54990 Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Proposed Rules 

September 15, 2007, which is 

incorporated by reference in 14 CFR 

71.1. The Class E Surface Area 

designation listed in this document 

would be published subsequently in the 

Order. 

The FAA has determined that this 

proposed regulation only involves an 

established body of technical 

regulations for which frequent and 

routine amendments are necessary to 

keep them operationally current. It, 

therefore, (1) is not a ‘‘significant 

regulatory action’’ under Executive 

Order 12866; (2) is not a ‘‘significant 

rule’’ under DOT Regulatory Policies 

and Procedures (44 FR 11034; February 

26, 1979); and (3) does not warrant 

preparation of a Regulatory Evaluation 

as the anticipated impact is so minimal. 

Since this is a routine matter that will 

only affect air traffic procedures and air 

navigation, it is certified that this rule, 

when promulgated, will not have a 

significant economic impact on a 

substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. The FAA’s authority to 

issue rules regarding aviation safety is 

found in Title 49 of the U.S. Code. 

Subtitle 1, Section 106 describes the 

authority of the FAA Administrator 

Subtitle VII, Aviation Programs, 

describes in more detail the scope of the 

agency’s authority. This rulemaking is 

promulgated under the authority 

described in Subtitle VII, Part A, 

Subpart I, Section 40103. Under that 

section, the FAA is charged with 

prescribing regulations to assign the use 

of airspace necessary to ensure the 

safety of aircraft and the efficient use of 

airspace. This regulation is within the 

scope of that authority as it would 

establish controlled airspace at Grayling 

Army Airfield, Grayling, MI. 

List of Subjects in 14 CFR Part 71 

Airspace, Incorporation by reference, 

Navigation (Air). 

The Proposed Amendment 

Accordingly, pursuant to the 

authority delegated to me, the Federal 

Aviation Administration proposes to 

amend 14 CFR Part 71 as follows: 

PART 71—DESIGNATION OF CLASS A, 

B, C, D, AND E AIRSPACE AREAS; 

AIRWAYS; ROUTES; AND REPORTING 

POINTS 

1. The authority citation for Part 71 

continues to read as follows: 

Authority: 49 U.S.C. 106(g); 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– 

1963 Comp., p. 389. 

§ 71.1 [Amended] 

2. The incorporation by reference in 

14 CFR 71.1 of Federal Aviation 

Administration Order 7400.9R, Airspace 

Designations and Reporting Points, 

dated August 15, 2007, and effective 

September 15, 2007, is amended as 

follows: 

Paragraph 5000 Class D Airspace 

* * * * * 

AGL MI D Grayling, MI [New] 

Grayling Army Airfield, MI 

(Lat. 44°40′49′′ N., long. 84°43′44′′ W.) 

Grayling VOR 

(Lat. 44°40′54′′ N., long. 84°43′44′′ W.) 

That airspace extending upward from the 

surface to and including 3,700 feet MSL 

within a 4.2-mile radius of Grayling Army 

Airfield and within 2 miles each side of the 

304° bearing from Grayling Army Airfield 

extending from the 4.2-mile radius to 7.7 

miles northwest of the airport. This Class D 

airspace area is effective during the specific 

dates and times established in advance by a 

Notice to Airmen. The effective date and time 

will thereafter be continuously published in 

the Airport/Facility Directory. 

Paragraph 6002 Class E Airspace 

Designated as Surface Areas 

* * * * * 

AGL MI E2 Grayling, MI [New] 

Grayling Army Airfield, MI 

(Lat. 44°40′49′′ N., long. 84°43′44′′ W.) 

Grayling VOR 

(Lat. 44°40′54′′ N., long. 84°43′44′′ W.) 

That airspace extending upward from the 

surface to and including 3,700 feet MSL 

within a 4.2-mile radius of Grayling Army 

Airfield and within 2 miles each side of the 

304° bearing from Grayling Army Airfield 

extending from the 4.2-mile radius to 7.7 

miles northwest of the airport. This Class E 

Surface Area is effective during the specific 

dates and times established in advance by a 

Notice to Airmen. The effective date and time 

will thereafter be continuously published in 

the Airport/Facility Directory. 

* * * * * 

Issued in Fort Worth, TX, on September 12, 

2008. 

Donald R. Smith, 

Manager, Operations Support Group, ATO 

Central Service Center. 

[FR Doc. E8–22433 Filed 9–23–08; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–142339–05] 

RIN 1545–BE89 

Targeted Populations Under Section 

45D(e)(2) 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations relating to how an 

entity serving certain targeted 

populations under section 45D(e)(2) can 

meet the requirements to be a qualified 

active low-income community business. 

The regulations reflect changes to the 

law made by the American Jobs Creation 

Act of 2004. The regulations will affect 

certain taxpayers claiming the new 

markets tax credit. This document also 

provides a notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by December 23, 2008. 

Outlines of topics to be discussed at the 

public hearing scheduled for Thursday, 

January 22, 2009 at 10:00 a.m. must be 

received by Friday, December 26, 2008. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–142339–05), room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be hand 

delivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to: CC:PA:LPD:PR (REG–142339–05), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically, via the Federal 

eRulemaking Portal at 

www.regulations.gov (IRS—REG– 

142339–05). The public hearing will be 

held in the IRS Auditorium, Internal 

Revenue Building, 1111 Constitution 

Avenue, NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the regulations, Julie 

Hanlon-Bolton, (202) 622–3040; 

concerning submission of comments, 

the hearing, and/or to be placed on the 

building access list to attend the 

hearing, Funmi Awosika Taylor, (202) 

622–7180 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document amends 26 CFR part 1 

to provide rules relating to certain 

targeted populations under section 

45D(e)(2). On May 24, 2005, the 


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Community Development Financial 

Institutions (CDFI) Fund published an 

advance notice of proposed rulemaking 

(ANPRM) (70 FR 29658) to seek 

comments from the public with respect 

to how targeted populations may be 

treated as eligible low-income 

communities under section 45D(e)(2). In 

response to the ANPRM, comments 

were received making various 

suggestions relating to the Treasury 

Department’s definition of the term 

‘‘targeted populations’’ and proposing 

amendments to the requirements to be 

a qualified active low-income 

community business under § 1.45D–1. 

