51560 Federal Register / Vol. 73, No. 171 / Wednesday, September 3, 2008 / Notices 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5235–N–01] 

Statutorily Mandated Designation of 

Difficult Development Areas and 

Qualified Census Tracts for 2009 

AGENCY: Office of the Assistant 

Secretary for Policy Development and 

Research, HUD. 

ACTION: Notice. 

SUMMARY: This document designates 

‘‘Difficult Development Areas’’ (DDAs) 

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). The 

United States Department of Housing 

and Urban Development makes new 

DDA designations annually. The 

designations of ‘‘Qualified Census 

Tracts’’ (QCTs) under section 42 of the 

Internal Revenue Code published 

September 28, 2006, remain in effect. 

FOR FURTHER INFORMATION CONTACT: For 

questions on how areas 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 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 number (202) 622– 

3040, fax number (202) 622–4451. 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 number (202) 205– 

8885, fax number (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 

202–708–8339. (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 designates DDAs for each 

of the 50 states, the District of Columbia, 

Puerto Rico, American Samoa, Guam, 

the Northern Mariana Islands, and the 

U.S. Virgin Islands. The designations of 

DDAs in this notice are based on final 

Fiscal Year (FY) 2008 Fair Market Rents 

(FMRs), FY2008 income limits, and 

2000 Census population counts, as 

explained below. This notice also lists 

those areas treated as DDAs under the 

Gulf Opportunity Zone Act of 2005 (GO 

Zone Act) (Pub. L. 109–135; the GO 

Zone Act, as amended by the U.S. Troop 

Readiness, Veterans’ Care, Katrina 

Recovery, and Iraq Accountability 

Appropriations Act of 2007). 

Specifically, the GO Zone Act provides 

that areas ‘‘determined by the President 

to warrant individual or individual and 

public assistance from the federal 

government under the Robert T. Stafford 

Disaster Relief and Emergency 

Assistance Act (Stafford Act)’’ as a 

result of Hurricanes Katrina, Rita, or 

Wilma: (1) Shall be treated as DDAs 

designated under subclause (I) of 

Internal Revenue Code section 

42(d)(5)(C)(iii) (i.e., areas designated by 

the Secretary of Housing and Urban 

Development as having high 

construction, land, and utility costs 

relative to area median gross income 

(AMGI)), and (2) shall not be taken into 

account for purposes of applying the 

limitation under subclause II of such 

section (i.e., the 20 percent cap on the 

total population of designated areas). 

The designations of QCTs under section 

42 of the Internal Revenue Code (Code) 

published September 28, 2006 (71 FR 

57234) remain in effect. 

2000 Census 

Data from the 2000 Census on total 

population of metropolitan areas and 

nonmetropolitan areas are used in the 

designation of DDAs. The Office of 

Management and Budget (OMB) first 

published new metropolitan area 

definitions incorporating 2000 Census 

data in OMB Bulletin No. 03–04 on June 

6, 2003, and has updated them 

periodically, including most recently, in 

OMB Bulletin No. 07–01 on December 

18, 2006. The FY2008 FMRs and 

FY2008 income limits used to designate 

DDAs are based on these new 

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. 

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 Code, 

including the LIHTC found at section 42 

of the Code. The Secretary of HUD is 

required to designate DDAs and QCTs 

by section 42(d)(5)(C) (redesignated 

section 42(d)(5)(B) by the Housing and 

Economic Recovery Act of 2008) of the 

Code. In order to assist in understanding 

HUD’s mandated designation of DDAs 

and QCTs for use in administering 

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 Code 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 lowincome housing. 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 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 to states as additional 

credit. State and local housing agencies 

allocate the state’s credit ceiling among 

low-income housing buildings whose 

owners have applied for the credit. 

