[Federal Register Volume 77, Number 77 (Friday, April 20, 2012)]
[Notices]
[Pages 23735-23740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9630]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5633-N-01]


Statutorily Mandated Designation of Qualified Census Tracts for 
Section 42 of the Internal Revenue Code of 1986

AGENCY: Office of the Assistant Secretary for Policy Development and 
Research, HUD.

ACTION: Notice.

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SUMMARY: This notice designates ``Qualified Census Tracts'' (QCTs) for 
purposes of the Low-Income Housing Tax Credit (LIHTC) under Section 42 
of the Internal Revenue Code of 1986 for 2013. HUD is making new 
designation of QCTs at this time on the basis of new data from the 2010 
Decennial Census and the 2006-2010 tabulations of American Community 
Survey (ACS). The 2012 Difficult Development Areas (DDAs) designated in 
the Federal Register notice published on October 27, 2011 (76 FR 66741) 
are not changed by this notice and remain in effect.

FOR FURTHER INFORMATION CONTACT: For questions on how QCTs are 
designated and on geographic definitions, contact Michael K. Hollar, 
Senior Economist, Economic Development and Public Finance Division, 
Office of Policy Development and Research, Department of Housing and 
Urban Development, 451 Seventh Street SW., Room 8234, Washington, DC 
20410-6000; telephone number 202-402-5878, or send an email to 
<a href="/cdn-cgi/l/email-protection#2d60444e454c4841036603654241414c5f6d455849034a425b"><span class="__cf_email__" data-cfemail="d499bdb7bcb5b1b8fa9ffa9cbbb8b8b5a694bca1b0fab3bba2">[email protected]</span></a>. 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 number 202-
622-3040, fax number 202-622-4753. For questions about the ``HUB 
Zones'' program, contact Mariana Pardo, Assistant Administrator for 
Procurement Policy, Office of Government Contracting, Small Business 
Administration, 409 Third Street SW., Suite 8800, Washington, DC

[[Page 23736]]

20416; telephone number 202-205-8885, fax number 202-205-7167, or send 
an email to <a href="/cdn-cgi/l/email-protection#731b0611091c1d16330011125d141c05"><span class="__cf_email__" data-cfemail="3a524f584055545f7a49585b145d554c">[email protected]</span></a>. A text telephone is available for persons 
with hearing or speech impairments at 202-708-8339. (These are not 
toll-free telephone numbers.) Additional copies of this notice and 
paper copies of the tables listing designated 2013 QCTs 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, including the tables listing the 2013 
QCTs designated by this notice, are available electronically on the 
Internet at http://www.huduser.org/datasets/qct.html.

SUPPLEMENTARY INFORMATION:

This Notice

    This notice designates QCTs for each of the 50 states, the District 
of Columbia, and Puerto Rico based on data from the 2010 Decennial 
Census and the 2006-2010 tabulations of ACS data. HUD is making the 
designation of QCTs for 2013 earlier than it has in recent years to 
provide more time for the public to adjust to the revised list of QCTs 
because QCTs have not changed substantially since 2007, and because the 
boundaries and numbering of Census Tracts established for the 2010 
Decennial Census may differ from those established for the 2000 Census, 
upon which past QCT designations were based. However, the effective 
date of the revised list of QCTs will still be the beginning of 
calendar year 2013 as described in this notice. The list of Census 
Tracts designated as QCTs by this notice are not published in the 
Federal Register, but are available electronically on the Internet at 
http://www.huduser.org/datasets/qct.html. Paper copies of this notice 
and the tables listing the 2013 QCTs are available through HUD User at 
800-245-2691 for a small fee to cover duplication and mailing costs.
    The designations of QCTs under Section 42 of the Internal Revenue 
Code published in the Federal Register 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 because data from the 2010 Decennial Census is not 
available for these areas.
    The 2012 DDAs designated in the Federal Register notice published 
on October 27, 2011 (76 FR 66741) are not changed by this notice and 
remain in effect.

