27036 Federal Register / Vol. 61, No. 105 / Thursday, May 30, 1996 / Proposed Rules

Dated: May 20, 1996.

Mary Elizabeth Hoinkes,

General Counsel.

[FR Doc. 96–13469 Filed 5–29–96; 8:45 am]

BILLING CODE 6820–32–M

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[PS–29–95]

RIN 1545–AT60

Available Unit Rule

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations concerning the

low-income housing credit. The

proposed regulations provide rules for

determining the treatment of lowincome housing units in a building that

are occupied by individuals whose

incomes increase above 140 percent of

the income limitation applicable under

section 42(g)(1). The proposed

regulations affect owners of those

buildings. This document also provides

notice of public hearing on these

proposed regulations.

DATES: Written comments and outlines

of topics to be discussed at the public

hearing scheduled for September 17,

1996, must be received by August 28,

1996.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (PS–29–95), room

5228, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative,

submissions may be hand delivered

between the hours of 8 a.m. and 5 p.m.

to: CC:DOM:CORP:R (PS–29–95),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue NW.,

Washington, DC. The public hearing

will be held in the NYU Classroom,

room 2615, Internal Revenue Building,

1111 Constitution Avenue, NW.,

Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, David Selig,

(202) 622–3040; concerning submissions

and the hearing, Christina Vasquez,

(202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed

amendments to the Income Tax

Regulations (26 CFR Part 1) under

section 42. These amendments are

proposed to provide guidance under

section 42(g)(2)(D), as amended by

section 7108(e)(1) of the Omnibus

Budget and Reconciliation Act of 1989,

and section 11701(a)(3)(A) and (a)(4) of

the Omnibus Budget and Reconciliation

Act of 1990. Section 42(g)(2)(D)

provides rules for determining the

treatment of low-income housing units

that are occupied by individuals whose

incomes rise above the income

limitation applicable under section

42(g)(1).

The general rule in section

42(g)(2)(D)(i) provides that if the income

of an occupant of a low-income unit

increases above the income limitation

applicable under section 42(g)(1), the

unit continues to be treated as a lowincome unit. This general rule only

applies if the occupant’s income

initially met the income limitation and

the unit continues to be rent-restricted.

Section 42(g)(2)(D)(ii), however,

provides an exception to the general

rule in section 42(g)(2)(D)(i). The unit

ceases being treated as a low-income

unit when two conditions occur. The

first condition is that the occupant’s

income increases above 140 percent of

the income limitation applicable under

section 42(g)(1), or above 170 percent

for a deep rent-skewed project described

in section 142(d)(4)(B) (applicable

income limitation). When this occurs,

the unit becomes an over-income unit.

The second condition is that a new

resident, whose income exceeds the

applicable income limitation

(nonqualified resident), occupies any

residential unit in the building of a

comparable or smaller size (comparable

unit).

Explanation of Provisions

All Available Units Must Be Rented to

Qualified Residents

The heading of section 42(g)(2)(D)(ii)

indicates that the next available unit

must be rented to a low-income tenant

to maintain the low-income status of an

over-income unit. Although the heading

of section 42(g)(2)(D)(ii) refers to the

next available unit, the body of section

42(g)(2)(D)(ii) clarifies that if any

available comparable unit is occupied

by a nonqualified resident, the overincome unit ceases to be treated as a

low-income unit. Therefore, all

available comparable units in the

building, not only the next available

unit, must be rented to qualified

residents to maintain the low-income

status of the over-income unit.

A Current Resident May Move Within

the Same Low-Income Building

The proposed regulations define a

qualified resident under the available

unit rule as any person whose income

does not exceed the applicable income

limitation or any current resident,

regardless of the income level of the

current resident. Thus, a current

resident may move to a different unit in

the same low-income building without

causing a violation of the available unit

rule even if the current resident’s

income exceeds the applicable income

limitation. When a current resident

moves to a different unit within the

same low-income building, the new unit

adopts the status of the vacated unit.

Rule Applies to Each Building

Separately

The rules of section 42 generally

apply on a building-by-building basis.

For example, the amount of credit

allowable under section 42(a) is

determined for each building in a

qualified low-income housing project.

The recapture of credit under section

42(j) is determined by examining the

qualified basis of each building. In

addition, section 42(g)(2)(D)(ii) uses the

phrase ‘‘any residential rental unit in

the building’’ to identify residential

rental units that must be rented to

qualified residents to preserve the lowincome status of an over-income unit.