Besides section 42 credits derived from 

the credit ceiling, states may also 

provide section 42 credits to owners of 

buildings based on the percentage of 

certain building costs financed by taxexempt 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 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 40 percent of the units must 


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Federal Register / Vol. 73, No. 171 / Wednesday, September 3, 2008 / Notices 51561 

1Section 42(d)(5)(C)(iii) was redesignated section 

42(d)(5)(b)(iii) by the Housing and Economic 

Recovery Act of 2008. 

be rent-restricted and occupied by 

tenants with incomes no higher than 60 

percent of AMGI. The term ‘‘rentrestricted’’ 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 lowincome 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)), 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 

monthly for projects placed in service 

after 1987 under procedures specified in 

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 lowincome 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. 

Section 42 of the Code defines a DDA 

as any area designated by the Secretary 

of HUD as an area that has high 

construction, land, and utility costs 

relative to the AMGI. All designated 

DDAs in metropolitan areas (taken 

together) may not contain more than 20 

percent of the aggregate population of 

all metropolitan areas, and all 

designated areas not in metropolitan 

areas may not contain more than 20 

percent of the aggregate population of 

all nonmetropolitan areas. 

The GO Zone Act provides that 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 shall be treated as DDAs 

designated under subclause I of Internal 

Revenue Code section 42(d)(5)(C)(iii) 1

(i.e., areas designated by the Secretary of 

HUD as having high construction, land, 

and utility costs relative to AMGI), and 

shall not be taken into account for 

purposes of applying the limitation 

under subclause II of such section (i.e., 

the 20 percent cap on the total 

population of designated areas). This 

notice lists the affected areas described 

in the GO Zone Act. Because the 

populations of DDAs designated under 

the GO Zone Act are not counted against 

the statutory 20 percent cap on the 

aggregate population of DDAs, the total 

population of designated metropolitan 

DDAs (regular and GO Zone) listed in 

this notice exceeds 20 percent of the 

total population of all MSAs, and the 

population of all nonmetropolitan DDAs 

listed in this notice exceeds 20 percent 

of the total population of 

nonmetropolitan counties. 

Section 42(d)(5)(C)(v) as added to the 

Code by the Housing and Economic 

Recovery Act of 2008, and redesignated 

as 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. Difficult Development Areas 

This notice lists all 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 as DDAs 

according to lists of counties and 

parishes from the Federal Emergency 

Management Agency Web site (http:// 

www.fema.gov/). Affected metropolitan 

areas and nonmetropolitan areas are 

assigned the indicator ‘‘[GO Zone]’’ in 

the lists of DDAs. 

In developing the list of the remaining 

DDAs, HUD compared housing costs 

with incomes. HUD used 2000 Census 

population data and the MSA 

definitions, as published in OMB 

Bulletin No. 07–01 on December 18, 

2006, with modifications, as described 

below. In keeping with past practice of 

basing the coming year’s DDA 

designations on data from the preceding 

year, the basis for these comparisons is 

the FY2008 HUD income limits for very 

low-income households (Very LowIncome Limits, or VLILs), which are 

based on 50 percent of AMGI, and final 

FY2008 FMRs used for the Housing 

Choice Voucher (HCV) program. In 

formulating the FY2008 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 base 40th-percentile recentmover 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 FY2008 FMR areas and 

FMRs are available at http:// 

www.huduser.org/DATASETS/fmr/ 

fmrs/index.asp?data=fmr08. Complete 

details on HUD’s process for 

determining FY2008 income limits are 

available at http://www.huduser.org/ 

datasets/il/il2008_docsys.html.) 


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51562 Federal Register / Vol. 73, No. 171 / Wednesday, September 3, 2008 / Notices 

HUD’s unit of analysis for designating 

metropolitan DDAs, therefore, consists 

of: entire MSAs, in cases where these 

were not broken up into HMFAs for 

purposes of computing FMRs and 

VLILs; and HMFAs within the MSAs 

that were broken up for such purposes. 