2010 Census and 2006-2010 American Community Survey Data

    Data from the 2010 Census on total population of census tracts, 
metropolitan areas, and the nonmetropolitan parts of states are used in 
the designation of QCTs. OMB published new metropolitan area 
definitions incorporating 2000 Census data first in OMB Bulletin No. 
03-04 on June 6, 2003, and updated periodically through OMB Bulletin 
No. 10-02 on December 1, 2009. The FY2012 income limits used to 
designate QCTs are based on these metropolitan statistical area (MSA) 
definitions with modifications to account for substantial differences 
in rental housing markets (and in some cases median income levels) 
within MSAs. This QCT designation uses the current OMB metropolitan 
area definitions without modification for purposes of evaluating how 
many census tracts can be designated under the population cap, but uses 
the HUD-modified definitions and their associated area median incomes 
for determining QCT eligibility.
    Because the 2010 Decennial Census did not include questions on 
respondent household income, HUD uses 2006-2010 ACS data to designate 
QCTs. The ACS tabulates data collected over 5 years to provide 
estimates of socioeconomic variables for small areas containing fewer 
than 20,000 persons, like Census Tracts. The 2006-2010 ACS tabulations 
are the first to be issued according to the same Census Tract 
geographic boundaries as the 2010 Census tabulations.

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 IRC, including the LIHTC found at Section 42 (26 
U.S.C. 42). The Secretary of HUD is required to designate DDAs and QCTs 
by IRC Section 42(d)(5)(B). In order to assist in understanding HUD's 
mandated designation of DDAs and QCTs for use in administering IRC 
Section 42, a summary of the section is provided. The following summary 
does not purport to bind Treasury or the IRS in any way, nor does it 
purport to bind HUD, since HUD has authority to interpret or administer 
the IRC only in instances where it receives explicit statutory 
delegation.

Summary of the Low-Income Housing Tax Credit

    The LIHTC is a tax incentive intended to increase the availability 
of low-income housing. IRC Section 42 provides an income tax credit to 
owners of newly constructed or substantially rehabilitated low-income 
rental housing projects. The dollar amount of the LIHTC available for 
allocation by each state (credit ceiling) is limited by population. 
Each state is allowed a credit ceiling based on a statutory formula 
indicated at IRC Section 42(h)(3). States may carry forward unallocated 
credits derived from the credit ceiling for one year; however, to the 
extent such unallocated credits are not used by then, the credits go 
into a national pool to be redistributed as additional credit to states 
satisfying certain criteria. State and local housing agencies allocate 
the state's credit ceiling among low-income housing buildings whose 
owners have applied for the credit. Besides IRC Section 42 credits 
derived from the credit ceiling, states may also provide IRC Section 42 
credits to owners of buildings based on the percentage of certain 
building costs financed by tax-exempt bond proceeds. Credits provided 
under the tax-exempt bond ``volume cap'' do not reduce the credits 
available from the credit ceiling.
    The credits allocated to a building are based on the cost of units 
placed in service as low-income units under particular minimum 
occupancy and maximum rent criteria. In general, a building must meet 
one of two thresholds to be eligible for the LIHTC; either: (1) 20 
percent of the units must be rent-restricted and occupied by tenants 
with incomes no higher than 50 percent of the Area Median Gross Income 
(AMGI), or (2) 40 percent of the units must be rent-restricted and 
occupied by tenants with incomes no higher than 60 percent of AMGI. The 
term ``rent-restricted'' means that gross rent, including an allowance 
for tenant-paid utilities, cannot exceed 30 percent of the tenant's 
imputed income limitation (i.e., 50 percent or 60 percent of AMGI). The 
rent and occupancy thresholds remain in effect for at least 15 years, 
and building owners are required to enter into agreements to maintain 
the low-income character of the building for at least an additional 15 
years.
    The LIHTC reduces income tax liability dollar-for-dollar. It is 
taken annually for a term of 10 years and is intended to yield a 
present value of either: (1) 70 percent of the ``qualified basis'' for 
new construction or substantial rehabilitation expenditures that are 
not federally subsidized (as defined in Section 42(i)(2)), or (2) 30 
percent of the qualified basis for the cost of acquiring certain 
existing buildings or projects that are federally subsidized. The 
actual credit rates are adjusted

[[Page 23737]]

