80_FR_73427 80 FR 73201 - Statutorily Mandated Designation of Difficult Development Areas and Qualified Census Tracts for 2016

80 FR 73201 - Statutorily Mandated Designation of Difficult Development Areas and Qualified Census Tracts for 2016

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 80, Issue 226 (November 24, 2015)

Page Range73201-73207
FR Document2015-29953

This document designates ``Difficult Development Areas'' (DDAs) and ``Qualified Census Tracts'' (QCTs) for purposes of the Low- Income Housing Tax Credit (LIHTC) under Internal Revenue Code (IRC) Section 42 (26 U.S.C. 42). The United States Department of Housing and Urban Development (HUD) makes new DDA and QCT designations annually. As previously announced, the 2016 metropolitan DDA designations use for the first time Small Area Fair Market Rents (SAFMRs), rather than metropolitan-area Fair Market Rents (FMRs), for designating metropolitan DDAs. Compared to previous designations, this notice: (1) Describes a strengthening of the data quality standard HUD uses in designating the 2016 QCTs, (2) extends from 365 days to 730 days the period for which the 2016 lists of QCTs and DDAs are effective for projects located in areas not on a subsequent list of DDAs or QCTs but having submitted applications while the area was a 2016 QCT or DDA, and (3) establishes the effective date of the new QCTs and DDAs as July 1, 2016 rather than January 1.

Federal Register, Volume 80 Issue 226 (Tuesday, November 24, 2015)
[Federal Register Volume 80, Number 226 (Tuesday, November 24, 2015)]
[Notices]
[Pages 73201-73207]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-29953]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5898-N-01]


Statutorily Mandated Designation of Difficult Development Areas 
and Qualified Census Tracts for 2016

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

ACTION: Notice.

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SUMMARY: This document designates ``Difficult Development Areas'' 
(DDAs) and ``Qualified Census Tracts'' (QCTs) for purposes of the Low-
Income Housing Tax Credit (LIHTC) under Internal Revenue Code (IRC) 
Section 42 (26 U.S.C. 42). The United States Department of Housing and 
Urban Development (HUD) makes new DDA and QCT designations annually. As 
previously announced, the 2016 metropolitan DDA designations use for 
the first time Small Area Fair Market Rents (SAFMRs), rather than 
metropolitan-area Fair Market Rents (FMRs), for designating 
metropolitan DDAs. Compared to previous designations, this notice: (1) 
Describes a strengthening of the data quality standard HUD uses in 
designating the 2016 QCTs, (2) extends from 365 days to 730 days the 
period for which the 2016 lists of QCTs and DDAs are effective for 
projects located in areas not on a subsequent list of DDAs or QCTs but 
having submitted applications while the area was a 2016 QCT or DDA, and 
(3) establishes the effective date of the new QCTs and DDAs as July 1, 
2016 rather than January 1.

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 
[email protected]. 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-
317-4137, fax number 202-317-6731. For questions about the ``HUB Zone'' 
program, contact Mariana Pardo, Director, HUBZone Program, Office of 
Government Contracting and Business Development, U.S. Small Business 
Administration, 409 Third Street SW., Suite 8800, Washington, DC 20416; 
telephone number 202-205-2985, fax number 202-481-6443, or send an 
email to [email protected]. A text telephone is available for persons 
with hearing or speech impairments at 800-877-8339. (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 modified Fiscal Year (FY) 2015 Small Area Fair 
Market Rents (SAFMRs), FY2015 income limits, and 2010 Census population 
counts, as explained below.
    This notice also designates QCTs based on new income and poverty 
data released in the American Community Survey (ACS). HUD relies on the 
most recent three sets of ACS estimates to ensure that anomalous 
estimates, due to sampling, do not affect the QCT status of tracts.

2010 Census and 2007-2011, 2008-2012 and 2009-2013 American Community 
Survey Data

    Data from the 2010 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 updated them periodically through OMB Bulletin 
No. 10-02 on

[[Page 73202]]

December 1, 2009. FY2015 FMRs and FY2015 income limits used to 
designate DDAs are based on these metropolitan statistical area (MSA) 
definitions, with modifications to account for substantial differences 
in rental housing markets (and, in some cases, median income levels) 
within MSAs. SAFMRs are calculated for the ZIP Code Tabulation Areas 
(ZCTAs), or portions of ZCTAs within the metropolitan areas defined by 
OMB Bulletin No. 10-02.
    Data from the 2010 Census on total population of census tracts, 
metropolitan areas, and the nonmetropolitan parts of states are used in 
the designation of QCTs. The FY2015 income limits used to designate 
QCTs are based on these MSA definitions with modifications to account 
for substantial differences in rental housing markets (and in some 
cases median income levels) within MSAs. This QCT designation uses the 
OMB metropolitan area definitions published in OMB Bulletin No. 10-02 
on December 1, 2009, without modification for purposes of evaluating 
how many census tracts can be designated under the population cap, but 
uses the HUD-modified definitions and their associated area median 
incomes for determining QCT eligibility.
    Because the 2010 Decennial Census did not include questions on 
respondent household income, HUD uses ACS data to designate QCTs. The 
ACS tabulates data collected over 5 years to provide estimates of 
socioeconomic variables for small areas containing fewer than 20,000 
persons, such as census tracts. Due to anomalies in estimates from 
year-to-year, HUD incorporates three sets of ACS tabulations to ensure 
that anomalous estimates do not affect QCT status.

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

Summary of the Low-Income Housing Tax Credit

    The LIHTC is a tax incentive intended to increase the availability 
of low-income housing. IRC Section 42 provides an income tax credit to 
owners of newly constructed or substantially rehabilitated low-income 
rental housing projects. The dollar amount of the LIHTC available for 
allocation by each state (credit ceiling) is limited by population. 
Each state is allowed a credit ceiling based on a statutory formula 
indicated at IRC Section 42(h)(3). States may carry forward unallocated 
credits derived from the credit ceiling for one year; however, to the 
extent such unallocated credits are not used by then, the credits go 
into a national pool to be redistributed 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 IRC Section 42 credits derived from the credit 
ceiling, states may also provide IRC Section 42 credits to owners of 
buildings based on the percentage of certain building costs financed by 
tax-exempt bond proceeds. Credits provided under the tax-exempt bond 
``volume cap'' do not reduce the credits available from the credit 
ceiling.
    The credits allocated to a building are based on the cost of units 
placed in service as low-income units under particular minimum 
occupancy and maximum rent criteria. In general, a building must meet 
one of two thresholds to be eligible for the LIHTC; either: (1) 20 
percent of the units must be rent-restricted and occupied by tenants 
with incomes no higher than 50 percent of the Area Median Gross Income 
(AMGI), or (2) 40 percent of the units must be rent-restricted and 
occupied by tenants with incomes no higher than 60 percent of AMGI. A 
unit is ``rent-restricted'' if the gross rent, including an allowance 
for tenant-paid utilities, does not exceed 30 percent of the imputed 
income limitation (i.e., 50 percent or 60 percent of AMGI) applicable 
to that unit. The rent and occupancy thresholds remain in effect for at 
least 15 years, and building owners are required to enter into 
agreements to maintain the low-income character of the building for at 
least an additional 15 years.
    The LIHTC reduces income tax liability dollar-for-dollar. It is 
taken annually for a term of 10 years and is intended to yield a 
present value of either: (1) 70 Percent of the ``qualified basis'' for 
new construction or substantial rehabilitation expenditures that are 
not federally subsidized (as defined in IRC Section 42(i)(2)), or (2) 
30 percent of the qualified basis for the cost of acquiring certain 
existing buildings or projects that are federally subsidized. The 
actual credit rates are adjusted monthly for projects placed in service 
after 1987 under procedures specified in IRC Section 42. Individuals 
can use the credits up to a deduction equivalent of $25,000 (the actual 
maximum amount of credit that an individual can claim depends on the 
individual's marginal tax rate). For buildings placed in service after 
December 31, 2007, individuals can use the credits against the 
alternative minimum tax. Corporations, other than S or personal service 
corporations, can use the credits against ordinary income tax, and, for 
buildings placed in service after December 31, 2007, against the 
alternative minimum tax. These corporations also can deduct losses from 
the project.
    The qualified basis represents the product of the building's 
``applicable fraction'' and its ``eligible basis.'' The applicable 
fraction is based on the number of low-income units in the building as 
a percentage of the total number of units, or based on the floor space 
of low-income units as a percentage of the total floor space of 
residential units in the building. The eligible basis is the adjusted 
basis attributable to acquisition, rehabilitation, or new construction 
costs (depending on the type of LIHTC involved). These costs include 
amounts chargeable to a capital account that are incurred prior to the 
end of the first taxable year in which the qualified low-income 
building is placed in service or, at the election of the taxpayer, the 
end of the succeeding taxable year. In the case of buildings located in 
designated DDAs or designated QCTs, eligible basis can be increased up 
to 130 percent from what it would otherwise be. This means that the 
available credits also can be increased by up to 30 percent. For 
example, if a 70 percent credit is available, it effectively could be 
increased to as much as 91 percent.
    IRC Section 42 defines a DDA as an area designated by the Secretary 
of HUD 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.
    IRC Section 42(d)(5)(B)(v) allows states to award an increase in 
basis up

[[Page 73203]]