The proposed regulations provide,

therefore, that in a project containing

more than one low-income building, the

available unit rule applies separately to

each building.

Effect of Violation of Available Unit

Rule

The proposed regulations further

provide that all over-income units in the

building lose their status as low-income

units if an owner violates the available

unit rule. A violation of the rule occurs

when a building has one or more overincome units and the owner of the

building rents an available comparable

unit in the building to a nonqualified

resident.

Over-Income Unit Counts Toward

Minimum Set-Aside Requirement

The proposed regulations also clarify

whether an over-income unit counts

towards satisfying the applicable

minimum set-aside requirement of

section 42(g)(1). The available unit rule

provides that an over-income unit

maintains its status as a low-income

unit as long as the owner does not rent

an available comparable unit to a

nonqualified resident. Section 42(i)(3),

which defines a low-income unit, and

section 42(g)(2)(D), which contains rules
Federal Register / Vol. 61, No. 105 / Thursday, May 30, 1996 / Proposed Rules 27037

for increases in the income of existing

low-income tenants, work together to

treat an over-income unit as a lowincome unit when determining whether

a project satisfies the applicable

minimum set-aside requirement. This

treatment helps diminish any incentive

a project owner may have to evict from

a rent-restricted unit those tenants who

originally qualified as low-income

tenants. See 2 H.R. Conf. Rep. No. 841,

99th Cong., 2d Sess. II–97 (1986), 1986–

3 (Vol. 4) C.B. 97. Therefore, the

proposed regulations provide that an

over-income unit may continue to be

included in the numerator and the

denominator of the ratio used to

determine whether a project satisfies the

applicable minimum set-aside

requirement of section 42(g)(1).

Relationship to Tax-Exempt Bond

Provisions

Financing arrangements using

obligations that purport to be exempt

facility bonds under section 142 must

meet the requirements of sections 103

and 141 through 150 for interest on the

obligations to be excluded from gross

income under section 103(a). The

requirements under section 142(d) may

differ from those under section 42. For

example, section 142(d)(1) is applied on

a project rather than on a building-bybuilding basis. The rules set forth in

these proposed regulations are not

intended as an interpretation of the

applicable rules under section 142.

The rules contained in the proposed

regulations are proposed to be effective

on the date final regulations are

published in the Federal Register.

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a

significant regulatory action as defined

in EO 12866. Therefore, a regulatory

assessment is not required. It also has

been determined that section 553(b) of

the Administrative Procedure Act (5

U.S.C. chapter 5) and the Regulatory

Flexibility Act (5 U.S.C. chapter 6) do

not apply to these regulations, and,

therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, this notice of proposed

rulemaking will be submitted to the

Chief Counsel for Advocacy of the Small

Business Administration for comment

on its impact on small business.

Comments and Public Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written comments (a signed original and

eight (8) copies) that are submitted

timely to the IRS. All comments will be

available for public inspection and

copying.

A public hearing has been scheduled

for September 17, 1996, at 10 a.m. in the

NYU Classroom, room 2615, Internal

Revenue Building, 1111 Constitution

Avenue, NW., Washington, DC. Because

of access restrictions, visitors will not be

admitted beyond the Internal Revenue

Building lobby more than 15 minutes

before the hearing starts.

The rules of 26 CFR 601.601(a)(3)

apply to the hearing.

Persons that wish to present oral

comments at the hearing must submit

written comments and outlines of topics

to be discussed and the time devoted to

each topic (signed original and eight (8)

copies by August 28, 1996.

A period of 10 minutes will be

allotted to each person for making

comments.

An agenda showing the scheduling of

the speakers will be prepared after the

deadline for receiving outlines has

passed. Copies of the agenda will be

available free of charge at the hearing.

Drafting Information: The principal author

of these regulations is David Selig, Office of

the Assistant Chief Counsel (Passthroughs

and Special Industries), IRS. However, other

personnel from the IRS and Treasury

Department participated in their

development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

Proposed Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding a new

citation in numerical order to read as

follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.42–15 is also issued under

26 U.S.C. 42(n). * * *

Par. 2. Section 1.42–15 is added to

read as follows:

§ 1.42–15 Available unit rule.