monthly for projects placed in service after 1987 under procedures 
specified in IRC Section 42. Individuals can use the credits up to a 
deduction equivalent of $25,000 (the actual maximum amount of credit 
that an individual can claim depends on the individual's marginal tax 
rate). For buildings placed in service after December 31, 2007, 
individuals can use the credits against the alternative minimum tax. 
Corporations, other than S or personal service corporations, can use 
the credits against ordinary income tax, and, for buildings placed in 
service after December 31, 2007, against the alternative minimum tax. 
These corporations also can deduct losses from the project.
    The qualified basis represents the product of the building's 
``applicable fraction'' and its ``eligible basis.'' The applicable 
fraction is based on the number of low-income units in the building as 
a percentage of the total number of units, or based on the floor space 
of low-income units as a percentage of the total floor space of 
residential units in the building. The eligible basis is the adjusted 
basis attributable to acquisition, rehabilitation, or new construction 
costs (depending on the type of LIHTC involved). These costs include 
amounts chargeable to a capital account that are incurred prior to the 
end of the first taxable year in which the qualified low-income 
building is placed in service or, at the election of the taxpayer, the 
end of the succeeding taxable year. In the case of buildings located in 
designated DDAs or designated QCTs, eligible basis can be increased up 
to 130 percent from what it would otherwise be. This means that the 
available credits also can be increased by up to 30 percent. For 
example, if a 70 percent credit is available, it effectively could be 
increased to as much as 91 percent.
    Under section 42(d)(5)(B) of the Code, a QCT is any census tract 
(or equivalent geographic area defined by the Bureau of the Census) in 
which at least 50 percent of households have an income less than 60 
percent of the AMGI or, where the poverty rate is at least 25 percent. 
There is a limit on the number of QCTs in any Metropolitan Statistical 
Area (``MSA'') that may be designated to receive an increase in 
eligible basis: all of the designated census tracts within a given MSA 
may not together contain more than 20 percent of the total population 
of the MSA. For purposes of HUD designations of QCTs, all non-
metropolitan areas in a state are treated as if they constituted a 
single metropolitan area.
    IRC Section 42(d)(5)(B)(v) allows states to award an increase in 
basis up to 30 percent to buildings located outside of federally 
designated DDAs and QCTs if the increase is necessary to make the 
building financially feasible. This state discretion applies only to 
buildings allocated credits under the state housing credit ceiling and 
is not permitted for buildings receiving credits in connection with 
tax-exempt bonds. Rules for such designations shall be set forth in the 
LIHTC-allocating agencies' qualified allocation plans (QAPs).

Explanation of HUD Designation Methodology

A. Qualified Census Tracts

    In developing this list of QCTs, HUD used 2010 Census 100-percent 
count data on total population, total households, and population in 
households; the median household income and poverty rate as estimated 
in the 2006-2010 ACS tabulations; the FY2012 Very Low-Income Limits 
(VLILs) computed at the HUD Metropolitan FMR Area (HMFA) level \1\ to 
determine tract eligibility; and the MSA definitions published in OMB 
Bulletin No. 10-02 on December 1, 2009, for determining how many 
eligible tracts can be designated under the statutory 20 percent 
population cap.
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    \1\ FY2012 HUD income limits for very low-income households 
(very low-income limits, or VLILs) are based on 50 percent of AMGI. 
In formulating the FY2012 Fair Market Rents (FMRs) and VLILs, HUD 
modified the current OMB definitions of MSAs to account for 
substantial differences in rents among areas within each new MSA 
that were in different FMR areas under definitions used in prior 
years. HUD formed these ``HUD Metro FMR Areas'' (HMFAs) in cases 
where one or more of the parts of newly defined MSAs that previously 
were in separate FMR areas had 2000 Census based 40th-percentile 
recent-mover rents that differed, by 5 percent or more, from the 
same statistic calculated at the MSA level. In addition, a few HMFAs 
were formed on the basis of very large differences in AMGIs among 
the MSA parts. All HMFAs are contained entirely within MSAs. All 
nonmetropolitan counties are outside of MSAs and are not broken up 
by HUD for purposes of setting FMRs and VLILs. (Complete details on 
HUD's process for determining FY2012 FMR areas and FMRs are 
available at http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr12. Complete details on HUD's process for 
determining FY2012 income limits are available at http://www.huduser.org/portal/datasets/il/il12/index.html.)
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    HUD uses the HMFA-level AMGIs to determine QCT eligibility because 
the statute, specifically 26 U.S.C. 42(d)(5)(C)(iv)(II), refers to the 
same section of the Code that defines income for purposes of tenant 
eligibility and unit maximum rent, specifically 26 U.S.C. 42(g)(4). By 
rule, the IRS sets these income limits according to HUD's VLILs, which, 
starting in FY2006 and thereafter, are established at the HMFA level. 
Similarly, HUD uses the entire MSA to determine how many eligible 
tracts can be designated under the 20 percent population cap as 
required by the statute (26 U.S.C. 42(d)(5)(C)(ii)(III)), which states 
that MSAs should be treated as singular areas. The QCTs were determined 
as follows:
    1. To be eligible to be designated a QCT, a census tract must have 
50 percent of its households with incomes below 60 percent of the AMGI 
or have a poverty rate of 25 percent or more. HUD calculates 60 percent 
of AMGI by multiplying by a factor of 1.2 the HMFA or nonmetropolitan 
county FY2012 VLIL adjusted for inflation to 2010 dollars.
    2. For each census tract, whether or not 50 percent of households 
have incomes below the 60 percent income standard (income criterion) 
was determined by: (a) Calculating the average household size of the 
census tract, (b) applying the income standard after adjusting it to 
match the average household size, and (c) comparing the average-
household-size-adjusted income standard to the median household income 
for the tract reported in the 2006-2010 ACS tabulations.\2\ Since 50 
percent of households in a tract have incomes above and below the tract 
median household income, if the tract median household income is less 
than the average-household-size-adjusted income standard for the tract, 
then more than 50 percent of households have incomes below the 
standard.
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    \2\ If the confidence interval around the median household 
income determined from the margin of error for the estimate as 
published by Census included $0, HUD determined the tract to be 
ineligible for evaluation as a QCT under the income criterion due to 
lack of a reliable income statistic.
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    3. For each census tract, the poverty rate was determined by 
dividing the population with incomes below the poverty line by the 
population for whom poverty status has been determined.\3\
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    \3\ If the confidence interval around the estimates of the 
population for whom poverty status has been determined or the number 
of persons below poverty included zero persons as determined from 
the margins of error for the estimates as published by Census, HUD 
determined the tract to be ineligible for evaluation as a QCT under 
the poverty rate criterion due to lack of reliable poverty 
statistics.
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    4. QCTs are those census tracts in which 50 percent or more of the 
households meet the income criterion, or 25 percent or more of the 
population is in poverty, such that the population of all census tracts 
that satisfy either one or both of these criteria does not exceed 20 
percent of the total population of the respective area.
    5. In areas where more than 20 percent of the population resides in 
eligible census tracts, census tracts are designated as QCTs in 
accordance with the following procedure:

[[Page 23738]]

    a. Eligible tracts are placed in one of two groups. The first group 
includes tracts that satisfy both the income and poverty criteria for 
QCTs. The second group includes tracts that satisfy either the income 
criterion or the poverty criterion, but not both.
    b. Tracts in the first group are ranked from lowest to highest by 
the ratio of the tract average-household-size-adjusted income limit to 
the median household income. Then, tracts in the first group are ranked 
from lowest to highest by the poverty rate. The two ranks are averaged 
to yield a combined rank. The tracts are then sorted on the combined 
rank, with the census tract with the highest combined rank being placed 
at the top of the sorted list. In the event of a tie, more populous 
tracts are ranked above less populous ones.
    c. Tracts in the second group are ranked from lowest to highest by 
the ratio of the tract average-household-size-adjusted income limit to 
the median household income. Then, tracts in the second group are 
ranked from lowest to highest by the poverty criterion. The two ranks 
are then averaged to yield a combined rank. The tracts are then sorted 
on the combined rank, with the census tract with the highest combined 
rank being placed at the top of the sorted list. In the event of a tie, 
more populous tracts are ranked above less populous ones.
    d. The ranked first group is stacked on top of the ranked second 
group to yield a single, concatenated, ranked list of eligible census 
tracts.
    e. Working down the single, concatenated, ranked list of eligible 
tracts, census tracts are designated until the designation of an 
additional tract would cause the 20 percent limit to be exceeded. If a 
census tract is not designated because doing so would raise the 
percentage above 20 percent, subsequent census tracts are then 
considered to determine if one or more census tract(s) with smaller 
population(s) could be designated without exceeding the 20 percent 
limit.

B. Exceptions to OMB Definitions of MSAs and Other Geographic Matters

    As stated in OMB Bulletin No. 10-02 defining metropolitan areas:

    ``OMB establishes and maintains the definitions of Metropolitan 
* * * Statistical Areas, * * * solely for statistical purposes * * * 
OMB does not take into account or attempt to anticipate any non-
statistical uses that may be made of the definitions[.] In cases 
where * * * an agency elects to use the Metropolitan * * * Area 
definitions in nonstatistical programs, it is the sponsoring 
agency's responsibility to ensure that the definitions are 
appropriate for such use. An agency using the statistical 
definitions in a nonstatistical program may modify the definitions, 
but only for the purposes of that program. In such cases, any 
modifications should be clearly identified as deviations from the 
OMB statistical area definitions in order to avoid confusion with 
OMB's official definitions of Metropolitan * * * Statistical 
Areas.''