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 Method

A. 2016 Difficult Development Areas
    In developing the list of DDAs, HUD compared housing costs with 
incomes. HUD used 2010 Census population for ZCTAs, and nonmetropolitan 
areas, and the MSA definitions, as published in OMB Bulletin No. 10-02 
on December 1, 2009, 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 FY2015 
HUD income limits for very low-income households (very low-income 
limits, or VLILs), which are based on 50 percent of AMGI, and modified 
FMRs based on the FY2015 FMRs used for the Housing Choice Voucher (HCV) 
program. For metropolitan DDAs, HUD used SAFMRs based on 3 annual 
releases of ACS data, to avoid statistical anomalies which affect 
estimates for some ZCTAs. For non-metropolitan DDAs, HUD used the final 
FY2015 FMRs as published on October 3, 2014 (79 FR 59786) and updated 
on January 12, 2015 (80 FR 1511).
    In formulating the FY2015 FMRs and VLILs, HUD modified the current 
OMB definitions of MSAs to account for substantial differences in rents 
among areas within each current MSA that were in different FMR areas 
under definitions used in prior years. HUD formed these ``HUD Metro FMR 
Areas'' (HMFAs) in cases where one or more of the parts of newly 
defined MSAs that previously were in separate FMR areas had 2000 Census 
based 40th-percentile recent-mover rents that differed, by 5 percent or 
more, from the same statistic calculated at the MSA level. In addition, 
a few HMFAs were formed on the basis of very large differences in AMGIs 
among the MSA parts. All HMFAs are contained entirely within MSAs. All 
nonmetropolitan counties are outside of MSAs and are not broken up by 
HUD for purposes of setting FMRs and VLILs. (Complete details on HUD's 
process for determining FY2015 FMR areas and FMRs are available at 
http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr15. 
Complete details on HUD's process for determining FY2015 income limits 
are available at http://www.huduser.org/portal/datasets/il/il15/index.html.)
    HUD's unit of analysis for designating metropolitan DDAs consists 
of ZCTAs, whose SAFMRs are compared to metropolitan VLILs. For purposes 
of computing VLILs in metropolitan areas, HUD considers entire MSAs, in 
cases where these were not broken up into HMFAs for purposes of 
computing 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 ZCTA, 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 metropolitan ZCTA and each nonmetropolitan county, HUD 
calculated a ratio. HUD used a modified FY2015 two-bedroom SAFMR for 
ZCTAs, the final FY2015 two-bedroom FMR as published for non-
metropolitan counties, and the FY2015 four-person VLIL for this 
calculation. The modified FY2015 two-bedroom SAFMRs for ZCTAs differ 
from the final FY2015 SAFMRs in 5 ways.
    First, three years of median rents from the American Community 
Survey (ACS) were deflated and averaged. Three years of ACS releases 
are averaged to avoid anomalies that occur due to statistical sampling 
in some ZCTAs. The modified SAFMRs rely on the 2006-2010, 2007-2011 and 
2008-2012 5-year ACS estimates. Only rents with margins of error less 
than 50 percent of the rent estimate were considered.\1\ Second, HUD 
did not limit the median gross ZCTA rent to 150 percent of the median 
gross Core-Based Statistical Area (CBSA) rent, as in the SAFMR 
calculations used in HUD's demonstration project. Third, for a small 
percentage of ZCTAs with median rents exceeding $2,000, the census 
releases only a value of ``$2,000+''. HUD's modified FY2015 SAFMRs 
includes an interpolated value above $2,000 for these areas. Fourth, 
HUD adjusted median rent values in New York City to correct for the 
downward-bias resulting from rent control and stabilization regulations 
using the New York City Housing and Vacancy Survey, which is conducted 
by the U.S. Census Bureau.\2\ Finally, the adjustment for recent mover 
rents is calculated at the HMFA-level rather than CBSA-level.
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    \1\ HUD is moving to a tighter margin of error ratio for most 
uses of ACS data (base rents, recent mover rents, median rents used 
in the Small Area FMR calculations, etc.) in order to make the FMRs 
more reliable and stable. ACS data with a coefficient of variation 
(CV) greater than 30 percent, which coincides with a margin of error 
ratio of 50 percent, is highly suspect.
    \2\ HUD encourages other jurisdictions with rent control laws 
that affect rents paid by recent movers into existing units to 
contact HUD about what data might be provided or collected to adjust 
SAFMRs in those jurisdictions.
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    a. The numerator of the ratio, representing the development cost of 
housing, was the area's FY2015 FMR, or SAFMR in metropolitan areas. In 
general, the FMR is based on the 40th-percentile gross rent paid by 
recent movers to live in a two-bedroom apartment.
    b. The denominator of the ratio, representing the maximum income of 
eligible tenants, 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, or SAFMR, to the LIHTC income-based rent 
limit were arrayed in descending order, separately, for ZCTAs and for 
nonmetropolitan counties.
    3. The DDAs are those with the highest ratios cumulative to 20 
percent of the 2010 population of all metropolitan areas and all 
nonmetropolitan areas. For purposes of applying this population cap, 
HUD excluded the population in areas designated as 2016 QCTs. Thus, an 
area can be designated as a QCT or DDA, but not both.
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 cannot exceed 20 
percent of the cumulative population of all metropolitan areas, and the 
cumulative population of nonmetropolitan DDAs 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

[[Page 73204]]

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 IRC. 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. Qualified Census Tracts
    In developing this list of QCTs, HUD used 2010 Census 100-percent 
count data on total population, total households, and population in 
households; the median household income and poverty rate as estimated 
in the 2007-2011, 2008-2012 and 2009-2013 ACS tabulations; the FY2015 
Very Low-Income Limits (VLILs) computed at the HUD Metropolitan FMR 
Area (HMFA) level \3\ to determine tract eligibility; and the MSA 
definitions published in OMB Bulletin No. 10-02 on December 1, 2009, 
for determining how many eligible tracts can be designated under the 
statutory 20 percent population cap.
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    \3\ HUD income limits for very low-income households (very low-
income limits, or VLILs) are based on 50 percent of AMGI. In 
formulating the Fair Market Rents (FMRs) and VLILs, HUD modified the 
current OMB definitions of MSAs to account for substantial 
differences in rents among areas within each new MSA that were in 
different FMR areas under definitions used in prior years. HUD 
formed these ``HUD Metro FMR Areas'' (HMFAs) in cases where one or 
more of the parts of newly defined MSAs that previously were in 
separate FMR areas had 2000 Census based 40th-percentile recent-
mover rents that differed, by 5 percent or more, from the same 
statistic calculated at the MSA level. In addition, a few HMFAs were 
formed on the basis of very large differences in AMGIs among the MSA 
parts. All HMFAs are contained entirely within MSAs. All 
nonmetropolitan counties are outside of MSAs and are not broken up 
by HUD for purposes of setting FMRs and VLILs. (Complete details on 
HUD's process for determining FMR areas and FMRs are available at 
http://www.huduser.org/portal/datasets/fmr.html. Complete details on 
HUD's process for determining income limits are available at http://www.huduser.org/portal/datasets/il.html.)
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    HUD uses the HMFA-level AMGIs to determine QCT eligibility because 
the statute, specifically IRC Section 42(d)(5)(B)(iv)(II), refers to 
the same section of the IRC that defines income for purposes of tenant 
eligibility and unit maximum rent, specifically IRC Section 42(g)(4). 
By rule, the IRS sets these income limits according to HUD's VLILs, 
which, starting in FY2006 and thereafter, are established at the HMFA 
level. Similarly, HUD uses the entire MSA to determine how many 
eligible tracts can be designated under the 20 percent population cap 
as required by the statute (IRC Section 42(d)(5)(B)(ii)(III)), which 
states that MSAs should be treated as singular areas. The QCTs were 
determined as follows:
    1. To be eligible to be designated a QCT, a census tract must have 
50 percent of its households with incomes below 60 percent of the AMGI 
or have a poverty rate of 25 percent or more. Due to potential 
statistical anomalies in the ACS 5-year estimates, one of these 
conditions must be met in at least 2 of the 3 evaluation years for a 
tract to be considered eligible for QCT designation. HUD calculates 60 
percent of AMGI by multiplying by a factor of 1.2 the HMFA or 
nonmetropolitan county FY2015 VLIL adjusted for inflation to match the 
ACS estimates. For example, the FY2015 VLILs were adjusted for 
inflation to 2012 dollars to compare with the median income estimate 
from the 2008-2012 ACS estimates. The inflation-adjusted 2012 VLIL was 
then deflated to 2011 for comparison with the 2007-2011 ACS estimates 
and inflated to 2013 to compare with the 2009-2013 ACS estimates.
    2. For each census tract, whether or not 50 percent of households 
have incomes below the 60 percent income standard (income criterion) 
was determined by: (a) Calculating the average household size of the 
census tract, (b) applying the income standard after adjusting it to 
match the average household size, and (c) comparing the average-
household-size-adjusted income standard to the median household income 
for the tract reported in each of the three years of ACS tabulations 
(2007-2011, 2008-2012 and 2009-2013). HUD did not consider estimates of 
median household income to be statistically reliable unless the margin 
of error was less than half of the estimate (or a Margin of Error 
Ratio, MoER, of 50 percent or less). If at least two of the three 
estimates were not statistically reliable by this measure, HUD 
determined the tract to be ineligible under the income criterion due to 
lack of consistently reliable median income statistics across the 3 ACS 
tabulations. In prior designations of QCTs, HUD accepted ACS data with 
MoERs of up to, but not including 100 percent. The higher data quality 
standard used for the 2016 QCTs is consistent with current thinking 
about the reliability of ACS data.\4\ Since 50 percent of households in 
a tract have incomes above and below the tract median household income, 
if the tract median household income is less than the average-
household-size-adjusted income standard for the tract, then more than 
50 percent of households have incomes below the standard.
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    \4\ For a discussion of ACS data quality measures, see: https://www.census.gov/content/dam/Census/library/publications/2008/acs/ACSGeneralHandbook.pdf.
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    3. For each census tract, the poverty rate was determined in each 
of the three releases of ACS tabulations (2007-2011, 2008-2012 and 
2009-2013) by dividing the population with incomes below the poverty 
line by the population for whom poverty status has been determined. As 
with the evaluation of tracts under the income criterion, HUD uses a 
higher data quality standard for evaluating ACS poverty rate data in 
designating the 2016 QCTs than HUD used in previous designations. HUD 
did not consider estimates of the poverty rate to be statistically 
reliable unless both the population for whom poverty status has been 
determined and the number of persons below poverty had MoERs of less 
than 50 percent of the respective estimates. In prior designations of 
QCTs, HUD accepted ACS data with MoERs of up to, but not including 100 
percent. If at least two of the three poverty rate estimates were not 
statistically reliable, HUD determined the tract to be ineligible under 
the poverty rate criterion due to lack of reliable poverty statistics 
across the ACS tabulations.
    4. QCTs are those census tracts in which 50 percent or more of the 
households meet the income criterion in at least two of the three years 
evaluated, or 25 percent or more of the population is in poverty in at 
least two of the three years evaluated, such that the population of all 
census tracts that satisfy either one or both of these criteria does 
not exceed 20 percent of the total population of the respective area.
    5. In areas where more than 20 percent of the population resides in