Hereafter in this notice, the unit of 

analysis for designating metropolitan 

DDAs will be called the HMFA, and the 

unit of analysis for nonmetropolitan 

DDAs will be the nonmetropolitan 

county or county equivalent area. The 

procedure used in making the DDA 

calculations follows: 

1. For each HMFA and each 

nonmetropolitan county, a ratio was 

calculated. This calculation used the 

final FY2008 two-bedroom FMR and the 

FY2008 four-person VLIL. 

a. The numerator of the ratio was the 

area’s final FY2008 FMR. In general, the 

FMR is based on the 40th-percentile 

gross rent paid by recent movers to live 

in a two-bedroom apartment. In 

metropolitan areas granted a FMR based 

on the 50th-percentile rent for purposes 

of improving the administration of 

HUD’s HCV program (see 71 FR 5068), 

the 40th-percentile rent was used to 

ensure nationwide consistency of 

comparisons. 

b. The denominator of the ratio was 

the monthly LIHTC income-based rent 

limit, which was calculated as 1⁄12 of 30 

percent of 120 percent of the area’s VLIL 

(where the VLIL was rounded to the 

nearest $50 and not allowed to exceed 

80 percent of the AMGI in areas where 

the VLIL is adjusted upward from its 50 

percent-of-AMGI base). 

2. The ratios of the FMR to the LIHTC 

income-based rent limit were arrayed in 

descending order, separately, for 

HMFAs and for nonmetropolitan 

counties. 

3. The non-GO Zone DDAs are those 

HMFAs and nonmetropolitan counties 

not 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, with the highest 

ratios cumulative to 20 percent of the 

2000 population of all HMFAs and of all 

nonmetropolitan counties, respectively. 

B. Application of Population Caps to 

DDA Determinations 

In identifying DDAs, HUD applied 

caps, or limitations, as noted above. The 

cumulative population of metropolitan 

DDAs not 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 cannot exceed 

20 percent of the cumulative population 

of all metropolitan areas. The 

cumulative population of 

nonmetropolitan DDAs not 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 Katrina, Rita, or Wilma cannot 

exceed 20 percent of the cumulative 

population of all nonmetropolitan areas. 

In applying these caps, HUD 

established procedures to deal with how 

to treat small overruns of the caps. The 

remainder of this section explains those 

procedures. In general, HUD stops 

selecting areas when it is impossible to 

choose another area without exceeding 

the applicable cap. The only exceptions 

to this policy are when the next eligible 

excluded area contains either a large 

absolute population or a large 

percentage of the total population, or 

the next excluded area’s ranking ratio, 

as described above, was identical (to 

four decimal places) to the last area 

selected, and its inclusion resulted in 

only a minor overrun of the cap. Thus, 

for both the designated metropolitan 

and nonmetropolitan DDAs, there may 

be minimal overruns of the cap. HUD 

believes the designation of additional 

areas in the above examples of minimal 

overruns is consistent with the intent of 

the Stafford Act. As long as the apparent 

excess is small due to measurement 

errors, some latitude is justifiable 

because it is impossible to determine 

whether the 20 percent cap has been 

exceeded. Despite the care and effort 

involved in a Decennial Census, the 

Census Bureau and all users of the data 

recognize that the population counts for 

a given area and for the entire country 

are not precise. Therefore, the extent of 

the measurement error is unknown. 

There can be errors in both the 

numerator and denominator of the ratio 

of populations used in applying a 20 

percent cap. In circumstances where a 

strict application of a 20 percent cap 

results in an anomalous situation, 

recognition of the unavoidable 

imprecision in the census data justifies 

accepting small variances above the 20 

percent limit. 

