation is 

effective: 

(1) For housing credit dollar amounts 

allocated and buildings placed in 

service during the period beginning on 

January 1, 2006, and ending on 

December 31, 2008; or 

(2) for purposes of Section 42(h)(4)(B) 

of the Internal Revenue Code, for 

buildings placed in service during the 

period beginning on January 1, 2006, 

and ending on December 31, 2008, but 

only with respect to bonds issued after 

December 31, 2005. 

The 2007 lists of QCTs and the 2007 

lists of DDAs that are not part of the GO 

Zone Designation are effective: 

(1) For allocations of credit after 

December 31, 2006; or 

(2) for purposes of Section 42(h)(4)(B) 

of the Code, if the bonds are issued and 

the building is placed in service after 

December 31, 2006. 

If an area is not on a subsequent list 

of DDAs or QCTs, the 2007 lists are 

effective for the area if: 

(1) The allocation of credit to an 

applicant is made no later than the end 

of the 365-day period after the 

submission to the credit-allocating 

agency of a complete application by the 

applicant, and the submission is made 

before the effective date of the 

subsequent lists; or 

(2) for purposes of Section 42(h)(4)(B) 

of the Code, if: 

(a) The bonds are issued or the 

building is placed in service no later 

than the end of the 365-day period after 

the applicant submits a complete 

application to the bond-issuing agency, 

and 

(b) the submission is made before the 

effective date of the subsequent lists, 

provided that both the issuance of the 

bonds and the placement in service of 

the building occur after the application 

is submitted. 

An application is deemed to be 

submitted on the date it is filed if the 

application is determined to be 

complete as certified in writing by the 

credit-allocating or bond-issuing agency. 

A ‘‘complete application’’ means that no 

more than de minimis clarification of 

the application is required for the 

agency to make a decision about the 

allocation of tax credits or issuance of 

bonds requested in the application. 

In the case of a ‘‘multiphase project,’’

the DDA or QCT status of the site of the 

project that applies for all phases of the 

project is that which applied when the 

project received its first allocation of 

LIHTC as certified in writing by the 

LIHTC-allocating agency. For purposes 

of Section 42(h)(4)(B) of the Internal 

Revenue Code, the DDA or QCT status 

of the site of the project that applies for 

all phases of the project is that which 

applied when the first of the following 

occurred as certified in writing by the 

LIHTC-allocating agency: (a) The 

building(s) in the first phase were 

placed in service or (b) the bonds were 

issued. 

For purposes of this notice, a 

‘‘multiphase project’’ is defined as a set 

of buildings to be constructed or 

rehabilitated under the rules of the 

LIHTC and meeting the following 

criteria as certified in writing by the 

applicable LIHTC-allocating agency: 


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Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices 9963 

(1) In the first application for tax 

credit, the applicant must include an 

indication of the multiphase nature of 

the project (i.e., the applicant’s intent to 

make future applications for LIHTC 

because of Qualified Allocation Plan 

(QAP) limitations, or agency allocation 

authority ceilings, for buildings located 

on a site as defined below). For 

purposes of applications made in 2007 

only, the preceding sentence will be met 

if an applicant who previously 

submitted a complete application for an 

earlier phase of a multiphase project 

(when such earlier phase was in a QCT 

or DDA), but failed to properly identify 

all phases of the multiphase project in 

the earlier application, submits a 

complete application for a present phase 

of the same project and all phases of the 

project occur on a contiguous parcel of 

land; 

(2) At the time credits are allocated to 

the first phase of the project, there must 

be common control (ownership, 

leasehold, or option to buy or lease) of 

all land where the buildings shall be 

constructed or rehabilitated (the site); 

(3) The aggregate amount of LIHTC 

applied for on behalf of, or that would 

eventually be allocated to, the buildings 

on the site exceeds the one-year 

limitation on credits per applicant as 

defined in the QAP of the LIHTCallocating agency, or the annual per 

capita credit authority of the LIHTC 

allocating agency, and is the reason the 

applicant must request multiple 

allocations over 2 or more years; and 

(4) All applications for LIHTC for 

buildings on the site are made in 

immediately consecutive years. 

For purposes of demonstrating 

compliance with the effective date 

provisions of this notice, ‘‘certified in 

writing’’ means that the LIHTCallocating agency has provided a signed 

letter to the applicant stating that the 

LIHTC-allocating agency has found that 

the applicant meets the conditions set 

forth in this notice. 

The designations of QCTs under 

Section 42 of the Internal Revenue Code 

published on December 12, 2002 (67 FR 

76451) for the U.S. Virgin Islands, and 

on December 19, 2003 (68 FR 70982) for 

American Samoa, Guam, and the 

Northern Mariana Islands, remain in 

effect. 