[[Page 73205]]

eligible census tracts, census tracts are designated as QCTs in 
accordance with the following procedure:
    a. The income and poverty criteria are each averaged over the three 
ACS tabulations (2007-2011, 2008-2012 and 2009-2013). Statistically 
reliable values that did not exceed the income and poverty rate 
thresholds were included in the average.
    b. Eligible tracts are placed in one of two groups based on the 
averaged values of the income and poverty criteria. The first group 
includes tracts that satisfy both the income and poverty criteria for 
QCTs for at least two of the three evaluation years. The second group 
includes tracts that satisfy either the income criterion or the poverty 
criterion in at least two of three years, but not both. A tract must 
qualify by at least one of the criteria in at least two of the three 
evaluation years to be eligible, although it does not need to be the 
same criterion.
    c. Tracts in the first group are ranked from highest to lowest by 
the average of the ratios of the tract average-household-size-adjusted 
income limit to the median household income. Then, tracts in the first 
group are ranked from highest to lowest by the average of the poverty 
rates. The two ranks are averaged to yield a combined rank. The tracts 
are then sorted on the combined rank, with the census tract with the 
highest combined rank being placed at the top of the sorted list. In 
the event of a tie, more populous tracts are ranked above less populous 
ones.
    d. Tracts in the second group are ranked from highest to lowest by 
the average of the ratios of the tract average-household-size-adjusted 
income limit to the median household income. Then, tracts in the second 
group are ranked from highest to lowest by the average of the poverty 
rates. The two ranks are then averaged to yield a combined rank. The 
tracts are then sorted on the combined rank, with the census tract with 
the highest combined rank being placed at the top of the sorted list. 
In the event of a tie, more populous tracts are ranked above less 
populous ones.
    e. The ranked first group is stacked on top of the ranked second 
group to yield a single, concatenated, ranked list of eligible census 
tracts.
    f. Working down the single, concatenated, ranked list of eligible 
tracts, census tracts are identified as designated until the 
designation of an additional tract would cause the 20 percent limit to 
be exceeded. If a census tract is not designated because doing so would 
raise the percentage above 20 percent, subsequent census tracts are 
then considered to determine if one or more census tract(s) with 
smaller population(s) could be designated without exceeding the 20 
percent limit.
D. Exceptions to OMB Definitions of MSAs and Other Geographic Matters
    As stated in OMB Bulletin 10-02, defining metropolitan areas:

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

    Following OMB guidance, the estimation procedure for the FMRs and 
income limits incorporates the current OMB definitions of metropolitan 
areas based on the 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 subareas 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 FMR and income limit 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 
HUD-modified 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 MSAs 
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 and Income Limits 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.
    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 an 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.

Future Designations

    DDAs are designated annually as updated income and FMR data are 
made public. QCTs are designated annually as new income and poverty 
rate data are released.

Effective Date

    The 2016 lists of QCTs and DDAs are effective:
    (1) for allocations of credit after June 30, 2016; or
    (2) for purposes of IRC Section 42(h)(4), if the bonds are issued 
and the building is placed in service after June 30, 2016.
    If an area is not on a subsequent list of QCTs or DDAs, the 2016 
lists are effective for the area if:
    (1) the allocation of credit to an applicant is made no later than 
the end of the 730-day period after the applicant submits a complete 
application to the LIHTC-allocating agency, and the submission is made 
before the effective date of the subsequent lists; or
    (2) for purposes of IRC Section 42(h)(4), if:
    (a) the bonds are issued or the building is placed in service no 
later than the end of the 730-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,

[[Page 73206]]

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 IRC Section 42(h)(4), 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 
Qualified Allocation Plan (QAP) of the LIHTC-allocating agency, or the 
annual per-capita credit authority of the LIHTC allocating agency, and 
is the reason the applicant must request multiple allocations over 2 or 
more years; and
    (3) All applications for LIHTC for buildings on the site are made 
in immediately consecutive years.
    Members of the public are hereby reminded that the Secretary of 
Housing and Urban Development, or the Secretary's designee, has legal 
authority to designate DDAs and QCTs, by publishing lists of geographic 
entities as defined by, in the case of DDAs, the Census Bureau, the 
several states and the governments of the insular areas of the United 
States and, in the case of QCTs, by the Census Bureau; and to establish 
the effective dates of such lists. The Secretary of the Treasury, 
through the IRS thereof, has sole legal authority to interpret, and to 
determine and enforce compliance with the IRC and associated 
regulations, including Federal Register notices published by HUD for 
purposes of designating DDAs and QCTs. Representations made by any 
other entity as to the content of HUD notices designating DDAs and QCTs 
that do not precisely match the language published by HUD should not be 
relied upon by taxpayers in determining what actions are necessary to 
comply with HUD notices.

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 examples 
covering DDAs are equally applicable to QCT designations.
    (Case A) Project A is located in a 2016 DDA that is NOT a 
designated DDA in 2017 or 2018. A complete application for tax credits 
for Project A is filed with the allocating agency on November 15, 2016. 
Credits are allocated to Project A on October 30, 2018. Project A is 
eligible for the increase in basis accorded a project in a 2016 DDA 
because the application was filed BEFORE January 1, 2017 (the assumed 
effective date for the 2017 DDA lists), and because tax credits were 
allocated no later than the end of the 730-day period after the filing 
of the complete application for an allocation of tax credits.
    (Case B) Project B is located in a 2016 DDA that is NOT a 
designated DDA in 2017 or 2018. A complete application for tax credits 
for Project B is filed with the allocating agency on December 1, 2016. 
Credits are allocated to Project B on March 30, 2019. Project B is NOT 
eligible for the increase in basis accorded a project in a 2016 DDA 
because, although the application for an allocation of tax credits was 
filed BEFORE January 1, 2017 (the assumed effective date of the 2017 
DDA lists), the tax credits were allocated later than the end of the 
730-day period after the filing of the complete application.
    (Case C) Project C is located in a 2016 DDA that was not a DDA in 
2015. Project C was placed in service on November 15, 2015. A complete 
application for tax-exempt bond financing for Project C is filed with 
the bond-issuing agency on January 15, 2016. The bonds that will 
support the permanent financing of Project C are issued on September 
30, 2016. Project C is NOT eligible for the increase in basis otherwise 
accorded a project in a 2016 DDA, because the project was placed in 
service BEFORE July 1, 2016.
    (Case D) Project D is located in an area that is a DDA in 2016, but 
is NOT a DDA in 2017 or 2018. A complete application for tax-exempt 
bond financing for Project D is filed with the bond-issuing agency on 
October 30, 2016. Bonds are issued for Project D on April 30, 2018, but 
Project D is not placed in service until January 30, 2019. Project D is 
eligible for the increase in basis available to projects located in 
2016 DDAs because: (1) One of the two events necessary for triggering 
the effective date for buildings described in Section 42(h)(4)(B) of 
the IRC (the two events being bonds issued and buildings placed in 
service) took place on April 30, 2018, within the 730-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 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 a multiphase project located in a 2016 DDA 
that is NOT a designated DDA or QCT in 2017. The first phase of Project 
E received an allocation of credits in 2016, pursuant to an application 
filed July 15, 2016, which describes the multiphase composition of the 
project. An application for tax credits for the second phase of Project 
E is filed with the allocating agency by the same entity on July 15, 
2017. The second phase of Project E is located on a contiguous site. 
Credits are allocated to the second phase of Project E on October 30, 
2017. The aggregate amount of credits allocated to the two phases of 
Project E exceeds the amount of credits that may be allocated to an 
applicant in one year under the allocating agency's QAP and is the 
reason that applications were made in multiple phases. The second phase 
of Project E is, therefore, eligible for the increase in basis accorded 
a project in a 2016 DDA, because it meets all of the conditions to be a 
part of a multiphase project.
    (Case F) Project F is a multiphase project located in a 2016 DDA 
that is NOT a designated DDA in 2017 or 2018. The first phase of 
Project F received an allocation of credits in 2016, pursuant to an 
application filed July 15, 2016, which does not describe the multiphase 
composition of the project. An application for tax credits for the 
second

[[Page 73207]]

phase of Project F is filed with the allocating agency by the same 
entity on March 15, 2018. Credits are allocated to the second phase of 
Project F on October 30, 2018. The aggregate amount of credits 
allocated to the two phases of Project F exceeds the amount of credits 
that may be allocated to an applicant in one year under the allocating 
agency's QAP. The second phase of Project F is, therefore, NOT eligible 
for the increase in basis accorded a project in a 2016 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 F was 
not made in the year immediately following the first phase application 
year.

Findings and Certifications

Environmental Impact

    This notice involves the establishment of fiscal requirements or 
procedures that are related to rate and cost determinations and do not 
constitute a development decision affecting the physical condition of 
specific project areas or building sites. Accordingly, under 40 CFR 
1508.4 of the regulations of the Council on Environmental Quality and 
24 CFR 50.19(c)(6) of HUD's regulations, this notice is categorically 
excluded from environmental review under the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321).