On June 30, 2006, the IRS and Treasury 

Department released Notice 2006–60 

(2006–29 IRB 82), which announced 

that § 1.45D–1 would be amended to 

provide rules relating to how an entity 

meets the requirements to be a qualified 

active low-income community business 

when its activities involve certain 

targeted populations under section 

45D(e)(2). Taxpayers may rely on Notice 

2006–60 until final regulations are 

issued. See § 601.601(d)(2) (ii)(b). The 

IRS and Treasury Department have 

reviewed and considered all written and 

electronic comments in the process of 

preparing the proposed regulations. 

This preamble to the proposed 

regulations describes many of the more 

significant comments received by the 

IRS and Treasury Department in 

response to the notice. 

General Overview 

Section 45D(a)(1) provides a new 

markets tax credit on certain credit 

allowance dates described in section 

45D(a)(3) with respect to a qualified 

equity investment in a qualified 

community development entity (CDE) 

described in section 45D(c). 

Section 45D(b)(1) provides that an 

equity investment in a CDE is a 

‘‘qualified equity investment’’ if, among 

other requirements: (A) The investment 

is acquired by the taxpayer at its 

original issue (directly or through an 

underwriter) solely in exchange for 

cash; (B) substantially all of the cash is 

used by the CDE to make qualified lowincome community investments; and (C) 

the investment is designated for 

purposes of section 45D by the CDE. 

Under section 45D(b)(2), the 

maximum amount of equity investments 

issued by a CDE that may be designated 

by the CDE as qualified equity 

investments shall not exceed the portion 

of the new markets tax credit limitation 

set forth in section 45D(f)(1) that is 

allocated to the CDE by the Secretary 

under section 45D(f)(2). 

Section 45D(c)(1) provides that an 

entity is a CDE if, among other 

requirements, the entity is certified by 

the Secretary as a CDE. 

Section 45D(d)(1) provides that the 

term qualified low-income community 

investment means: (A) any capital or 

equity investment in, or loan to, any 

qualified active low-income community 

business (as defined in section 

45D(d)(2)); (B) the purchase from 

another CDE of any loan made by the 

entity that is a qualified low-income 

community investment; (C) financial 

counseling and other services specified 

in regulations prescribed by the 

Secretary to businesses located in, and 

residents of, low-income communities; 

and (D) any equity investment in, or 

loan to, any CDE. 

Under section 45D(d)(2), a qualified 

active low-income community business 

is any corporation (including a 

nonprofit corporation) or partnership if 

for such year, among other 

requirements, (i) at least 50 percent of 

the total gross income of the entity is 

derived from the active conduct of a 

qualified business within any lowincome community, (ii) a substantial 

portion of the use of the tangible 

property of the entity (whether owned 

or leased) is within any low-income 

community, and (iii) a substantial 

portion of the services performed for the 

entity by its employees are performed in 

any low-income community. 

Under section 45D(d)(3), with certain 

exceptions, a qualified business is any 

trade or business. The rental to others of 

real property is a qualified business 

only if, among other requirements, the 

real property is located in a low-income 

community. 

Section 221 of the American Jobs 

Creation Act of 2004 (Pub. L. 108–357, 

118 Stat. 1418) amended section 

45D(e)(2) to provide that the Secretary 

shall prescribe regulations under which 

one or more targeted populations 

(within the meaning of section 103(20) 

of the Riegle Community Development 

and Regulatory Improvement Act of 

1994 (12 U.S.C. 4702(20))) may be 

treated as low-income communities. 

The regulations shall include 

procedures for determining which 

entities are qualified active low-income 

community businesses with respect to 

those populations. 

The term targeted population, as 

defined in 12 U.S.C. 4702(20) and 12 

CFR 1805.201, means individuals, or an 

identifiable group of individuals, 

including an Indian tribe, who (A) are 

low-income persons; or (B) otherwise 

lack adequate access to loans or equity 

investments. Under 12 U.S.C. 4702(17) 

as interpreted by 12 CFR 1805.104, the 

term low-income means having an 

income, adjusted for family size, of not 

more than (A) for metropolitan areas, 80 

percent of the area median family 

income; and (B) for non-metropolitan 

areas, the greater of (i) 80 percent of the 

area median family income; or (ii) 80 

percent of the statewide 

nonmetropolitan area median family 

income. 

Section 101(a) of the Gulf 

Opportunity Zone Act of 2005 (Pub. L. 

109–135, 119 Stat. 2577) added new 

section 1400M(1), which provides that 

the Gulf Opportunity Zone (GO Zone) is 

that portion of the Hurricane Katrina 

disaster area 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 (the Act) by 

reason of Hurricane Katrina. 

Section 1400M(2) provides that the 

Hurricane Katrina disaster area is an 

area with respect to which a major 

disaster has been declared by the 

President before September 14, 2005, 

under section 401 of the Act by reason 

of Hurricane Katrina. After 

determination by the President that a 

disaster area warrants assistance 

pursuant to the Act, the Federal 

Emergency Management Agency 

(FEMA) makes damage assessments. 

The categories for damage assessment in 

the wake of a hurricane are: Flooded 

area, saturated area, limited damage, 

moderate damage, extensive damage, 

and catastrophic damage. 

Under section 1400N(m)(1), a CDE 

shall be eligible for an allocation under 

section 45D(f)(2) of the increase in the 

new markets tax credit limitation 

described in section 1400N(m)(2) only if 

a significant mission of the CDE is the 

recovery and redevelopment of the GO 

Zone. Section 1400N(m)(2) provides 

that the new markets tax credit 

limitation otherwise determined under 

section 45D(f)(1) shall be increased by 

an amount equal to $300,000,000 for 

2005 and 2006 and $400,000,000 for 

2007, to be allocated among CDEs to 

make qualified low-income community 

investments within the GO Zone. 

Notice 2006–60 provides rules 

relating to how an entity meets the 

requirements to be a qualified active 

low-income community business when 

its activities involve targeted 

populations. Targeted populations that 

will be treated as a low-income 

community are defined as individuals, 

or an identifiable group of individuals, 

including an Indian tribe, who are lowincome persons or who are individuals 

who otherwise lack adequate access to 

loans or equity investments. The notice 

provides requirements for qualified 

active low-income community 


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businesses that serve low-income 

targeted populations and for qualified 

active low-income community 

businesses that serve the GO Zone 

Targeted Population. 