Members of the public are hereby 

reminded that the Secretary of Housing 

and Urban Development, or the 

Secretary’s designee, has sole legal 

authority to designate DDAs and QCTs 

by publishing lists of geographic entities 

as defined by, in the case of DDAs, the 

several states and the governments of 

the insular areas of the United States 

and, in the case of QCTs, by the Census 

Bureau; and to establish the effective 

dates of these lists. The Secretary of the 

Treasury, through the IRS thereof, has 

sole legal authority to interpret, and to 

determine and enforce compliance with, 

the Internal Revenue Code and 

associated regulations including Federal 

Register notices published by HUD for 

purposes of designating DDAs and 

QCTs. Representations made by any 

other entity as to the content of HUD 

notices designating DDAs and QCTs that 

do not precisely match the language 

published by HUD should not be relied 

upon by taxpayers in determining what 

actions are necessary to comply with 

HUD notices. 

In addition, the section entitled 

‘‘Interpretive Examples of Effective 

Date’’ of the notice designating DDAs 

and QCTs for 2007 published on 

September 28, 2006 (71 FR 57234) is 

hereby amended with the addition of 

the following (in each case the 

description applied to a DDA is equally 

applicable to a QCT): 

(Case G) Project G is a multiphase 

project located in a 2006 regular DDA 

that is NOT a designated regular DDA in 

2007. The first phase of Project G 

received an allocation of credits in 2006 

pursuant to an application filed March 

15, 2006. An application for tax credits 

for the second phase Project G is filed 

with the allocating agency by the same 

entity on March 15, 2007. The second 

phase of Project G is located on a 

contiguous site controlled by the 

applicant at the time credits were 

allocated to the first phase. Credits are 

allocated to the second phase of Project 

G on October 30, 2007. The aggregate 

amount of credits allocated to the two 

phases of Project G exceeds the amount 

of credits that may be allocated to an 

applicant in one year under the 

allocating agency’s QAP and is the 

reason that the application contains 

multiple phases. The second phase of 

Project G is therefore eligible for the 

increase in basis accorded a project in 

a 2006 regular DDA because it meets all 

of the conditions to be a part of a 

multiphase project.(Case H) Project H is 

a multiphase project located in a 2006 

regular DDA that is NOT a designated 

regular DDA in 2007. The first phase of 

Project H received an allocation of 

credits in 2006 pursuant to an 

application filed March 15, 2006. An 

application for tax credits for the second 

phase Project H is filed with the 

allocating agency by the same entity on 

March 15, 2008. The second phase of 

Project H is located on a site that was 

not controlled by the applicant at the 

time credits were allocated to the first 

phase. Credits are allocated to the 

second phase of Project H on October 

30, 2008. The aggregate amount of 

credits allocated to the two phases of 

Project H exceeds the amount of credits 

that may be allocated to an applicant in 

one year under the allocating agency’s 

QAP. The second phase of Project H is 

therefore NOT eligible for the increase 

in basis accorded a project in a 2006 

regular DDA because it does not meet all 

of the conditions for a multiphase 

project as defined in this notice. Project 

H is not on land controlled by the 

applicant at the time credits were 

allocated to the first phase. Also, the 

application for credits for the second 

phase of Project H was not made in the 

year immediately following the first 

phase application year. 

Findings and Certifications 

Environmental Impact 

In accordance with 40 CFR 1508.4 of 

the regulations of the Council on 

Environmental Quality and 24 CFR 

50.19(c)(6) of HUD’s regulations, the 

policies and procedures contained in 

this notice provide for the establishment 

of fiscal requirements or procedures that 

do not constitute a development 

decision affecting the physical 

condition of specific project areas or 

building sites and, therefore, are 

categorically excluded from the 

requirements of the National 

Environmental Policy Act, except for 

extraordinary circumstances, and no 

Finding of No Significant Impact is 

required. 

Federalism Impact 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any policy document that 

has federalism implications if the 

document either imposes substantial 

direct compliance costs on state and 

local governments and is not required 

by statute, or the document preempts 

state law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the executive order. This 

notice merely modifies the content of a 

previous notice designating DDAs and 

QCTs as required under Section 42 of 

the Internal Revenue Code, as amended, 

for the use by political subdivisions of 

the states in allocating the LIHTC. As a 

result, this notice is not subject to 

review under the order. 

Dated: March 1, 2007. 

Darlene F. Williams, 

Assistant Secretary for Policy, Development 

and Research. 

[FR Doc. E7–3894 Filed 3–5–07; 8:45 am] 

BILLING CODE 4210–67–P 


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