C. Exceptions to OMB Definitions of 

MSAs and Other Geographic Matters 

As stated in OMB Bulletin 07–01, 

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 FY2008 

FMRs incorporates the current OMB 

definitions of metropolitan areas based 

on the new Core-Based Statistical Area 

(CBSA) standards, as implemented with 

2000 Census data, 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 approach becoming so 

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 

(nonmetropolitan counties include the 

county components of Micropolitan 

CBSAs where the counties are generally 

assigned separate FMRs). The HUDmodified CBSA definitions allow for 

subarea 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 the June 30, 1999, OMB 

definitions of MSA and Primary MSAs 

(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 nonmetropolitan counties.) Subareas of 

MSAs are assigned their own FMRs 

when the subarea 2000 Census Base 

FMR differs significantly from the MSA 

2000 Census Base FMR (or, 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 subareas have been 

determined, are referred to as ‘‘HUD 

Metro FMR Areas (HMFAs),’’ to 

distinguish such areas from OMB’s 

official definition of MSAs. 


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In addition, Waller County, Texas, 

which is part of the Houston-BaytownSugar Land, TX HMFA, is not an area 

‘‘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. It is, therefore, excluded from 

the definition of the Houston-BaytownSugar Land, TX HMFA and is assigned 

the FMR and VLIL of the HoustonBaytown-Sugar Land, TX HMFA and is 

evaluated as if it were a separate 

metropolitan area for purposes of 

designating DDAs. The HoustonBaytown-Sugar Land, TX HMFA is 

assigned the indicator ‘‘(part)’’ in the list 

of Metropolitan DDAs. 

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 DDAs. 

For the convenience of readers of this 

notice, the geographical definitions of 

designated Metropolitan DDAs are 

included in the list of DDAs. 

The Census Bureau provides no 

tabulations of 2000 Census data for 

Broomfield County, Colorado, an area 

that was created from parts of four 

Colorado counties when the city of 

Broomfield became a county in 

November 2001. Broomfield County is 

made up of former parts of Adams, 

Boulder, Jefferson, and Weld counties. 

The boundaries of Broomfield County 

are similar, but not identical to, the 

boundaries of the city of Broomfield at 

the time of the 2000 Census. In OMB 

metropolitan area definitions and, 

therefore, for purposes of this notice, 

Broomfield County is included as part 

of the Denver-Aurora, CO MSA. Census 

tracts in Broomfield County include the 

parts of the Adams, Boulder, Jefferson, 

and Weld County census tracts that 

were within the boundaries of the city 

of Broomfield according to the 2000 

Census, plus parts of three Adams 

County tracts (85.15, 85.16, and 85.28), 

and one Jefferson County tract (98.25) 

that were not within any municipality 

during the 2000 Census but which, 

according to Census Bureau maps, are 

within the boundaries of Broomfield 

County. Data for Adams, Boulder, 

Jefferson, and Weld counties and their 

census tracts were adjusted to exclude 

the data assigned to Broomfield County 

and its census tracts. 

Future Designations 

DDAs are designated annually as 

updated income and FMR data are made 

public. 

Effective Date 

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, 2010; or 

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

the Internal Revenue Code, for buildings 

placed in service during the period 

beginning on January 1, 2006, and 

ending on December 31, 2010, but only 

with respect to bonds issued after 

December 31, 2005. 

The 2009 lists of DDAs that are not 

part of the GO Zone Designation are 

effective: 

(1) For allocations of credit after 

December 31, 2008; or 

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

the Code, if the bonds are issued and the 

building is placed in service after 

December 31, 2008. 

If an area is not on a subsequent list 

of DDAs, the 2009 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 section 42(h)(4) 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 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. For purposes of section 42(h)(4) 

of the 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: (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 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 

(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 Code and associated regulations, 

including Federal Register notices 

published by HUD for purposes of 

designating DDAs and QCTs. 

Representations made by any other 


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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. 

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 DDA status. The 

term ‘‘regular DDA,’’ as used below, 

refers to DDAs that are designated by 

the Secretary of HUD as having high 

construction, land, and utility costs 

relative to AMGI. The term ‘‘GO Zone 

DDA’’ refers to 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 examples 

covering regular DDAs are equally 

applicable to QCT designations. 