Summary of Comments and 

Explanation of Provisions 

The proposed amendments to 

§ 1.45D–1 incorporate the guidance 

provided by Notice 2006–60 into the 

regulations. Unless otherwise stated, the 

existing rules of § 1.45D–1 relating to 

qualified active low-income community 

businesses apply to businesses serving 

targeted populations. For example, the 

‘‘reasonable expectations’’ safe harbor of 

§ 1.45D–1(d)(6)(i) applies to businesses 

serving targeted populations. That rule 

allows an entity to be treated as a 

qualified active low-income community 

business for the duration of the CDE’s 

investment if the CDE reasonably 

expects, at the time the CDE makes the 

investment in, or loan to, the entity that 

the entity will satisfy the requirements 

to be a qualified active low-income 

community business throughout the 

entire period of the investment or loan. 

Except as discussed later in this 

preamble, the rules in these proposed 

regulations are the same as those 

provided in Notice 2006–60. 

Sections 3.03 and 3.04 of Notice 

2006–60 and the proposed amendments 

to § 1.45D–1 include a definition of 

Targeted Populations, determined by 

the Treasury Department, that further 

defines the terms ‘‘low-income persons’’ 

and ‘‘individuals who otherwise lack 

adequate access to loans or equity 

investments.’’ 

Section 3.03(1) of Notice 2006–60 

states that an individual shall be 

considered to be low-income if the 

individual’s family income, adjusted for 

family size, is not more than (A) for 

metropolitan areas, 80 percent of the 

area median family income; and (B) for 

non-metropolitan areas, the greater of (i) 

80 percent of the area median family 

income; or (ii) 80 percent of the 

statewide nonmetropolitan area median 

family income. A commentator 

requested guidance on calculating the 

applicable income limitation and 

calculating the family income. In 

calculating the applicable income 

limitation, taxpayers must rely on the 

annual estimates of median family 

income released by the Department of 

Housing and Urban Development (HUD) 

and may rely on those figures until 45 

days after HUD releases a new list of 

income limits, or until HUD’s effective 

date for the new list, whichever is later. 

For example, a taxpayer hires on 

January 1, 2007, a new employee who 

is a member of a four person family. The 

most recent HUD median family income 

estimates were released on March 19, 

2007. In determining whether the 

employee is low-income on January 1, 

2008, the taxpayer may rely on the 2007 

HUD median family income estimates 

for a four person family until 45 days 

after HUD releases a new list of income 

limits, or until HUD’s effective date for 

the new list, whichever is later. The 

income limits are computed and listed, 

according to family size, by HUD for 

every Metropolitan Statistical Area, 

Primary Metropolitan Statistical Area, 

and nonmetropolitan county of the 

United States and Puerto Rico. HUD 

also releases income limits for the 

possessions of Guam and the Virgin 

Islands. 

One commentator suggested that it 

would be less burdensome for a 

qualified active low-income community 

businesses to document that an 

individual is low-income for purposes 

of section 45D(e)(2) if individuals who 

live in a low-income community as 

defined in section 45D(e)(1), (3), (4), or 

(5) were deemed to be low-income for 

purposes of section 45D(e)(2). However, 

section 45D(e)(2) directly cross 

references targeted populations as 

defined in 12 U.S.C. 4702(20). The term 

low-income is defined in 12 U.S.C. 

4702(17) to mean having an income, 

adjusted for family size, of not more 

than: For metropolitan areas, 80 percent 

of the area median income; and for 

nonmetropolitan areas, the greater of 80 

percent of the area median income or 80 

percent of the statewide 

nonmetropolitan area median income. 

Accordingly, the Treasury Department 

is not adopting the commentator’s 

suggestion. 

Some commentators suggested stricter 

requirements for targeted populations 

by increasing the 120-percent-income 

restriction in section 3.03(3) of Notice 

2006–60 to 150 percent of municipal 

median income and requiring that 

taxpayers meet all three of the qualified 

active low-income community business 

tests set forth in sections 3.03(2)(a) and 

3.04(3)(a) instead of one of the three. 

The commentators also suggested 

providing stricter requirements for the 

definitions of low-income persons, lowincome communities, and qualified 

active low-income community 

businesses. The commentators 

expressed concern that Notice 2006–60 

permits investments beyond lowincome communities. Neither Notice 

2006–60 nor the proposed regulations 

change the existing rules governing lowincome communities. Rather, they 

provide guidance on how an entity 

serving certain targeted populations 

under section 45D(e)(2) can be a 

qualified active low-income community 

business. The IRS and Treasury 

Department believe that Notice 2006–60 

and the proposed regulations 

appropriately implement Congressional 

intent to expand new market tax credit 

investments to low-income individuals 

and individuals that otherwise lack 

adequate access to loans or equity 

investments by treating targeted 

populations as a low-income 

community. Congress enacted the 

targeted populations provisions under 

section 45D(e)(2) to expand new 

markets tax credit investment dollars to 

other underserved areas. Consequently, 

the proposed regulations do not adopt 

the commentators’ suggestions. 

Some commentators believe that the 

rules in Notice 2006–60 should be 

broadened in scope to allow entities 

engaged in essential governmental 

functions, such as health care services 

to the community, to be deemed to be 

a qualified active low-income 

community business serving targeted 

populations. The IRS and Treasury 

Department do not believe that it is 

appropriate to provide targeted benefits 

to particular industries. Accordingly, 

the proposed regulations do not adopt 

this comment. 

Other commentators believe that a 

non-profit business that is not 

individually owned should be able to 

satisfy the ownership test if at least 25 

percent of the business’s board is 

comprised of individuals who are lowincome or represent a low-income 

targeted population. Another 

commentator suggested removing the 

120-percent-income restriction. 

Concerning the rules for the GO Zone 

Targeted Population, one commentator 

suggested using parishes rather than 

census tracts and suggested removing or 

substantially reducing the percentage 

test for the gross income requirement. 

The proposed regulations do not adopt 

these suggestions because the IRS and 

Treasury Department believe that the 

guidance provided in Notice 2006–60 

generally ensures that the businesses 

receiving qualified low-income 

community investments serve targeted 

populations for low-income and GO 

Zone populations. Finally, some 

commentators suggested providing 

geographic rules for targeted 

populations. Targeted populations is not 

a geographic concept; it is designed to 

provide a new markets tax credit to 

investors of qualified active low-income 

community businesses that serve 

targeted populations. Therefore, this 

comment was not adopted. 

Section 3.03(2) of Notice 2006–60 

provides qualified active low-income 

community business requirements for 


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low-income targeted populations. 