Federalism Impact

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any policy document that has federalism implications if 
the document either imposes substantial direct compliance costs on 
state and local governments and is not required by statute, or the 
document preempts state law, unless the agency meets the consultation 
and funding requirements of section 6 of the executive order. This 
notice merely designates DDAs as required under IRC Section 42, as 
amended, for the use by political subdivisions of the states in 
allocating the LIHTC. This notice also details the technical method 
used in making such designations. As a result, this notice is not 
subject to review under the order.

    Dated: November 19, 2015.
Katherine M. O'Regan,
Assistant Secretary for Policy Development and Research.
[FR Doc. 2015-29953 Filed 11-20-15; 11:15 am]
 BILLING CODE 4210-67-P



                                                                             Federal Register / Vol. 80, No. 226 / Tuesday, November 24, 2015 / Notices                                            73201

                                                  functions of the agency, including                      hour burden associated with this                      451 Seventh Street SW., Room 8234,
                                                  whether the information will have                       collection is 29,300,000 hours.                       Washington, DC 20410–6000; telephone
                                                  practical utility;                                        (7) An estimate of the total public                 number 202–402–5878, or send an email
                                                    (2) Evaluate the accuracy of the                      burden (in cost) associated with the                  to Michael.K.Hollar@hud.gov. For
                                                  agency’s estimate of the burden of the                  collection: The estimated total annual                specific legal questions pertaining to
                                                  proposed collection of information,                     cost burden associated with this                      Section 42, contact Branch 5, Office of
                                                  including the validity of the                           collection of information is $0.                      the Associate Chief Counsel,
                                                  methodology and assumptions used;                         Dated: November 19, 2015.                           Passthroughs and Special Industries,
                                                    (3) Enhance the quality, utility, and                                                                       Internal Revenue Service, 1111
                                                                                                          Laura Dawkins,
                                                  clarity of the information to be                                                                              Constitution Avenue NW., Washington,
                                                                                                          Chief, Regulatory Coordination Division,
                                                  collected; and                                                                                                DC 20224; telephone number 202–317–
                                                                                                          Office of Policy and Strategy, U.S. Citizenship
                                                    (4) Minimize the burden of the                                                                              4137, fax number 202–317–6731. For
                                                                                                          and Immigration Services, Department of
                                                  collection of information on those who                  Homeland Security.                                    questions about the ‘‘HUB Zone’’
                                                  are to respond, including through the                                                                         program, contact Mariana Pardo,
                                                                                                          [FR Doc. 2015–29909 Filed 11–23–15; 8:45 am]
                                                  use of appropriate automated,                                                                                 Director, HUBZone Program, Office of
                                                                                                          BILLING CODE 9111–97–P
                                                  electronic, mechanical, or other                                                                              Government Contracting and Business
                                                  technological collection techniques or                                                                        Development, U.S. Small Business
                                                  other forms of information technology,                                                                        Administration, 409 Third Street SW.,
                                                  e.g., permitting electronic submission of               DEPARTMENT OF HOUSING AND                             Suite 8800, Washington, DC 20416;
                                                  responses.                                              URBAN DEVELOPMENT                                     telephone number 202–205–2985, fax
                                                                                                          [Docket No. FR–5898–N–01]                             number 202–481–6443, or send an email
                                                  Overview of This Information
                                                                                                                                                                to hubzone@sba.gov. A text telephone is
                                                  Collection                                              Statutorily Mandated Designation of                   available for persons with hearing or
                                                    (1) Type of Information Collection:                   Difficult Development Areas and                       speech impairments at 800–877–8339.
                                                  Revision of a Currently Approved                        Qualified Census Tracts for 2016                      (These are not toll-free telephone
                                                  Collection.                                                                                                   numbers.) Additional copies of this
                                                    (2) Title of the Form/Collection:                     AGENCY:  Office of the Assistant
                                                                                                                                                                notice are available through HUD User
                                                  Employment Eligibility Verification.                    Secretary for Policy Development and
                                                                                                                                                                at 800–245–2691 for a small fee to cover
                                                    (3) Agency form number, if any, and                   Research, HUD.
                                                                                                                                                                duplication and mailing costs.
                                                  the applicable DHS component                            ACTION: Notice.                                          Copies Available Electronically: This
                                                  sponsoring the collection: I–9; USCIS.                                                                        notice and additional information about
                                                    (4) Affected public who will be asked                 SUMMARY:    This document designates
                                                                                                          ‘‘Difficult Development Areas’’ (DDAs)                DDAs and QCTs are available
                                                  or required to respond, as well as a brief                                                                    electronically on the Internet at http://
                                                  abstract:                                               and ‘‘Qualified Census Tracts’’ (QCTs)
                                                                                                                                                                www.huduser.org/datasets/qct.html.
                                                    Primary: Employers, employees,                        for purposes of the Low-Income
                                                                                                          Housing Tax Credit (LIHTC) under                      SUPPLEMENTARY INFORMATION:
                                                  recruiters and referrers for a fee (limited
                                                  to agricultural associations, agricultural              Internal Revenue Code (IRC) Section 42                This Document
                                                  employers, or farm labor contractors),                  (26 U.S.C. 42). The United States
                                                                                                                                                                  This notice designates DDAs for each
                                                  and state employment agencies. This                     Department of Housing and Urban
                                                                                                                                                                of the 50 states, the District of Columbia,
                                                  form was developed to facilitate                        Development (HUD) makes new DDA
                                                                                                                                                                Puerto Rico, American Samoa, Guam,
                                                  compliance with section 274A of the                     and QCT designations annually. As                     the Northern Mariana Islands, and the
                                                  Immigration and Nationality Act, which                  previously announced, the 2016                        U.S. Virgin Islands. The designations of
                                                  prohibits the knowing employment of                     metropolitan DDA designations use for                 DDAs in this notice are based on
                                                  unauthorized aliens. This information                   the first time Small Area Fair Market                 modified Fiscal Year (FY) 2015 Small
                                                  collection is necessary for employers,                  Rents (SAFMRs), rather than                           Area Fair Market Rents (SAFMRs),
                                                  agricultural recruiters and referrers for a             metropolitan-area Fair Market Rents                   FY2015 income limits, and 2010 Census
                                                  fee, and state employment agencies to                   (FMRs), for designating metropolitan                  population counts, as explained below.
                                                  verify the identity and employment                      DDAs. Compared to previous                              This notice also designates QCTs
                                                  authorization of individuals hired (or                  designations, this notice: (1) Describes a            based on new income and poverty data
                                                  recruited or referred for a fee, if                     strengthening of the data quality                     released in the American Community
                                                  applicable) for employment in the                       standard HUD uses in designating the                  Survey (ACS). HUD relies on the most
                                                  United States.                                          2016 QCTs, (2) extends from 365 days                  recent three sets of ACS estimates to
                                                    (5) An estimate of the total number of                to 730 days the period for which the                  ensure that anomalous estimates, due to
                                                  respondents and the amount of time                      2016 lists of QCTs and DDAs are                       sampling, do not affect the QCT status
                                                  estimated for an average respondent to                  effective for projects located in areas not           of tracts.
                                                  respond: The estimated total number of                  on a subsequent list of DDAs or QCTs
                                                  respondents for the information                         but having submitted applications while               2010 Census and 2007–2011, 2008–2012
                                                  collection I–9 is 55,400,000 for                        the area was a 2016 QCT or DDA, and                   and 2009–2013 American Community
                                                  employers and recruiters and referrers                  (3) establishes the effective date of the             Survey Data
                                                  with an estimated hour burden per                       new QCTs and DDAs as July 1, 2016                        Data from the 2010 Census on total
                                                  response is .33 hours; 55,400,000 for                   rather than January 1.                                population of metropolitan areas and
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                                                  individuals/households with an                          FOR FURTHER INFORMATION CONTACT: For                  nonmetropolitan areas are used in the
                                                  estimated hour burden response of .17                   questions on how areas are designated                 designation of DDAs. The Office of
                                                  hour; and 20,000,000 for record keepers                 and on geographic definitions, contact                Management and Budget (OMB) first
                                                  with an estimated hour burden response                  Michael K. Hollar, Senior Economist,                  published new metropolitan area
                                                  of .08 hours.                                           Economic Development and Public                       definitions incorporating 2000 Census
                                                    (6) An estimate of the total public                   Finance Division, Office of Policy                    data in OMB Bulletin No. 03–04 on June
                                                  burden (in hours) associated with the                   Development and Research, Department                  6, 2003, and updated them periodically
                                                  collection: The total estimated annual                  of Housing and Urban Development,                     through OMB Bulletin No. 10–02 on


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                                                  73202                      Federal Register / Vol. 80, No. 226 / Tuesday, November 24, 2015 / Notices