(Case A) Project A is located in a 2009 

regular DDA that is NOT a designated 

regular DDA in 2010. A complete 

application for tax credits for Project A 

is filed with the allocating agency on 

November 15, 2009. Credits are 

allocated to Project A on October 30, 

2010. Project A is eligible for the 

increase in basis accorded a project in 

a 2009 regular DDA because the 

application was filed BEFORE January 

1, 2010 (the assumed effective date for 

the 2010 regular DDA 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 2009 

regular DDA that is NOT a designated 

regular DDA in 2010. A complete 

application for tax credits for Project B 

is filed with the allocating agency on 

December 1, 2009. Credits are allocated 

to Project B on March 30, 2011. Project 

B is NOT eligible for the increase in 

basis accorded a project in a 2009 

regular DDA because, although the 

application for an allocation of tax 

credits was filed BEFORE January 1, 

2010 (the assumed effective date of the 

2010 regular DDA 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 2009 

regular DDA that was not a DDA in 

2008. Project C was placed in service on 

November 15, 2008. A complete 

application for tax-exempt bond 

financing for Project C is filed with the 

bond-issuing agency on January 15, 

2009. The bonds that will support the 

permanent financing of Project C are 

issued on September 30, 2009. Project C 

is NOT eligible for the increase in basis 

otherwise accorded a project in a 2009 

DDA because the project was placed in 

service BEFORE January 1, 2009. 

(Case D) Project D is located in an area 

that is a regular DDA in 2009, but is 

NOT a regular DDA in 2010. A complete 

application for tax-exempt bond 

financing for Project D is filed with the 

bond-issuing agency on October 30, 

2009. Bonds are issued for Project D on 

April 30, 2010, but Project D is not 

placed in service until January 30, 2011. 

Project D is eligible for the increase in 

basis available to projects located in 

2009 regular DDAs because: (1) The first 

of the two events necessary for 

triggering the effective date for buildings 

described in Section 42(h)(4)(B) of the 

Code (the two events being bonds issued 

and buildings placed in service) took 

place on April 30, 2010, 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 regular DDA, 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 located in a GO 

Zone DDA. The bonds used to finance 

Project E are issued on July 1, 2011, and 

Project E is placed in service July 1, 

2012. Project E is NOT eligible for the 

increase in basis available to projects in 

GO Zone DDAs because it was not 

placed in service during the period that 

began on January 1, 2006, and ends on 

December 31, 2010. 

(Case F) Project F is located in a GO 

Zone DDA. The bonds used to finance 

Project F were issued July 1, 2005, and 

Project F is placed in service on July 1, 

2009. Project F is NOT eligible for the 

increase in basis available to projects in 

GO Zone DDAs because the bonds used 

to finance project F were issued 

BEFORE December 31, 2005. 

(Case G) Project G is a multiphase 

project located in a 2009 regular DDA 

that is NOT a designated regular DDA in 

2010. The first phase of Project G 

received an allocation of credits in 2009, 

pursuant to an application filed March 

15, 2009, which describes the 

multiphase composition of the project. 

An application for tax credits for the 

second phase Project G is filed with the 

allocating agency by the same entity on 

March 15, 2010. The second phase of 

Project G is located on a contiguous site. 

Credits are allocated to the second 

phase of Project G on October 30, 2010. 

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 applications were 

made in multiple phases. The second 

phase of Project G is, therefore, eligible 

for the increase in basis accorded a 

project in a 2009 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 2009 regular DDA 

that is NOT a designated regular DDA in 

2010. The first phase of Project H 

received an allocation of credits in 2009, 

pursuant to an application filed March 

15, 2009, which does not describe the 

multiphase composition of the project. 

An application for tax credits for the 

second phase of Project H is filed with 

the allocating agency by the same entity 

on March 15, 2011. Credits are allocated 

to the second phase of Project H on 

October 30, 2011. 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 2009 

regular DDA, 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 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 


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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 

Internal Revenue Code, 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: August 12, 2008. 

Darlene F. Williams, 

Assistant Secretary for Policy Development 

and Research. 

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[FR Doc. E8–20322 Filed 9–2–08; 8:45 am] 

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