Several commentators suggested that 

businesses that qualify and participate 

in other Federal programs targeted 

specifically to low-income individuals 

and families may use such participation 

as a proxy for meeting the targeted 

populations requirements. The IRS and 

Treasury Department have not analyzed 

other Federal programs to determine 

whether they meet the statutory 

requirements under section 45D(e), and 

it is not certain that programs currently 

meeting the requirements would 

continue to do so in the future. 

Moreover, the IRS and Treasury 

Department do not believe it is 

appropriate to exempt certain 

businesses from meeting the regulatory 

requirements to be a qualified active 

low-income community business based 

upon participation in other Federal 

programs, including those designed to 

aid low-income individuals and 

families, because these Federal 

programs cannot be substituted for the 

statutory requirements under section 

45D(e). Therefore, the proposed 

regulations do not adopt this comment. 

One commentator requested that the 

gross income requirement of section 

3.03(2)(a)(i) of Notice 2006–60 be 

amended to include income from the 

provision of services to businesses that 

serve targeted populations. The 

comment focuses on wholesalers that 

sell goods to retailers that resell to lowincome persons. The IRS and Treasury 

Department believe that such a rule 

would cover too broad a range of 

transactions and would conflict with the 

goal of ensuring that qualified lowincome community investment dollars 

go directly to businesses that serve 

targeted populations. Accordingly, the 

proposed regulations do not adopt this 

comment. 

Several commentators suggested that 

additional restrictions should be added 

to the employee requirement under 

sections 3.03(2)(a)(ii) and 3.04(3)(a)(ii) 

of Notice 2006–60. One commentator 

proposed that the employee should be a 

member of a targeted group as defined 

by the work opportunity tax credit 

under section 51. Another commentator 

suggested that a business should be able 

to satisfy the employee test only if the 

business pays a wage that would 

increase the income of the low-income 

individual being hired. Still another 

commentator suggested that the 

employee requirement be satisfied only 

if each $25,000 in tax credit allocation 

results in at least one new job. Although 

the proposed regulations do not 

incorporate these suggestions at this 

time, the IRS and Treasury Department 

request comments regarding whether 

additional restrictions should be added 

to the employee requirement. 

One commentator asked that the 

guidance provided in section 3.03(2)(b) 

of Notice 2006–60 on the determination 

of whether an employee is a low-income 

person be amended to provide that the 

determination should be made on the 

later of the date the employee was hired 

or the date the qualified low-income 

community investment is made. The 

IRS and Treasury Department believe 

that adopting this comment would 

create undue complexity. In addition, 

the IRS and Treasury Department do not 

want to provide a rule that may 

encourage employers to keep their 

employees low-income to be eligible as 

a qualified active low-income 

community business. Therefore, the 

proposed regulations retain the rule in 

Notice 2006–60 that the determination 

of whether an employee is a low-income 

person is made at the time of hire. 

Sections 3.03(3)(a)(iii) and 

3.04(4)(a)(iii) of Notice 2006–60 provide 

that the 120-percent-income restriction 

and the 200-percent-income restriction, 

respectively, do not apply to an entity 

located within a population census tract 

with a population of less than 2,000 if 

such tract is located in a metropolitan 

area and more than 75 percent of the 

tract is zoned for commercial or 

industrial use. A commentator 

suggested that to determine whether 75 

percent of a population census tract is 

zoned for commercial or industrial use, 

the area of the population census tract 

should be used. In addition, the tract 

should be considered zoned for 

commercial or industrial use if 

commercial or industrial use is a 

permissible zoning use. The IRS and 

Treasury Department agree that these 

suggestions will help clarify the rule. 

Accordingly, the proposed regulations 

adopt the commentator’s suggestions. 

Sections 3.03(3)(b), 3.04(3)(b), and 

3.04(4)(b) of Notice 2006–60 provide 

tests to determine whether an entity is 

located in a particular census tract. One 

commentator suggested that the 

percentages used for the use of tangible 

property test and services performed 

test be increased from 40 percent to 60 

percent. The proposed regulations do 

not adopt this comment because the 

proposed percentages are consistent 

with the qualified active low-income 

community business requirements 

under § 1.45D–1(d)(4)(i). 

Section 3.03(4) of Notice 2006–60 

provides that the rental to others of real 

property for low-income targeted 

populations that otherwise satisfies the 

requirements to be a qualified business 

will be treated as located in a lowincome community if at least 50 percent 

of the entity’s total gross income is 

derived from rentals to individuals who 

are low-income persons and/or to a 

qualified active low-income community 

business that meets the requirements for 

low-income targeted populations. 

Section 3.04(5) provides a similar rule 

for rental of real property for the GO 

Zone Targeted Population. One 

commentator suggested that ‘‘50 

percent’’ be lowered to ‘‘20 percent’’ to 

mirror the definition of non-residential 

real property for purposes of 

depreciation under section 168. The IRS 

and Treasury Department believe that, 

for purposes of determining whether a 

business engaged in the rental of real 

property is located in a low-income 

community, it is more appropriate to 

adopt rules consistent with the rules 

governing whether an entity is a 

qualified active low-income community 

business for targeted populations. 

Therefore, the proposed regulations do 

not adopt the commentator’s suggestion. 

The Treasury Department has 

determined that an individual is 

considered to otherwise lack adequate 

access to loans or equity investments 

only if the individual was displaced 

from his or her principal residence as a 

result of Hurricane Katrina and/or the 

individual lost his or her principal 

source of employment as a result of 

Hurricane Katrina. In order to meet this 

definition, the individual’s principal 

residence or principal source of 

employment, as applicable, must have 

been located in a population census 

tract within the GO Zone that contains 

one or more areas designated by FEMA 

as flooded, having sustained extensive 

damage, or having sustained 

catastrophic damage as a result of 

Hurricane Katrina. One commentator 

asked how taxpayers would know 

which population census tracts have 

received the relevant FEMA 

designations. The CDFI Fund has made 

this information available on its Web 

site at www.cdfifund.gov. 

Commentators requested that the GO 

Zone Targeted Population be expanded 

to all census tracts within the GO Zone, 

rather than limited to only those areas 

designated by FEMA as flooded, having 

sustained extensive damage, or having 

sustained catastrophic damage as a 

result of Hurricane Katrina. The IRS and 

Treasury Department believe that for 

purposes of the increase in the 

limitation under section 1400N(m)(2), 

the new markets tax credit should only 

be used in the areas that were most 

devastated by Hurricane Katrina or are 

otherwise qualified as low-income 

communities. The IRS and Treasury 

Department believe that the areas that 

were most devastated by Hurricane 


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Katrina are in greater need of assistance, 

due to lack of adequate access to loans 

or equity investments, than other areas 

within the GO Zone. 