                                                  December 1, 2009. FY2015 FMRs and                       Summary of the Low-Income Housing                     that are not federally subsidized (as
                                                  FY2015 income limits used to designate                  Tax Credit                                            defined in IRC Section 42(i)(2)), or (2)
                                                  DDAs are based on these metropolitan                       The LIHTC is a tax incentive intended              30 percent of the qualified basis for the
                                                  statistical area (MSA) definitions, with                to increase the availability of low-                  cost of acquiring certain existing
                                                  modifications to account for substantial                income housing. IRC Section 42                        buildings or projects that are federally
                                                  differences in rental housing markets                   provides an income tax credit to owners               subsidized. The actual credit rates are
                                                  (and, in some cases, median income                      of newly constructed or substantially                 adjusted monthly for projects placed in
                                                  levels) within MSAs. SAFMRs are                         rehabilitated low-income rental housing               service after 1987 under procedures
                                                  calculated for the ZIP Code Tabulation                  projects. The dollar amount of the                    specified in IRC Section 42. Individuals
                                                  Areas (ZCTAs), or portions of ZCTAs                     LIHTC available for allocation by each                can use the credits up to a deduction
                                                  within the metropolitan areas defined                   state (credit ceiling) is limited by                  equivalent of $25,000 (the actual
                                                  by OMB Bulletin No. 10–02.                              population. Each state is allowed a                   maximum amount of credit that an
                                                                                                                                                                individual can claim depends on the
                                                     Data from the 2010 Census on total                   credit ceiling based on a statutory
                                                                                                                                                                individual’s marginal tax rate). For
                                                  population of census tracts,                            formula indicated at IRC Section
                                                                                                                                                                buildings placed in service after
                                                  metropolitan areas, and the                             42(h)(3). States may carry forward
                                                                                                                                                                December 31, 2007, individuals can use
                                                  nonmetropolitan parts of states are used                unallocated credits derived from the
                                                                                                                                                                the credits against the alternative
                                                  in the designation of QCTs. The FY2015                  credit ceiling for one year; however, to
                                                                                                                                                                minimum tax. Corporations, other than
                                                  income limits used to designate QCTs                    the extent such unallocated credits are
                                                                                                                                                                S or personal service corporations, can
                                                  are based on these MSA definitions with                 not used by then, the credits go into a
                                                                                                                                                                use the credits against ordinary income
                                                  modifications to account for substantial                national pool to be redistributed to
                                                                                                                                                                tax, and, for buildings placed in service
                                                  differences in rental housing markets                   states as additional credit. State and
                                                                                                                                                                after December 31, 2007, against the
                                                                                                          local housing agencies allocate the                   alternative minimum tax. These
                                                  (and in some cases median income
                                                                                                          state’s credit ceiling among low-income               corporations also can deduct losses from
                                                  levels) within MSAs. This QCT
                                                                                                          housing buildings whose owners have                   the project.
                                                  designation uses the OMB metropolitan
                                                                                                          applied for the credit. Besides IRC                      The qualified basis represents the
                                                  area definitions published in OMB
                                                                                                          Section 42 credits derived from the                   product of the building’s ‘‘applicable
                                                  Bulletin No. 10–02 on December 1,
                                                                                                          credit ceiling, states may also provide               fraction’’ and its ‘‘eligible basis.’’ The
                                                  2009, without modification for purposes                 IRC Section 42 credits to owners of
                                                  of evaluating how many census tracts                                                                          applicable fraction is based on the
                                                                                                          buildings based on the percentage of                  number of low-income units in the
                                                  can be designated under the population                  certain building costs financed by tax-
                                                  cap, but uses the HUD-modified                                                                                building as a percentage of the total
                                                                                                          exempt bond proceeds. Credits provided                number of units, or based on the floor
                                                  definitions and their associated area                   under the tax-exempt bond ‘‘volume
                                                  median incomes for determining QCT                                                                            space of low-income units as a
                                                                                                          cap’’ do not reduce the credits available             percentage of the total floor space of
                                                  eligibility.                                            from the credit ceiling.                              residential units in the building. The
                                                     Because the 2010 Decennial Census                       The credits allocated to a building are            eligible basis is the adjusted basis
                                                  did not include questions on respondent                 based on the cost of units placed in                  attributable to acquisition,
                                                  household income, HUD uses ACS data                     service as low-income units under                     rehabilitation, or new construction costs
                                                  to designate QCTs. The ACS tabulates                    particular minimum occupancy and                      (depending on the type of LIHTC
                                                  data collected over 5 years to provide                  maximum rent criteria. In general, a                  involved). These costs include amounts
                                                  estimates of socioeconomic variables for                building must meet one of two                         chargeable to a capital account that are
                                                  small areas containing fewer than                       thresholds to be eligible for the LIHTC;              incurred prior to the end of the first
                                                  20,000 persons, such as census tracts.                  either: (1) 20 percent of the units must              taxable year in which the qualified low-
                                                  Due to anomalies in estimates from                      be rent-restricted and occupied by                    income building is placed in service or,
                                                  year-to-year, HUD incorporates three                    tenants with incomes no higher than 50                at the election of the taxpayer, the end
                                                  sets of ACS tabulations to ensure that                  percent of the Area Median Gross                      of the succeeding taxable year. In the
                                                  anomalous estimates do not affect QCT                   Income (AMGI), or (2) 40 percent of the               case of buildings located in designated
                                                  status.                                                 units must be rent-restricted and                     DDAs or designated QCTs, eligible basis
                                                                                                          occupied by tenants with incomes no                   can be increased up to 130 percent from
                                                  Background                                              higher than 60 percent of AMGI. A unit                what it would otherwise be. This means
                                                                                                          is ‘‘rent-restricted’’ if the gross rent,             that the available credits also can be
                                                    The U.S. Department of the Treasury                   including an allowance for tenant-paid                increased by up to 30 percent. For
                                                  (Treasury) and its Internal Revenue                     utilities, does not exceed 30 percent of              example, if a 70 percent credit is
                                                  Service (IRS) are authorized to interpret               the imputed income limitation (i.e., 50               available, it effectively could be
                                                  and enforce the provisions of the LIHTC                 percent or 60 percent of AMGI)                        increased to as much as 91 percent.
                                                  found at IRC Section 42. The Secretary                  applicable to that unit. The rent and                    IRC Section 42 defines a DDA as an
                                                  of HUD is required to designate DDAs                    occupancy thresholds remain in effect                 area designated by the Secretary of HUD
                                                  and QCTs by IRC Section 42(d)(5)(B). In                 for at least 15 years, and building                   that has high construction, land, and
                                                  order to assist in understanding HUD’s                  owners are required to enter into                     utility costs relative to the AMGI. All
                                                  mandated designation of DDAs and                        agreements to maintain the low-income                 designated DDAs in metropolitan areas
                                                  QCTs for use in administering IRC                       character of the building for at least an             (taken together) may not contain more
                                                  Section 42, a summary of the section is
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                                                                                                          additional 15 years.                                  than 20 percent of the aggregate
                                                  provided. The following summary does                       The LIHTC reduces income tax                       population of all metropolitan areas,
                                                  not purport to bind Treasury or the IRS                 liability dollar-for-dollar. It is taken              and all designated areas not in
                                                  in any way, nor does it purport to bind                 annually for a term of 10 years and is                metropolitan areas may not contain
                                                  HUD, since HUD has authority to                         intended to yield a present value of                  more than 20 percent of the aggregate
                                                  interpret or administer the IRC only in                 either: (1) 70 Percent of the ‘‘qualified             population of all nonmetropolitan areas.
                                                  instances where it receives explicit                    basis’’ for new construction or                          IRC Section 42(d)(5)(B)(v) allows
                                                  statutory delegation.                                   substantial rehabilitation expenditures               states to award an increase in basis up


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                                                                             Federal Register / Vol. 80, No. 226 / Tuesday, November 24, 2015 / Notices                                                      73203