(a) Definitions. The following

definitions apply to this section:

Applicable income limitation means

the limitation applicable under section

42(g)(1) or, for deep rent-skewed

projects described in section

142(d)(4)(B), 40 percent of area median

gross income.

Available unit rule means the rule in

section 42(g)(2)(D)(ii).

Comparable unit means a residential

unit in a low-income building that is

comparably sized or smaller than an

over-income unit or, for deep rentskewed projects described in section

142(d)(4)(B), any low-income unit.

Low-income resident means a person

whose income does not exceed the

applicable income limitation.

Low-income unit is defined by section

42(i)(3)(A).

New resident means a person who

currently is not living in the low-income

building.

Nonqualified resident means a new

resident whose income exceeds the

applicable income limitation.

Over-income unit means a lowincome unit in which the income of the

occupants of the unit increases above

140 percent of the applicable income

limitation under section 42(g)(1), or

above 170 percent of the applicable

income limitation for deep rent-skewed

projects described in section

142(d)(4)(B).

Qualified resident means a lowincome resident or a current resident.

(b) General section 42(g)(2)(D)(i) rule.

Except as provided in paragraph (c) of

this section, notwithstanding an

increase in the income of the occupants

of a low-income unit above the

applicable income limitation, if the

income of the occupants initially met

the applicable income limitation, and

the unit continues to be rentrestricted——

(1) The unit continues to be treated as

a low-income unit; and

(2) The unit continues to be included

in the numerator and the denominator

of the ratio used to determine whether

a project satisfies the applicable

minimum set-aside requirement of

section 42(g)(1).

(c) Exception. A unit ceases to be

treated as a low-income unit if it

becomes an over-income unit and a

nonqualified resident occupies any

comparable unit that is available or that

subsequently becomes available in the

same low-income building. Thus, to

continue treating the over-income unit

as a low-income unit, the owner of a

low-income building must rent to

qualified residents all comparable units

that are available or that subsequently

become available in the same building.

(d) Effect of current resident moving

within building. When a current

resident moves to a different unit within

the building, the newly occupied unit

adopts the status of the vacated unit.

Thus, if a current resident, whose

income exceeds the applicable income

limitation, moves from an over-income

unit to a vacant unit in the same

building, the newly occupied unit is

treated as an over-income unit.
27038 Federal Register / Vol. 61, No. 105 / Thursday, May 30, 1996 / Proposed Rules

(e) Buildings accounted for

separately. In a project containing more

than one low-income building, the

available unit rule applies separately to

each building.

(f) Result of violation of available unit

rule. If any comparable unit that

subsequently becomes available is

rented to a nonqualified resident, all

over-income units within the same

building lose their status as low-income

units.

(g) Examples. The following examples

illustrate this section.

Example 1. This example illustrates a

violation of the available unit rule in a lowincome building containing three overincome units. On January 1, 1997, a qualified

low-income housing project, consisting of

one building containing ten identically sized

residential units, received a housing credit

dollar amount allocation from a state housing

credit agency for five low-income units. To

avoid recapture of credit, the Project owner

must maintain five of the units as lowincome units. The project satisfied the

minimum set-aside requirement of section

42(g)(1)(B). Units 1, 2, 3, 4, and 5 were

occupied by individuals whose incomes did

not exceed the income limitation applicable

under section 42(g)(1) (low-income

residents). Units 6, 7, 8, and 9 were occupied

by market-rate tenants. Unit 10 was vacant.

On November 21, 1997, the annual incomes

of the individuals in Units 1, 2, and 3

increased above 140 percent of the income

limitation applicable under section 42(g)(1),

causing those units to become over-income

units. On November 30, 1997, Units 8 and 9

became vacant. On December 1, 1997, the

project owner rented Units 8 and 9 to

qualified residents at rates meeting the rent

restriction requirements of section 42(g)(2).

On December 31, 1997, the Project owner

rented Unit 10 to a market-rate tenant.

Because Unit 10, an available comparable

unit, was leased to a market-rate tenant,

Units 1, 2, and 3 ceased to be treated as lowincome units. On that date, Units 4, 5, 8, and

9 were the only remaining low-income units.

Because the Project owner did not maintain

five of the residential units as low-income

units, the qualified basis in the building is

reduced, and credit must be recaptured. If the

project owner had rented Unit 10 to a

qualified resident, eight of the units would be

low-income units. Units 1, 2, and 3, the overincome units, could then be rented to marketrate tenants because the building would still

contain five low-income units.