    Following OMB guidance, the estimation procedure for the FY2012 
VLILs incorporates the current OMB definitions of metropolitan areas 
based on the new Core-Based Statistical Area (CBSA) standards, but 
makes adjustments to the definitions in order to separate subparts of 
these areas in cases where FMRs (and in a few cases, VLILs) would 
otherwise change significantly if the new area definitions were used 
without modification. In CBSAs where sub-areas are established, it is 
HUD's view that the geographic extent of the housing markets are not 
yet the same as the geographic extent of the CBSAs, but may become so 
in the future as the social and economic integration of the CBSA 
component areas increases.
    The geographic baseline for the new estimation procedure is the 
CBSA Metropolitan Areas (referred to as Metropolitan Statistical Areas 
or MSAs) and CBSA Non-Metropolitan Counties (non-metropolitan counties 
include the county components of Micropolitan CBSAs where the counties 
are generally assigned separate FMRs). The proposed HUD-modified CBSA 
definitions allow for sub-area FMRs within MSAs based on the boundaries 
of ``Old FMR Areas'' (OFAs) within the boundaries of new MSAs. (OFAs 
are the FMR areas defined for the FY2005 FMRs. Collectively, they 
include June 30, 1999, OMB-definition Metropolitan Statistical Areas 
and Primary Metropolitan Statistical Areas (old definition MSAs/PMSAs), 
metropolitan counties deleted from old definition MSAs/PMSAs by HUD for 
FMR-setting purposes, and counties and county parts outside of old 
definition MSAs/PMSAs referred to as non-metropolitan counties.) Sub-
areas of MSAs are assigned their own FMRs when the sub-area 2000 Census 
Base FMR differs significantly from the MSA 2000 Census Base FMR (and 
in some cases where the 2000 Census base AMGI differs significantly 
from the MSA 2000 Census Base AMGI). MSA subareas, and the remaining 
portions of MSAs after sub-areas have been determined, are referred to 
as ``HUD Metro FMR Areas (HMFAs)'' to distinguish these areas from 
OMB's official definition of MSAs.
    In the New England states (Connecticut, Maine, Massachusetts, New 
Hampshire, Rhode Island, and Vermont), HMFAs are defined according to 
county subdivisions or minor civil divisions (MCDs), rather than county 
boundaries. However, since no part of a HMFA is outside an OMB-defined, 
county-based MSA, all New England nonmetropolitan counties are kept 
intact for purposes of designating Nonmetropolitan QCTs.

Future Designations

    QCTs are designated periodically as new data become available, or 
as metropolitan area definitions change. QCTs are being updated at this 
time to reflect the availability of 2010 Decennial Census data on 
population and 2006-2010 ACS data on tract median household incomes and 
poverty rates.

Effective Date

    The 2013 lists of QCTs are effective:
    (1) For allocations of credit after December 31, 2012; or
    (2) For purposes of IRC Section 42(h)(4), if the bonds are issued 
and the building is placed in service after December 31, 2012.
    If an area is not on a subsequent list of QCTs, the 2013 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 applicant submits a complete 
application to the LIHTC-allocating agency, and the submission is made 
before the effective date of the subsequent lists; or
    (2) For purposes of IRC Section 42(h)(4), 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 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 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. For 
purposes of IRC Section 42(h)(4), the QCT status of the site of the 
project

[[Page 23739]]

that applies for all phases of the project is that which applied when 
the first of the following occurred: (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:
    (1) The multiphase composition of the project (i.e., total number 
of buildings and phases in project, with a description of how many 
buildings are to be built in each phase and when each phase is to be 
completed, and any other information required by the agency) is made 
known by the applicant in the first application of credit for any 
building in the project, and that applicant identifies the buildings in 
the project for which credit is (or will be) sought;
    (2) 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 
Qualified Allocation Plan (QAP) of the LIHTC-allocating 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
    (3) All applications for LIHTC for buildings on the site are made 
in immediately consecutive years.
    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 such lists. The Secretary of the Treasury, through 
the IRS thereof, has sole legal authority to interpret, and to 
determine and enforce compliance with the IRC 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.
    The designations of DDAs under IRC Section 42, published in the 
Federal Register on October 27, 2011 (76 FR 66741), remain in effect.