Commentators requested that the 

proposed regulations not limit use of the 

rules governing the GO Zone Targeted 

Population to investments made by 

CDEs with allocations from the increase 

under section 1400N(m)(2). The IRS and 

Treasury Department do not believe that 

it is appropriate to expand the ability to 

use the rules governing the GO Zone 

Targeted Population beyond 

investments made by CDEs with GO 

Zone allocations, because it would 

remove much needed assistance from 

other low-income communities within 

the GO Zone. 

Section 1.45D–1(d)(4)(iv)(A) provides 

that for purposes of § 1.45D–1(d)(4)(i), 

an entity will be treated as engaged in 

the active conduct of a trade or business 

if, at the time the CDE makes a capital 

or equity investment in, or loan to, the 

entity, the CDE reasonably expects that 

the entity will generate revenues (or, in 

the case of a nonprofit corporation, 

engage in an activity that furthers its 

purpose as a nonprofit corporation) 

within 3 years after the date the 

investment or loan is made. This ‘‘active 

conduct of a trade or business’’ safe 

harbor applies only for purposes of 

determining whether an entity is 

engaged in the active conduct of a trade 

or business and does not apply for 

purposes of determining whether an 

entity is otherwise a qualified active 

low-income community business. 

Further, the ‘‘active conduct of a trade 

or business’’ safe harbor does not 

conflict with the gross-income 

requirement of § 1.45D–1(d)(4)(i)(A) 

because that paragraph provides that the 

entity is deemed to meet the grossincome requirement if the entity meets 

the requirements of either § 1.45D– 

1(d)(4)(i)(B) or (C) if ‘‘50 percent’’ is 

applied instead of ‘‘40 percent.’’ 

Therefore, an entity that has no gross 

receipts and relies on the ‘‘active 

conduct of a trade or business’’ safe 

harbor of § 1.45D–1(d)(4)(iv)(A) can 

meet the requirements to be a qualified 

active low-income community business 

by satisfying either the use of tangible 

property requirement of § 1.45D– 

1(d)(4)(i)(B) or the services performed 

requirement of § 1.45D–1(d)(4)(i)(C) at 

50 percent instead of 40 percent. Several 

commentators requested that, in order to 

accommodate start-up entities, the 

proposed regulations provide a rule 

wherein a business could qualify as a 

qualified active low-income community 

business serving targeted populations if 

the CDE reasonably expects that the 

entity will generate revenues within 

three years after the date the investment 

or loan is made. If a business serving 

targeted populations chose to apply the 

gross income requirement rather than 

the employee requirement or the owner 

requirement, the commentators’ 

suggestion could potentially allow a 

business to be a qualified active lowincome community business for three 

years without having to meet any 

requirement. This result is clearly 

inappropriate. Therefore, the proposed 

regulations do not adopt the 

commentators’ suggestion. In addition, 

the proposed regulations clarify the 

language in § 1.45D–1(d)(4)(iv)(A) to 

address any confusion as to the 

application of the ‘‘active conduct of a 

trade or business’’ safe harbor. 

Several commentators submitted 

comments that address subjects not 

within the scope of these proposed 

regulations. For example, comments 

were received addressing CDFI Fund 

allocation application procedures, such 

as minimum submission requirements, 

weighted scoring criteria, approval 

procedures, ‘‘high distress’’ criteria, 

underwriting criteria, and amendments 

to existing allocation agreements. These 

comments have been forwarded to the 

CDFI Fund for consideration. 

Proposed Effective/Applicability Date 

The rules contained in these 

regulations are proposed to apply to 

taxable years ending on or after the date 

of publication of the Treasury decision 

adopting these rules as final regulation 

in the Federal Register. In the 

meantime, taxpayers may rely on Notice 

2006–60 (2006–29 IRB 82) for 

designations made by the Secretary after 

October 22, 2004. 

Request for Comments 

The IRS and Treasury Department 

invite taxpayers to submit comments on 

issues relating to how an entity meets 

the requirements to be a qualified active 

low-income community business when 

its activities involve certain targeted 

populations under section 45D(e)(2). In 

particular, the IRS and Treasury 

Department encourage taxpayers to 

submit comments on the following 

issues: 

1. What measure of income should be 

used to determine an individual’s 

income for purposes of the definition of 

low-income persons in § 1.45D– 

1(d)(9)(i)(A)? For example, should the 

measure of income for this purpose be 

the same as the measure of income used 

by the U.S. Census Bureau, the measure 

of income on the IRS Form 1040, or the 

measure of income in 24 CFR Part 5, 

which is used for certain HUD programs 

and other Federal programs? The IRS 

and Treasury Department are 

considering using the measure of 

income used by the U.S. Census Bureau 

to ensure a consistent comparison 

between the individual’s family income 

and the applicable area median family 

income. 

2. Should the gross income 

requirements in § 1.45D– 

1(d)(9)(i)(B)(1)(i) and (ii)(C)(1)(i) be 

modified to include the fair market 

value of goods and services provided to 

low-income persons at reduced fees? 

For example, should a business that 

provides its services to low-income 

persons for half of what it charges its 

other customers be able to include the 

fair market value of the services 

provided to low-income persons in its 

calculation of gross income for purposes 

of the requirement in § 1.45D– 

1(d)(9)(i)(B)(1)(i)? 

3. Should additional restrictions be 

added to the employee requirements in 

§ 1.45D–1(d)(9)(i)(B)(1)(ii) and 

(ii)(C)(1)(ii)? For example, as one 

commentator suggested, should a 

requirement be added that the employee 

be a member of a targeted group as 

defined by the work opportunity tax 

credit? As another commentator 

suggested, should the employee test be 

satisfied only if the business pays a 

wage that would increase the income of 

the low-income individual being hired? 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

is hereby certified that these regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. This certification is based upon 

the fact that the regulations provide a 

positive impact because, consistent with 

legislative intent, they allow a tax credit 

to be claimed in situations where it was 

previously unavailable without the 

Secretary providing for such situations 

in regulations. Therefore, a Regulatory 

Flexibility Analysis under the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) 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 their 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) or electronic comments 


rwilkins on PROD1PC63 with PROPOSALS
Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Proposed Rules 54995 

that are submitted timely to the IRS. 