Example 2. This example illustrates the

provisions of paragraph (d) of this section. A

low-income project consists of one six-floor

building. The residential units in the

building are identically sized. The building

contains two over-income units on the sixth

floor and two vacant units on the first floor.

The project owner, desiring to maintain the

over-income units as low-income units,

wants to rent the available units to qualified

residents. J, a resident of one of the overincome units, wishes to occupy a unit on the

first floor. J’s income has recently increased

above the applicable income limitation. The

project owner permits J to move into one of

the units on the first floor. Despite the

increase in J’s income, J is a qualified

resident under the available unit rule because

J is a current resident of the building. The

unit occupied by J becomes an over-income

unit under the available unit rule. The overincome units in the building continue to be

treated as low-income units.

(h) Effective date. This section is

effective on the date final regulations

are published in the Federal Register.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 96–13297 Filed 5–29–96; 8:45 am]

BILLING CODE [4830–01-U]

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[ID1–1–5528b; FRL–5449–3]

Approval and Promulgation of State

Implementation Plans: Idaho

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The EPA proposes to approve

the State Implementation Plan (SIP)

revision submitted by the State of Idaho

for the purpose of bringing about

attainment of the National Ambient Air

Quality Standard (NAAQS) for

particulate matter with an aerodynamic

diameter less than or equal to 10

micrometers (PM10) in the Northern Ada

County PM10 nonattainment area. In the

Final Rules Section of this Federal

Register, the EPA is approving the

State’s SIP revision as a direct final rule

without prior proposal because the

Agency views this as a noncontroversial

revision amendment and anticipates no

adverse comments. A detailed rationale

for the approval is set forth in the direct

final rule. If no adverse comments are

received in response to this proposed

rule, no further activity is contemplated

in relation to this rule. If the EPA

receives adverse comments, the direct

final rule will be withdrawn and all

public comments received will be

addressed in a subsequent final rule

based on this proposed rule. The EPA

will not institute a second comment

period on this action.

DATES: Comments on this proposed rule

must be received in writing by July 1,

1996.

ADDRESSES: Written comments should

be addressed to Montel Livingston,

Environmental Protection Specialist

(OAQ–107), Office of Air Quality, at the

EPA Regional Office listed below.

Copies of the documents relevant to this

proposed rule are available for public

inspection during normal business

hours at the following locations. The

interested persons wanting to examine

these documents should make an

appointment with the appropriate office

at least 24 hours before the visiting day.

U.S. Environmental Protection

Agency, Region 10, Office of Air

Quality, 1200 6th Avenue, Seattle, WA

98101.

The State of Idaho, Division of

Environmental Quality, 1410 North

Hilton, Boise, Idaho 83720.

FOR FURTHER INFORMATION CONTACT:

Doug Cole, EPA, Region 10, Idaho

Operations Office, 1435 North Orchard,

Boise, Idaho 83706, (206) 334–9555.

SUPPLEMENTARY INFORMATION:

See the information provided in the

Direct Final action which is located in

the Rules Section of this Federal

Register.

Dated: March 20, 1996.

Chuck Clarke,

Regional Administrator.

[FR Doc. 96–12889 Filed 5–29–96; 8:45 am]

BILLING CODE 6560–50–P

40 CFR Parts 60, 63, 260, 261, 264, 265,

266, 270 and 271

[FRL–5511–7]

Hazardous Waste Combustors;

Revised Standards; Proposed Rule—

Notice of Extension of Comment

Period

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule: notice of

extension of comment period.

SUMMARY: Since publication of the

proposed rule for hazardous waste

combustors (61 FR 17358 (April 19,

1996)), EPA has received several

requests to extend the comment period

given the complexity of the proposed

rulemaking. Accordingly, the Agency is

extending the comment period 60 days

to August 19, 1996.

DATES: Comment period is extended

from June 18, 1996 to August 19, 1996.

ADDRESSES: Commenters must send an

original and two copies of their

comments referencing Docket Number

F–96–RCSP–FFFFF to: RCRA Docket

Information Center, Office of Solid

Waste (5305W), U.S. Environmental

Protection Agency Headquarters (EPA,

HQ), 401 M Street, SW., Washington,

DC 20460. For other information

regarding submitting comments

electronically, viewing the comments