Interpretive Examples of Effective Date

    For the convenience of readers of this notice, interpretive 
examples are provided below to illustrate the consequences of the 
effective date in areas that gain or lose QCT status.
    (Case A) Project A is located in a 2012 QCT that is NOT a 
designated QCT in 2013. A complete application for tax credits for 
Project A is filed with the allocating agency on November 15, 2012. 
Credits are allocated to Project A on October 30, 2013. Project A is 
eligible for the increase in basis accorded a project in a 2012 QCT 
because the application was filed BEFORE January 1, 2013 (the effective 
date for the 2013 QCT lists), and because tax credits were allocated no 
later than the end of the 365-day period after the filing of the 
complete application for an allocation of tax credits.
    (Case B) Project B is located in a 2012 QCT that is NOT a 
designated QCT in 2013 or 2014. A complete application for tax credits 
for Project B is filed with the allocating agency on December 1, 2012. 
Credits are allocated to Project B on March 30, 2014. Project B is NOT 
eligible for the increase in basis accorded a project in a 2012 QCT 
because, although the application for an allocation of tax credits was 
filed BEFORE January 1, 2013 (the effective date of the 2013 QCT 
lists), the tax credits were allocated later than the end of the 365-
day period after the filing of the complete application.
    (Case C) Project C is located in a 2013 QCT that was not a QCT in 
2012. Project C was placed in service on November 15, 2012. A complete 
application for tax-exempt bond financing for Project C is filed with 
the bond-issuing agency on January 15, 2013. The bonds that will 
support the permanent financing of Project C are issued on September 
30, 2013. Project C is NOT eligible for the increase in basis otherwise 
accorded a project in a 2013 QCT, because the project was placed in 
service BEFORE January 1, 2013.
    (Case D) Project D is located in an area that is a QCT in 2012, but 
is NOT a QCT in 2013. A complete application for tax-exempt bond 
financing for Project D is filed with the bond-issuing agency on 
October 30, 2012. Bonds are issued for Project D on April 30, 2013, but 
Project D is not placed in service until January 30, 2014. Project D is 
eligible for the increase in basis available to projects located in 
2012 QCTs because: (1) One of the two events necessary for triggering 
the effective date for buildings described in Section 42(h)(4)(B) of 
the IRC (the two events being bonds issued and buildings placed in 
service) took place on April 30, 2013, within the 365-day period after 
a complete application for tax-exempt bond financing was filed, (2) the 
application was filed during a time when the location of Project D was 
in a QCT, and (3) both the issuance of the bonds and placement in 
service of Project D occurred after the application was submitted.
    (Case E) Project E is a multiphase project located in a 2012 QCT 
that is NOT a designated QCT in 2013. The first phase of Project E 
received an allocation of credits in 2012, pursuant to an application 
filed March 15, 2012, which describes the multiphase composition of the 
project. An application for tax credits for the second phase of Project 
E is filed with the allocating agency by the same entity on March 15, 
2013. The second phase of Project E is located on a contiguous site. 
Credits are allocated to the second phase of Project E on October 30, 
2013. The aggregate amount of credits allocated to the two phases of 
Project E 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 applications were made in multiple phases. The second phase 
of Project E is, therefore, eligible for the increase in basis accorded 
a project in a 2012 QCT, because it meets all of the conditions to be a 
part of a multiphase project.
    (Case F) Project F is a multiphase project located in a 2012 QCT 
that is NOT a designated QCT in 2013. The first phase of Project F 
received an allocation of credits in 2012, pursuant to an application 
filed March 15, 2012, which does not describe the multiphase 
composition of the project. An application for tax credits for the 
second phase of Project F is filed with the allocating agency by the 
same entity on March 15, 2014. Credits are allocated to the second 
phase of Project F on October 30, 2014. The aggregate amount of credits 
allocated to the two phases of Project F 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 F is, therefore, NOT eligible 
for the increase in basis accorded a project in a 2012 QCT, since it 
does not meet all of the conditions for a multiphase project, as 
defined in this notice. The original application for credits for the 
first phase did not describe the multiphase composition of the project. 
Also, the application for credits for the second phase of Project F was 
not made in the

[[Page 23740]]

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 designates DDAs as required under Section 42 of the IRC, 
as amended, for the use by political subdivisions of the states in 
allocating the LIHTC. This notice also details the technical 
methodology used in making such designations. As a result, this notice 
is not subject to review under the order.

    Dated: April 13, 2012.
Raphael W. Bostic,
 Assistant Secretary for Policy Development and Research.
[FR Doc. 2012-9630 Filed 4-19-12; 8:45 am]
BILLING CODE 4210-67-P


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