Comments are requested on all aspects 

of the proposed regulations. In addition, 

the IRS and Treasury Department 

specifically request comments on the 

clarity of the proposed rules and how 

they can be made easier to understand. 

All comments will be available for 

public inspection and copying. 

A public hearing has been scheduled 

for Friday, January 22, 2009 at 10 a.m. 

in the IRS Auditorium, Internal Revenue 

Building, 1111 Constitution Avenue, 

NW., Washington, DC. Due to building 

security procedures, visitors must enter 

at the Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

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

apply to the hearing. 

Persons who wish to present oral 

comments at the hearing must submit 

electronic or written comments and an 

outline of the topics to be discussed and 

the time to be devoted to each topic (a 

signed original and eight (8) copies) by 

December 26, 2008. 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 Lauren Ross Taylor, 

formerly with the Office of the Associate 

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 an entry 

in numerical order to read in part as 

follows: 

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

Section 1.45D–1 also issued under 26 

U.S.C. 45D(e)(2) * * * 

Par. 2. Section 1.45D–1 is amended 

by: 

1. In paragraph (a), revising the entry 

for paragraph (h) and adding new 

entries for (d)(9), (d)(9)(i), (d)(9)(i)(A), 

(d)(9)(i)(B), (d)(9)(i)(B)(1), (d)(9)(i)(B)(2), 

(d)(9)(i)(B)(3), (d)(9)(i)(C), (d)(9)(i)(C)(1), 

(d)(9)(i)(C)(2), (d)(9)(i)(D), (d)(9)(ii), 

(d)(9)(ii)(A), (d)(9)(ii)(B), (d)(9)(ii)(C), 

(d)(9)(ii)(C)(1), (d)(9)(ii)(C)(2), 

(d)(9)(ii)(C)(2)(i), (d)(9)(ii)(C)(2)(ii), 

(d)(9)(ii)(D), (d)(9)(ii)(D)(1), 

(d)(9)(ii)(D)(2), (d)(9)(ii)(E), and (h)(3). 

2. Revising paragraph (d)(4)(i) 

introductory text. 

3. Adding the language ‘‘See 

paragraph (d)(9) of this section for rules 

relating to targeted populations.’’ to the 

end of paragraph (d)(4)(i)(A). 

4. Adding the language ‘‘See 

paragraph (d)(9) of this section for rules 

relating to targeted populations.’’ to the 

end of paragraph (d)(4)(i)(B)(1). 

5. Adding the language ‘‘See 

paragraph (d)(9) of this section for rules 

relating to targeted populations.’’ to the 

end of paragraph (d)(4)(i)(C). 

6. Adding a new sentence at the end 

of paragraph (d)(4)(iv)(A). 

7. Adding new paragraph (d)(9). 

8. Revising the heading for paragraph 

(h) and adding new paragraph (h)(3). 

The additions and revisions read as 

follows: 

§ 1.45D–1 New markets tax credit. 

(a) * * * 

(d) * * * 

(9) Targeted populations. 

(i) Low-income persons. 

(A) Definition. 

(B) Qualified active low-income 

community business requirements for lowincome targeted populations. 

(1) In general. 

(2) Employee. 

(3) Owner. 

(C) 120-percent-income restriction. 

(1) In general. 

(2) Population census tract location. 

(D) Rental of real property for low-income 

targeted populations. 

(ii) Individuals who otherwise lack 

adequate access to loans or equity 

investments. 

(A) In general. 

(B) GO Zone Targeted Population. 

(C) Qualified active low-income 

community business requirements for the GO 

Zone Targeted Population. 

(1) In general. 

(2) Location. 

(i) In general. 

(ii) Determination. 

(D) 200-percent-income restriction. 

(1) In general. 

(2) Population census tract location. 

(E) Rental of real property for the GO Zone 

Targeted Population. 

* * * * * 

(h) Effective/applicability dates 

(3) Targeted populations. 

* * * * * 

(d) * * * 

(4) * * * 

(i) In general. The term qualified 

active low-income community business 

means, with respect to any taxable year, 

a corporation (including a nonprofit 

corporation) or a partnership engaged in 

the active conduct of a qualified 

business (as defined in paragraph (d)(5) 

of this section), if the requirements of 

(d)(4)(i)(A), (B), (C), (D), and (E) of this 

section are met (or in the case of an 

entity serving targeted populations, if 

the requirements of paragraphs 

(d)(4)(i)(D), (E), and (d)(9)(i) or (ii) of 

this section are met). Solely for 

purposes of this section, a nonprofit 

corporation will be deemed to be 

engaged in the active conduct of a trade 

or business if it is engaged in an activity 

that furthers its purpose as a nonprofit 

corporation. 

* * * * * 

(iv) Active conduct of a trade or 

business—(A) * * * This paragraph 

(d)(4)(iv) applies only for purposes of 

determining whether an entity is 

engaged in the active conduct of a trade 

or business and does not apply for 

purposes of determining whether the 

gross-income requirement under 

paragraph (d)(4)(i)(A), (d)(9)(i)(B)(1)(i), 

or (d)(9)(ii)(C)(1)(i) of this section is 

satisfied. 

* * * * * 

(9) Targeted populations. As 

determined by the Treasury Department, 

for purposes of section 45D(e)(2), 

targeted populations that will be treated 

as a low-income community are 

individuals, or an identifiable group of 

individuals, including an Indian tribe, 

who are low-income persons as defined 

in paragraph (d)(9)(i) of this section or 

who are individuals who otherwise lack 

adequate access to loans or equity 

investments as defined in paragraph 

(d)(9)(ii) of this section. 

(i) Low-income persons—(A) 

Definition. For purposes of section 

45D(e)(2), an individual shall be 

considered to be low-income if the 

individual’s family income, adjusted for 

family size, is not more than— 

(1) For metropolitan areas, 80 percent 

of the area median family income; and 

(2) For non-metropolitan areas, the 

greater of 80 percent of the area median 

family income, or 80 percent of the 

statewide non-metropolitan area median 

family income. 