                                                  to 30 percent to buildings located                      huduser.org/portal/datasets/fmr/fmrs/                   regulations using the New York City
                                                  outside of federally designated DDAs                    docsys.html&data=fmr15. Complete                        Housing and Vacancy Survey, which is
                                                  and QCTs if the increase is necessary to                details on HUD’s process for                            conducted by the U.S. Census Bureau.2
                                                  make the building financially feasible.                 determining FY2015 income limits are                    Finally, the adjustment for recent mover
                                                  This state discretion applies only to                   available at http://www.huduser.org/                    rents is calculated at the HMFA-level
                                                  buildings allocated credits under the                   portal/datasets/il/il15/index.html.)                    rather than CBSA-level.
                                                  state housing credit ceiling and is not                    HUD’s unit of analysis for designating                  a. The numerator of the ratio,
                                                  permitted for buildings receiving credits               metropolitan DDAs consists of ZCTAs,                    representing the development cost of
                                                  in connection with tax-exempt bonds.                    whose SAFMRs are compared to                            housing, was the area’s FY2015 FMR, or
                                                  Rules for such designations shall be set                metropolitan VLILs. For purposes of                     SAFMR in metropolitan areas. In
                                                  forth in the LIHTC-allocating agencies’                 computing VLILs in metropolitan areas,                  general, the FMR is based on the 40th-
                                                  qualified allocation plans (QAPs).                      HUD considers entire MSAs, in cases                     percentile gross rent paid by recent
                                                                                                          where these were not broken up into                     movers to live in a two-bedroom
                                                  Explanation of HUD Designation                          HMFAs for purposes of computing                         apartment.
                                                  Method                                                  VLILs; and HMFAs within the MSAs                           b. The denominator of the ratio,
                                                  A. 2016 Difficult Development Areas                     that were broken up for such purposes.                  representing the maximum income of
                                                                                                          Hereafter in this notice, the unit of                   eligible tenants, was the monthly LIHTC
                                                     In developing the list of DDAs, HUD                                                                          income-based rent limit, which was
                                                                                                          analysis for designating metropolitan
                                                  compared housing costs with incomes.                                                                            calculated as 1/12 of 30 percent of 120
                                                                                                          DDAs will be called the ZCTA, and the
                                                  HUD used 2010 Census population for                                                                             percent of the area’s VLIL (where the
                                                                                                          unit of analysis for nonmetropolitan
                                                  ZCTAs, and nonmetropolitan areas, and                                                                           VLIL was rounded to the nearest $50
                                                                                                          DDAs will be the nonmetropolitan
                                                  the MSA definitions, as published in                                                                            and not allowed to exceed 80 percent of
                                                                                                          county or county equivalent area. The
                                                  OMB Bulletin No. 10–02 on December                                                                              the AMGI in areas where the VLIL is
                                                                                                          procedure used in making the DDA
                                                  1, 2009, with modifications, as                                                                                 adjusted upward from its 50 percent-of-
                                                                                                          calculations follows:
                                                  described below. In keeping with past                      1. For each metropolitan ZCTA and                    AMGI base).
                                                  practice of basing the coming year’s                    each nonmetropolitan county, HUD                           2. The ratios of the FMR, or SAFMR,
                                                  DDA designations on data from the                       calculated a ratio. HUD used a modified                 to the LIHTC income-based rent limit
                                                  preceding year, the basis for these                     FY2015 two-bedroom SAFMR for                            were arrayed in descending order,
                                                  comparisons is the FY2015 HUD income                    ZCTAs, the final FY2015 two-bedroom                     separately, for ZCTAs and for
                                                  limits for very low-income households                   FMR as published for non-metropolitan                   nonmetropolitan counties.
                                                  (very low-income limits, or VLILs),                     counties, and the FY2015 four-person                       3. The DDAs are those with the
                                                  which are based on 50 percent of AMGI,                  VLIL for this calculation. The modified                 highest ratios cumulative to 20 percent
                                                  and modified FMRs based on the                          FY2015 two-bedroom SAFMRs for                           of the 2010 population of all
                                                  FY2015 FMRs used for the Housing                        ZCTAs differ from the final FY2015                      metropolitan areas and all
                                                  Choice Voucher (HCV) program. For                       SAFMRs in 5 ways.                                       nonmetropolitan areas. For purposes of
                                                  metropolitan DDAs, HUD used SAFMRs                         First, three years of median rents from              applying this population cap, HUD
                                                  based on 3 annual releases of ACS data,                 the American Community Survey (ACS)                     excluded the population in areas
                                                  to avoid statistical anomalies which                    were deflated and averaged. Three years                 designated as 2016 QCTs. Thus, an area
                                                  affect estimates for some ZCTAs. For                    of ACS releases are averaged to avoid                   can be designated as a QCT or DDA, but
                                                  non-metropolitan DDAs, HUD used the                     anomalies that occur due to statistical                 not both.
                                                  final FY2015 FMRs as published on                       sampling in some ZCTAs. The modified                    B. Application of Population Caps to
                                                  October 3, 2014 (79 FR 59786) and                       SAFMRs rely on the 2006–2010, 2007–                     DDA Determinations
                                                  updated on January 12, 2015 (80 FR                      2011 and 2008–2012 5-year ACS
                                                  1511).                                                                                                            In identifying DDAs, HUD applied
                                                                                                          estimates. Only rents with margins of
                                                     In formulating the FY2015 FMRs and                                                                           caps, or limitations, as noted above. The
                                                                                                          error less than 50 percent of the rent
                                                  VLILs, HUD modified the current OMB                                                                             cumulative population of metropolitan
                                                                                                          estimate were considered.1 Second,
                                                  definitions of MSAs to account for                                                                              DDAs cannot exceed 20 percent of the
                                                                                                          HUD did not limit the median gross
                                                  substantial differences in rents among                                                                          cumulative population of all
                                                                                                          ZCTA rent to 150 percent of the median
                                                  areas within each current MSA that                                                                              metropolitan areas, and the cumulative
                                                                                                          gross Core-Based Statistical Area
                                                  were in different FMR areas under                                                                               population of nonmetropolitan DDAs
                                                                                                          (CBSA) rent, as in the SAFMR
                                                  definitions used in prior years. HUD                                                                            cannot exceed 20 percent of the
                                                                                                          calculations used in HUD’s
                                                  formed these ‘‘HUD Metro FMR Areas’’                                                                            cumulative population of all
                                                                                                          demonstration project. Third, for a small
                                                  (HMFAs) in cases where one or more of                                                                           nonmetropolitan areas.
                                                                                                          percentage of ZCTAs with median rents                     In applying these caps, HUD
                                                  the parts of newly defined MSAs that
                                                                                                          exceeding $2,000, the census releases                   established procedures to deal with how
                                                  previously were in separate FMR areas
                                                                                                          only a value of ‘‘$2,000+’’. HUD’s                      to treat small overruns of the caps. The
                                                  had 2000 Census based 40th-percentile
                                                                                                          modified FY2015 SAFMRs includes an                      remainder of this section explains those
                                                  recent-mover rents that differed, by 5
                                                                                                          interpolated value above $2,000 for                     procedures. In general, HUD stops
                                                  percent or more, from the same statistic
                                                                                                          these areas. Fourth, HUD adjusted                       selecting areas when it is impossible to
                                                  calculated at the MSA level. In addition,
                                                                                                          median rent values in New York City to                  choose another area without exceeding
                                                  a few HMFAs were formed on the basis
                                                                                                          correct for the downward-bias resulting                 the applicable cap. The only exceptions
                                                  of very large differences in AMGIs
                                                                                                          from rent control and stabilization                     to this policy are when the next eligible
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                                                  among the MSA parts. All HMFAs are
                                                  contained entirely within MSAs. All                        1 HUD is moving to a tighter margin of error ratio
                                                                                                                                                                  excluded area contains either a large
                                                  nonmetropolitan counties are outside of                 for most uses of ACS data (base rents, recent mover     absolute population or a large
                                                  MSAs and are not broken up by HUD for                   rents, median rents used in the Small Area FMR
                                                  purposes of setting FMRs and VLILs.                     calculations, etc.) in order to make the FMRs more        2 HUD encourages other jurisdictions with rent

                                                                                                          reliable and stable. ACS data with a coefficient of     control laws that affect rents paid by recent movers
                                                  (Complete details on HUD’s process for                  variation (CV) greater than 30 percent, which           into existing units to contact HUD about what data
                                                  determining FY2015 FMR areas and                        coincides with a margin of error ratio of 50 percent,   might be provided or collected to adjust SAFMRs
                                                  FMRs are available at http://www.                       is highly suspect.                                      in those jurisdictions.



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                                                  73204                      Federal Register / Vol. 80, No. 226 / Tuesday, November 24, 2015 / Notices

                                                  percentage of the total population, or                  published in OMB Bulletin No. 10–02                   three estimates were not statistically
                                                  the next excluded area’s ranking ratio,                 on December 1, 2009, for determining                  reliable by this measure, HUD
                                                  as described above, was identical (to                   how many eligible tracts can be                       determined the tract to be ineligible
                                                  four decimal places) to the last area                   designated under the statutory 20                     under the income criterion due to lack
                                                  selected, and its inclusion resulted in                 percent population cap.                               of consistently reliable median income
                                                  only a minor overrun of the cap. Thus,                     HUD uses the HMFA-level AMGIs to                   statistics across the 3 ACS tabulations.
                                                  for both the designated metropolitan                    determine QCT eligibility because the                 In prior designations of QCTs, HUD
                                                  and nonmetropolitan DDAs, there may                     statute, specifically IRC Section                     accepted ACS data with MoERs of up to,
                                                  be minimal overruns of the cap. HUD                     42(d)(5)(B)(iv)(II), refers to the same               but not including 100 percent. The
                                                  believes the designation of additional                  section of the IRC that defines income                higher data quality standard used for the
                                                  areas in the above examples of minimal                  for purposes of tenant eligibility and                2016 QCTs is consistent with current
                                                  overruns is consistent with the intent of               unit maximum rent, specifically IRC                   thinking about the reliability of ACS
                                                  the IRC. As long as the apparent excess                 Section 42(g)(4). By rule, the IRS sets               data.4 Since 50 percent of households in
                                                  is small due to measurement errors,                     these income limits according to HUD’s                a tract have incomes above and below
                                                  some latitude is justifiable, because it is             VLILs, which, starting in FY2006 and                  the tract median household income, if
                                                  impossible to determine whether the 20                  thereafter, are established at the HMFA               the tract median household income is
                                                  percent cap has been exceeded. Despite                  level. Similarly, HUD uses the entire                 less than the average-household-size-
                                                  the care and effort involved in a                       MSA to determine how many eligible                    adjusted income standard for the tract,
                                                  Decennial Census, the Census Bureau                     tracts can be designated under the 20                 then more than 50 percent of
                                                  and all users of the data recognize that                percent population cap as required by                 households have incomes below the
                                                  the population counts for a given area                  the statute (IRC Section                              standard.
                                                  and for the entire country are not                      42(d)(5)(B)(ii)(III)), which states that                 3. For each census tract, the poverty
                                                  precise. Therefore, the extent of the                   MSAs should be treated as singular                    rate was determined in each of the three
                                                  measurement error is unknown. There                     areas. The QCTs were determined as                    releases of ACS tabulations (2007–2011,
                                                  can be errors in both the numerator and                 follows:                                              2008–2012 and 2009–2013) by dividing
                                                  denominator of the ratio of populations                    1. To be eligible to be designated a               the population with incomes below the
                                                  used in applying a 20 percent cap. In                   QCT, a census tract must have 50                      poverty line by the population for
                                                  circumstances where a strict application                percent of its households with incomes                whom poverty status has been
                                                  of a 20 percent cap results in an                       below 60 percent of the AMGI or have                  determined. As with the evaluation of
                                                  anomalous situation, recognition of the                 a poverty rate of 25 percent or more.                 tracts under the income criterion, HUD
                                                  unavoidable imprecision in the census                   Due to potential statistical anomalies in             uses a higher data quality standard for
                                                  data justifies accepting small variances                the ACS 5-year estimates, one of these                evaluating ACS poverty rate data in
                                                  above the 20 percent limit.                             conditions must be met in at least 2 of               designating the 2016 QCTs than HUD
                                                                                                          the 3 evaluation years for a tract to be              used in previous designations. HUD did
                                                  C. Qualified Census Tracts                              considered eligible for QCT designation.              not consider estimates of the poverty
                                                     In developing this list of QCTs, HUD                 HUD calculates 60 percent of AMGI by                  rate to be statistically reliable unless
                                                  used 2010 Census 100-percent count                      multiplying by a factor of 1.2 the HMFA               both the population for whom poverty
                                                  data on total population, total                         or nonmetropolitan county FY2015
                                                                                                                                                                status has been determined and the
                                                  households, and population in                           VLIL adjusted for inflation to match the
                                                                                                                                                                number of persons below poverty had
                                                  households; the median household                        ACS estimates. For example, the
                                                                                                                                                                MoERs of less than 50 percent of the
                                                  income and poverty rate as estimated in                 FY2015 VLILs were adjusted for
                                                                                                                                                                respective estimates. In prior
                                                  the 2007–2011, 2008–2012 and 2009–                      inflation to 2012 dollars to compare
                                                                                                                                                                designations of QCTs, HUD accepted
                                                  2013 ACS tabulations; the FY2015 Very                   with the median income estimate from
                                                                                                                                                                ACS data with MoERs of up to, but not
                                                  Low-Income Limits (VLILs) computed at                   the 2008–2012 ACS estimates. The
                                                  the HUD Metropolitan FMR Area                                                                                 including 100 percent. If at least two of
                                                                                                          inflation-adjusted 2012 VLIL was then
                                                  (HMFA) level 3 to determine tract                                                                             the three poverty rate estimates were not
                                                                                                          deflated to 2011 for comparison with
                                                  eligibility; and the MSA definitions                                                                          statistically reliable, HUD determined
                                                                                                          the 2007–2011 ACS estimates and
                                                                                                          inflated to 2013 to compare with the                  the tract to be ineligible under the
                                                     3 HUD income limits for very low-income
                                                                                                          2009–2013 ACS estimates.                              poverty rate criterion due to lack of
                                                  households (very low-income limits, or VLILs) are          2. For each census tract, whether or               reliable poverty statistics across the ACS
                                                  based on 50 percent of AMGI. In formulating the
                                                                                                          not 50 percent of households have                     tabulations.
                                                  Fair Market Rents (FMRs) and VLILs, HUD                                                                          4. QCTs are those census tracts in
                                                  modified the current OMB definitions of MSAs to         incomes below the 60 percent income
                                                  account for substantial differences in rents among      standard (income criterion) was                       which 50 percent or more of the
                                                  areas within each new MSA that were in different        determined by: (a) Calculating the                    households meet the income criterion in
                                                  FMR areas under definitions used in prior years.
                                                                                                          average household size of the census                  at least two of the three years evaluated,
                                                  HUD formed these ‘‘HUD Metro FMR Areas’’                                                                      or 25 percent or more of the population
                                                  (HMFAs) in cases where one or more of the parts         tract, (b) applying the income standard
                                                  of newly defined MSAs that previously were in           after adjusting it to match the average               is in poverty in at least two of the three
                                                  separate FMR areas had 2000 Census based 40th-          household size, and (c) comparing the                 years evaluated, such that the
                                                  percentile recent-mover rents that differed, by 5
                                                                                                          average-household-size-adjusted income                population of all census tracts that
                                                  percent or more, from the same statistic calculated                                                           satisfy either one or both of these
                                                  at the MSA level. In addition, a few HMFAs were         standard to the median household
                                                  formed on the basis of very large differences in        income for the tract reported in each of              criteria does not exceed 20 percent of
                                                  AMGIs among the MSA parts. All HMFAs are                                                                      the total population of the respective
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                                                                                                          the three years of ACS tabulations
                                                  contained entirely within MSAs. All
                                                                                                          (2007–2011, 2008–2012 and 2009–                       area.
                                                  nonmetropolitan counties are outside of MSAs and                                                                 5. In areas where more than 20
                                                  are not broken up by HUD for purposes of setting        2013). HUD did not consider estimates
                                                  FMRs and VLILs. (Complete details on HUD’s              of median household income to be                      percent of the population resides in
                                                  process for determining FMR areas and FMRs are          statistically reliable unless the margin of
                                                  available at http://www.huduser.org/portal/                                                                      4 For a discussion of ACS data quality measures,