(B) Qualified active low-income 

community business requirements for 


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54996 Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Proposed Rules 

low-income targeted populations—(1) In 

general. An entity will not be treated as 

a qualified active low-income 

community business for low-income 

targeted populations unless— 

(i) At least 50 percent of the entity’s 

total gross income for any taxable year 

is derived from sales, rentals, services, 

or other transactions with individuals 

who are low-income persons for 

purposes of section 45D(e)(2) and this 

paragraph (d)(9), 

(ii) At least 40 percent of the entity’s 

employees are individuals who are lowincome persons for purposes of section 

45D(e)(2) and this paragraph (d)(9), or 

(iii) At least 50 percent of the entity 

is owned by individuals who are lowincome persons for purposes of section 

45D(e)(2) and this paragraph (d)(9). 

(2) Employee. The determination of 

whether an employee is a low-income 

person must be made at the time the 

employee is hired. If the employee is a 

low-income person at the time of hire, 

that employee is considered a lowincome person for purposes of section 

45D(e)(2) and this paragraph (d)(9) 

throughout the time of employment, 

without regard to any increase in the 

employee’s income after the time of 

hire. 

(3) Owner. The determination of 

whether an owner is a low-income 

person must be made at the time the 

qualified low-income community 

investment is made. If an owner is a 

low-income person at the time the 

qualified low-income community 

investment is made, that owner is 

considered a low-income person for 

purposes of section 45D(e)(2) and this 

paragraph (d)(9) throughout the time the 

ownership interest is held by that 

owner. 

(C) 120-percent-income restriction— 

(1) In general—(i) In no case will an 

entity be treated as a qualified active 

low-income community business under 

paragraph (d)(9)(i) of this section if the 

entity is located in a population census 

tract for which the median family 

income exceeds 120 percent of— 

(A) In the case of a tract not located 

within a metropolitan area, the 

statewide median family income, or 

(B) In the case of a tract located within 

a metropolitan area, the greater of 

statewide median family income or 

metropolitan area median family 

income (120-percent-income 

restriction). 

(ii) The 120-percent-income 

restriction shall not apply to an entity 

located within a population census tract 

with a population of less than 2,000 if 

such tract is not located in a 

metropolitan area. 

(iii) The 120-percent-income 

restriction shall not apply to an entity 

located within a population census tract 

with a population of less than 2,000 if 

such tract is located in a metropolitan 

area and more than 75 percent of the 

tract is zoned for commercial or 

industrial use. For this purpose, the 75 

percent calculation should be made 

using the area of the population census 

tract. For purposes of this paragraph 

(d)(9)(i)(C)(1)(iii), property for which 

commercial or industrial use is a 

permissible zoning use will be treated as 

zoned for commercial or industrial use. 

(2) Population census tract location— 

(i) For purposes of the 120-percentincome restriction, an entity will be 

considered to be located in a population 

census tract for which the median 

family income exceeds 120 percent of 

the applicable median family income 

under paragraph (d)(9)(i)(C)(1)(i)(A) or 

(B) of this section (non-qualifying 

population census tract) if— 

(A) At least 50 percent of the total 

gross income of the entity is derived 

from the active conduct of a qualified 

business (as defined in paragraph (d)(5) 

of this section) within one or more nonqualifying population census tracts 

(non-qualifying gross income amount); 

(B) At least 40 percent of the use of 

the tangible property of the entity 

(whether owned or leased) is within one 

or more non-qualifying population 

census tracts (non-qualifying tangible 

property usage); and 

(C) At least 40 percent of the services 

performed for the entity by its 

employees are performed in one or more 

non-qualifying population census tracts 

(non-qualifying services performance). 

(ii) The entity is considered to have 

the non-qualifying gross income amount 

if the entity has non-qualifying tangible 

property usage or non-qualifying 

services performance of at least 50 

percent instead of 40 percent. 

(iii) If the entity has no employees, the 

entity is considered to have the nonqualifying gross income amount as well 

as non-qualifying services performance 

if at least 85 percent of the use of the 

tangible property of the entity (whether 

owned or leased) is within one or more 

non-qualifying population census tracts. 

(D) Rental of real property for lowincome targeted populations. The rental 

to others of real property for low-income 

targeted populations that otherwise 

satisfies the requirements to be a 

qualified business under paragraph 

(d)(5) of this section will be treated as 

located in a low-income community for 

purposes of paragraph (d)(5)(ii) of this 

section if at least 50 percent of the 

entity’s total gross income is derived 

from rentals to individuals who are lowincome persons for purposes of section 

45D(e)(2) and this paragraph (d)(9) and/ 

or to a qualified active low-income 

community business that meets the 

requirements for low-income targeted 

populations under paragraphs 

(d)(9)(i)(B)(1)(i) or (ii) and (d)(9)(i)(B)(2) 

of this section. 

(ii) Individuals who otherwise lack 

adequate access to loans or equity 

investments—(A) In general. Paragraph 

(d)(9)(ii) of this section may be applied 

only with regard to qualified lowincome community investments made 

under the increase in the new markets 

tax credit limitation pursuant to section 

1400N(m)(2). Therefore, only CDEs with 

a significant mission of recovery and 

redevelopment of the Gulf Opportunity 

Zone (GO Zone) that receive an 

allocation from the increase described 

in section 1400N(m)(2) may make 

qualified low-income community 

investments from that allocation 

pursuant to the rules in paragraph 

(d)(9)(ii) of this section. 

(B) GO Zone Targeted Population. As 

determined by the Treasury Department, 

for purposes of targeted populations 

under section 45D(e)(2), an individual is 

considered to otherwise lack adequate 

access to loans or equity investments 

only if the individual was displaced 

from his or her principal residence as a 

result of Hurricane Katrina and/or the 

individual lost his or her principal 

source of employment as a result of 

Hurricane Katrina (GO Zone Targeted 

Population). In order to meet this 

definition, the individual’s principal 

residence or principal source of 

employment, as applicable, must have 

been located in a population census 

tract within the GO Zone that contains 

one or more areas designated by the 

Federal Emergency Management Agency 

(FEMA) as flooded, having sustained 

extensive damage, or having sustained 

catastrophic damage as a result of 

Hurricane Katrina. 

(C) Qualified active low-income 

community business requirements for 

the GO Zone Targeted Population—(1) 

In general. An entity will not be treated 

as a qualified active low-income 

community business for the GO Zone 

Targeted Population unless— 

(i) At least 50 percent of the entity’s 

total gross income for any taxable year 

is derived from sales, rentals, services, 

or other transactions with the GO Zone 

Targeted Population, low-income 

persons as defined in paragraph (d)(9)(i) 

of this section, or some combination 

thereof; 

(ii) At least 40 percent of the entity’s 

employees consist of the GO Zone 

Targeted Population, low-income 

persons as defined in paragraph (d)(9)(i) 


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Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Proposed Rules 54997 

of this section, or some combination 

thereof; or 

(iii) At least 50 percent of the entity 

is owned by the GO Zone Targeted 

Population, low-income persons as 

defined in paragraph (d)(9)(i) of this 

section, or some combination thereof. 

(2) Location—(i) In general. In order 

to be a qualified active low-income 

community business under paragraph 

(d)(9)(ii)(C) of this section, the entity 

must be located in a population census 

tract within the GO Zone that contains 

one or more areas designated by FEMA 

as flooded, having sustained extensive 

damage, or having sustained 

catastrophic damage as a result of 

Hurricane Katrina (qualifying 

population census tract). 

(ii) Determination—(A) For purposes 

of the preceding paragraph, an entity 

will be considered to be located in a 

qualifying population census tract if— 

(I) At least 50 percent of the total 

gross income of the entity is derived 

from the active conduct of a qualified 

business (as defined in paragraph (d)(5) 

of this section) within one or more 

qualifying population census tracts 

(gross income requirement); 

(II) At least 40 percent of the use of 

the tangible property of the entity 

(whether owned or leased) is within one 

or more qualifying population census 

tracts (use of tangible property 

requirement); and 

(III) At least 40 percent of the services 

performed for the entity by its 

employees are performed in one or more 

qualifying population census tracts 

(services performed requirement). 

(B) The entity is deemed to satisfy the 

gross income requirement if the entity 

satisfies the use of tangible property 

requirement or the services performed 

requirement on the basis of at least 50 

percent instead of 40 percent. 

(C) If the entity has no employees, the 

entity is deemed to satisfy the services 

performed requirement as well as the 

gross income requirement if at least 85 

percent of the use of the tangible 

property of the entity (whether owned 

or leased) is within one or more 

qualifying population census tracts. 

(D) 200-percent-income restriction— 

(1) In general—(i) In no case will an 

entity be treated as a qualified active 

low-income community business under 

paragraph (d)(9)(ii) of this section if the 

entity is located in a population census 

tract for which the median family 

income exceeds 200 percent of— 

(A) In the case of a tract not located 

within a metropolitan area, the 

statewide median family income, or 

(B) In the case of a tract located within 

a metropolitan area, the greater of 

statewide median family income or 

metropolitan area median family 

income (200-percent-income 

restriction). 

(ii) The 200-percent-income 

restriction shall not apply to an entity 

located within a population census tract 

with a population of less than 2,000 if 

such tract is not located in a 

metropolitan area. 

(iii) The 200-percent-income 

restriction shall not apply to an entity 

located within a population census tract 

with a population of less than 2,000 if 

such tract is located in a metropolitan 

area and more than 75 percent of the 

tract is zoned for commercial or 

industrial use. For this purpose, the 75 

percent calculation should be made 

using the area of the population census 

tract. For purposes of this paragraph 

(d)(9)(ii)(D)(1)(iii), property for which 

commercial or industrial use is a 

permissible zoning use will be treated as 

zoned for commercial or industrial use. 

(2) Population census tract location— 

(i) For purposes of the 200-percentincome restriction, an entity will be 

considered to be located in a population 

census tract for which the median 

family income exceeds 200 percent of 

the applicable median family income 

under paragraph (d)(9)(ii)(D)(1)(i)(A) or 

(B) of this section (non-qualifying 

population census tract) if— 

(A) At least 50 percent of the total 

gross income of the entity is derived 

from the active conduct of a qualified 

business (as defined in paragraph (d)(5) 

of this section) within one or more nonqualifying population census tracts 

(non-qualifying gross income amount); 

(B) At least 40 percent of the use of 

the tangible property of the entity 

(whether owned or leased) is within one 

or more non-qualifying population 

census tracts (non-qualifying tangible 

property usage); and 

(C) At least 40 percent of the services 

performed for the entity by its 

employees are performed in one or more 

non-qualifying population census tracts 

(non-qualifying services performance). 

(ii) The entity is considered to have 

the non-qualifying gross income amount 

if the entity has non-qualifying tangible 

property usage or non-qualifying 

services performance of at least 50 

percent instead of 40 percent. 

(iii) If the entity has no employees, the 

entity is considered to have the nonqualifying gross income amount as well 

as non-qualifying services performance 

if at least 85 percent of the use of the 

tangible property of the entity (whether 

owned or leased) is within one or more 

non-qualifying population census tracts. 

(E) Rental of real property for the GO 

Zone Targeted Population. The rental to 

others of real property for the GO Zone 

Targeted Population that otherwise 

satisfies the requirements to be a 

qualified business under paragraph 

(d)(5) of this section will be treated as 

located in a low-income community for 

purposes of paragraph (d)(5)(ii) of this 

section if at least 50 percent of the 

entity’s total gross income is derived 

from rentals to the GO Zone Targeted 

Population, low-income persons as 

defined in paragraph (d)(9)(i) of this 

section and/or to a qualified active lowincome community business that meets 

the requirements for the GO Zone 

Targeted Population under paragraphs 

(d)(9)(ii)(C)(1)(i) or (ii) of this section. 

* * * * * 

(h) Effective/applicability dates * * * 

* * * * * 

(3) Targeted populations. The rules in 

paragraph (d)(9) of this section apply to 

taxable years ending on or after the date 

of publication of the Treasury decision 

adopting these rules as final regulation 

in the Federal Register. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E8–22481 Filed 9–23–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 138 

[Docket No. USCG–2008–0007] 

RIN 1625–AB25 

Consumer Price Index Adjustments of 

Oil Pollution Act of 1990 Limits of 

Liability—Vessels and Deepwater 

Ports 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

increase the limits of liability for vessels 

and deepwater ports under the Oil 

Pollution Act of 1990 (OPA 90) to 

account for inflation. This notice also 

sets forth the methodology the Coast 

Guard proposes to use for this and 

future adjustments to the OPA 90 limits 

of liability to reflect significant 

increases in the Consumer Price Index 

(CPI). These adjustments are required by 

OPA 90 to preserve the deterrent effect 

and polluter pays principle embodied in 

the OPA 90 liability provisions. 

DATES: Comments and related material 

must reach the Docket Management 

Facility on or before November 24, 

2008. Comments sent to the Office of 


rwilkins on PROD1PC63 with PROPOSALS