                                                  datasets/fmr.html. Complete details on HUD’s
                                                                                                          error was less than half of the estimate              see: https://www.census.gov/content/dam/Census/
                                                  process for determining income limits are available     (or a Margin of Error Ratio, MoER, of 50              library/publications/2008/acs/ACSGeneral
                                                  at http://www.huduser.org/portal/datasets/il.html.)     percent or less). If at least two of the              Handbook.pdf.



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                                                                             Federal Register / Vol. 80, No. 226 / Tuesday, November 24, 2015 / Notices                                            73205

                                                  eligible census tracts, census tracts are               more census tract(s) with smaller                     county parts outside of old definition
                                                  designated as QCTs in accordance with                   population(s) could be designated                     MSAs/PMSAs referred to as
                                                  the following procedure:                                without exceeding the 20 percent limit.               nonmetropolitan counties). Subareas of
                                                     a. The income and poverty criteria are                                                                     MSAs are assigned their own FMRs and
                                                  each averaged over the three ACS                        D. Exceptions to OMB Definitions of
                                                                                                                                                                Income Limits when the subarea 2000
                                                  tabulations (2007–2011, 2008–2012 and                   MSAs and Other Geographic Matters
                                                                                                                                                                Census Base FMR differs significantly
                                                  2009–2013). Statistically reliable values                 As stated in OMB Bulletin 10–02,                    from the MSA 2000 Census Base FMR
                                                  that did not exceed the income and                      defining metropolitan areas:                          (or, in some cases, where the 2000
                                                  poverty rate thresholds were included                      OMB establishes and maintains the                  Census base AMGI differs significantly
                                                  in the average.                                         definitions of Metropolitan . . . Statistical         from the MSA 2000 Census Base AMGI).
                                                     b. Eligible tracts are placed in one of              Areas, . . . solely for statistical purposes.         MSA subareas, and the remaining
                                                  two groups based on the averaged                        . . . OMB does not take into account or               portions of MSAs after subareas have
                                                  values of the income and poverty                        attempt to anticipate any non-statistical uses        been determined, are referred to as
                                                  criteria. The first group includes tracts               that may be made of the definitions[.] In
                                                                                                          cases where . . . an agency elects to use the         ‘‘HUD Metro FMR Areas (HMFAs),’’ to
                                                  that satisfy both the income and poverty                                                                      distinguish such areas from OMB’s
                                                                                                          Metropolitan . . . Area definitions in
                                                  criteria for QCTs for at least two of the                                                                     official definition of MSAs.
                                                                                                          nonstatistical programs, it is the sponsoring
                                                  three evaluation years. The second                      agency’s responsibility to ensure that the               In the New England states
                                                  group includes tracts that satisfy either               definitions are appropriate for such use. An          (Connecticut, Maine, Massachusetts,
                                                  the income criterion or the poverty                     agency using the statistical definitions in a         New Hampshire, Rhode Island, and
                                                  criterion in at least two of three years,               nonstatistical program may modify the                 Vermont), HMFAs are defined according
                                                  but not both. A tract must qualify by at                definitions, but only for the purposes of that        to county subdivisions or minor civil
                                                  least one of the criteria in at least two               program. In such cases, any modifications
                                                                                                                                                                divisions (MCDs), rather than county
                                                  of the three evaluation years to be                     should be clearly identified as deviations
                                                                                                          from the OMB statistical area definitions in          boundaries. However, since no part of
                                                  eligible, although it does not need to be                                                                     an HMFA is outside an OMB-defined,
                                                                                                          order to avoid confusion with OMB’s official
                                                  the same criterion.                                     definitions of Metropolitan . . . Statistical         county-based MSA, all New England
                                                     c. Tracts in the first group are ranked              Areas.                                                nonmetropolitan counties are kept
                                                  from highest to lowest by the average of                                                                      intact for purposes of designating
                                                  the ratios of the tract average-                           Following OMB guidance, the
                                                                                                          estimation procedure for the FMRs and                 Nonmetropolitan DDAs.
                                                  household-size-adjusted income limit to                                                                          For the convenience of readers of this
                                                  the median household income. Then,                      income limits incorporates the current
                                                                                                          OMB definitions of metropolitan areas                 notice, the geographical definitions of
                                                  tracts in the first group are ranked from                                                                     designated Metropolitan DDAs are
                                                  highest to lowest by the average of the                 based on the CBSA standards, as
                                                                                                          implemented with 2000 Census data,                    included in the list of DDAs.
                                                  poverty rates. The two ranks are
                                                  averaged to yield a combined rank. The                  but makes adjustments to the                          Future Designations
                                                  tracts are then sorted on the combined                  definitions, in order to separate subparts              DDAs are designated annually as
                                                  rank, with the census tract with the                    of these areas in cases where FMRs (and               updated income and FMR data are made
                                                  highest combined rank being placed at                   in a few cases, VLILs) would otherwise                public. QCTs are designated annually as
                                                  the top of the sorted list. In the event of             change significantly if the new area                  new income and poverty rate data are
                                                  a tie, more populous tracts are ranked                  definitions were used without                         released.
                                                  above less populous ones.                               modification. In CBSAs where subareas
                                                     d. Tracts in the second group are                    are established, it is HUD’s view that the            Effective Date
                                                  ranked from highest to lowest by the                    geographic extent of the housing                         The 2016 lists of QCTs and DDAs are
                                                  average of the ratios of the tract average-             markets are not yet the same as the                   effective:
                                                  household-size-adjusted income limit to                 geographic extent of the CBSAs, but                      (1) for allocations of credit after June
                                                  the median household income. Then,                      may approach becoming so as the social                30, 2016; or
                                                  tracts in the second group are ranked                   and economic integration of the CBSA                     (2) for purposes of IRC Section
                                                  from highest to lowest by the average of                component areas increases.                            42(h)(4), if the bonds are issued and the
                                                  the poverty rates. The two ranks are                       The geographic baseline for the FMR                building is placed in service after June
                                                  then averaged to yield a combined rank.                 and income limit estimation procedure                 30, 2016.
                                                  The tracts are then sorted on the                       is the CBSA Metropolitan Areas                           If an area is not on a subsequent list
                                                  combined rank, with the census tract                    (referred to as Metropolitan Statistical              of QCTs or DDAs, the 2016 lists are
                                                  with the highest combined rank being                    Areas or MSAs) and CBSA Non-                          effective for the area if:
                                                  placed at the top of the sorted list. In the            Metropolitan Counties (nonmetropolitan                   (1) the allocation of credit to an
                                                  event of a tie, more populous tracts are                counties include the county                           applicant is made no later than the end
                                                  ranked above less populous ones.                        components of Micropolitan CBSAs                      of the 730-day period after the applicant
                                                     e. The ranked first group is stacked on              where the counties are generally                      submits a complete application to the
                                                  top of the ranked second group to yield                 assigned separate FMRs). The HUD-                     LIHTC-allocating agency, and the
                                                  a single, concatenated, ranked list of                  modified CBSA definitions allow for                   submission is made before the effective
                                                  eligible census tracts.                                 subarea FMRs within MSAs based on                     date of the subsequent lists; or
                                                     f. Working down the single,                          the boundaries of ‘‘Old FMR Areas’’                      (2) for purposes of IRC Section
                                                  concatenated, ranked list of eligible                   (OFAs) within the boundaries of new                   42(h)(4), if:
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                                                  tracts, census tracts are identified as                 MSAs. (OFAs are the FMR areas defined                    (a) the bonds are issued or the
                                                  designated until the designation of an                  for the FY2005 FMRs. Collectively, they               building is placed in service no later
                                                  additional tract would cause the 20                     include the June 30, 1999, OMB                        than the end of the 730-day period after
                                                  percent limit to be exceeded. If a census               definitions of MSAs and Primary MSAs                  the applicant submits a complete
                                                  tract is not designated because doing so                (old definition MSAs/PMSAs),                          application to the bond-issuing agency,
                                                  would raise the percentage above 20                     metropolitan counties deleted from old                and
                                                  percent, subsequent census tracts are                   definition MSAs/PMSAs by HUD for                         (b) the submission is made before the
                                                  then considered to determine if one or                  FMR-setting purposes, and counties and                effective date of the subsequent lists,


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                                                  73206                      Federal Register / Vol. 80, No. 226 / Tuesday, November 24, 2015 / Notices

                                                  provided that both the issuance of the                  Census Bureau, the several states and                 2016. The bonds that will support the
                                                  bonds and the placement in service of                   the governments of the insular areas of               permanent financing of Project C are
                                                  the building occur after the application                the United States and, in the case of                 issued on September 30, 2016. Project C
                                                  is submitted.                                           QCTs, by the Census Bureau; and to                    is NOT eligible for the increase in basis
                                                     An application is deemed to be                       establish the effective dates of such lists.          otherwise accorded a project in a 2016
                                                  submitted on the date it is filed if the                The Secretary of the Treasury, through                DDA, because the project was placed in
                                                  application is determined to be                         the IRS thereof, has sole legal authority             service BEFORE July 1, 2016.
                                                  complete by the credit-allocating or                    to interpret, and to determine and                       (Case D) Project D is located in an area
                                                  bond-issuing agency. A ‘‘complete                       enforce compliance with the IRC and                   that is a DDA in 2016, but is NOT a DDA
                                                  application’’ means that no more than                   associated regulations, including                     in 2017 or 2018. A complete application
                                                  de minimis clarification of the                         Federal Register notices published by                 for tax-exempt bond financing for
                                                  application is required for the agency to               HUD for purposes of designating DDAs                  Project D is filed with the bond-issuing
                                                  make a decision about the allocation of                 and QCTs. Representations made by any                 agency on October 30, 2016. Bonds are
                                                  tax credits or issuance of bonds                        other entity as to the content of HUD                 issued for Project D on April 30, 2018,
                                                  requested in the application.                           notices designating DDAs and QCTs that                but Project D is not placed in service
                                                     In the case of a ‘‘multiphase project,’’             do not precisely match the language                   until January 30, 2019. Project D is
                                                  the DDA or QCT status of the site of the                published by HUD should not be relied                 eligible for the increase in basis
                                                  project that applies for all phases of the              upon by taxpayers in determining what                 available to projects located in 2016
                                                  project is that which applied when the                  actions are necessary to comply with                  DDAs because: (1) One of the two events
                                                  project received its first allocation of                HUD notices.                                          necessary for triggering the effective
                                                  LIHTC. For purposes of IRC Section                                                                            date for buildings described in Section
                                                  42(h)(4), the DDA or QCT status of the                  Interpretive Examples of Effective Date               42(h)(4)(B) of the IRC (the two events
                                                  site of the project that applies for all                   For the convenience of readers of this             being bonds issued and buildings
                                                  phases of the project is that which                     notice, interpretive examples are                     placed in service) took place on April
                                                  applied when the first of the following                 provided below to illustrate the                      30, 2018, within the 730-day period
                                                  occurred: (a) The building(s) in the first              consequences of the effective date in                 after a complete application for tax-
                                                  phase were placed in service, or (b) the                areas that gain or lose DDA status. The               exempt bond financing was filed, (2) the
                                                  bonds were issued.                                      examples covering DDAs are equally                    application was filed during a time
                                                     For purposes of this notice, a                       applicable to QCT designations.                       when the location of Project D was in a
                                                  ‘‘multiphase project’’ is defined as a set                 (Case A) Project A is located in a 2016            DDA, and (3) both the issuance of the
                                                  of buildings to be constructed or                       DDA that is NOT a designated DDA in                   bonds and placement in service of
                                                  rehabilitated under the rules of the                    2017 or 2018. A complete application                  Project D occurred after the application
                                                  LIHTC and meeting the following                         for tax credits for Project A is filed with           was submitted.
                                                  criteria:                                               the allocating agency on November 15,                    (Case E) Project E is a multiphase
                                                     (1) The multiphase composition of the                2016. Credits are allocated to Project A              project located in a 2016 DDA that is
                                                  project (i.e., total number of buildings                on October 30, 2018. Project A is                     NOT a designated DDA or QCT in 2017.
                                                  and phases in project, with a                           eligible for the increase in basis                    The first phase of Project E received an
                                                  description of how many buildings are                   accorded a project in a 2016 DDA                      allocation of credits in 2016, pursuant to
                                                  to be built in each phase and when each                 because the application was filed                     an application filed July 15, 2016,
                                                  phase is to be completed, and any other                 BEFORE January 1, 2017 (the assumed                   which describes the multiphase
                                                  information required by the agency) is                  effective date for the 2017 DDA lists),               composition of the project. An
                                                  made known by the applicant in the                      and because tax credits were allocated                application for tax credits for the second
                                                  first application of credit for any                     no later than the end of the 730-day                  phase of Project E is filed with the
                                                  building in the project, and that                       period after the filing of the complete               allocating agency by the same entity on
                                                  applicant identifies the buildings in the               application for an allocation of tax                  July 15, 2017. The second phase of
                                                  project for which credit is (or will be)                credits.                                              Project E is located on a contiguous site.
                                                  sought;                                                    (Case B) Project B is located in a 2016            Credits are allocated to the second
                                                     (2) The aggregate amount of LIHTC                    DDA that is NOT a designated DDA in                   phase of Project E on October 30, 2017.
                                                  applied for on behalf of, or that would                 2017 or 2018. A complete application                  The aggregate amount of credits
                                                  eventually be allocated to, the buildings               for tax credits for Project B is filed with           allocated to the two phases of Project E
                                                  on the site exceeds the one-year                        the allocating agency on December 1,                  exceeds the amount of credits that may
                                                  limitation on credits per applicant, as                 2016. Credits are allocated to Project B              be allocated to an applicant in one year
                                                  defined in the Qualified Allocation Plan                on March 30, 2019. Project B is NOT                   under the allocating agency’s QAP and
                                                  (QAP) of the LIHTC-allocating agency,                   eligible for the increase in basis                    is the reason that applications were
                                                  or the annual per-capita credit authority               accorded a project in a 2016 DDA                      made in multiple phases. The second
                                                  of the LIHTC allocating agency, and is                  because, although the application for an              phase of Project E is, therefore, eligible
                                                  the reason the applicant must request                   allocation of tax credits was filed                   for the increase in basis accorded a
                                                  multiple allocations over 2 or more                     BEFORE January 1, 2017 (the assumed                   project in a 2016 DDA, because it meets
                                                  years; and                                              effective date of the 2017 DDA lists), the            all of the conditions to be a part of a
                                                     (3) All applications for LIHTC for                   tax credits were allocated later than the             multiphase project.
                                                  buildings on the site are made in                       end of the 730-day period after the filing               (Case F) Project F is a multiphase
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                                                  immediately consecutive years.                          of the complete application.                          project located in a 2016 DDA that is
                                                     Members of the public are hereby                        (Case C) Project C is located in a 2016            NOT a designated DDA in 2017 or 2018.
                                                  reminded that the Secretary of Housing                  DDA that was not a DDA in 2015.                       The first phase of Project F received an
                                                  and Urban Development, or the                           Project C was placed in service on                    allocation of credits in 2016, pursuant to
                                                  Secretary’s designee, has legal authority               November 15, 2015. A complete                         an application filed July 15, 2016,
                                                  to designate DDAs and QCTs, by                          application for tax-exempt bond                       which does not describe the multiphase
                                                  publishing lists of geographic entities as              financing for Project C is filed with the             composition of the project. An
                                                  defined by, in the case of DDAs, the                    bond-issuing agency on January 15,                    application for tax credits for the second


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                                                                             Federal Register / Vol. 80, No. 226 / Tuesday, November 24, 2015 / Notices                                           73207

                                                  phase of Project F is filed with the                    DEPARTMENT OF THE INTERIOR                            I. Public Comment Procedures
                                                  allocating agency by the same entity on
                                                                                                                                                                A. How do I request copies of
                                                  March 15, 2018. Credits are allocated to                Fish and Wildlife Service
                                                                                                                                                                applications or comment on submitted
                                                  the second phase of Project F on
                                                                                                                                                                applications?
                                                  October 30, 2018. The aggregate amount                  [Docket No. FWS–HQ–IA–2015–0166;
                                                  of credits allocated to the two phases of               FXIA16710900000–156–FF09A30000]
                                                                                                                                                                   Send your request for copies of
                                                  Project F exceeds the amount of credits                                                                       applications or comments and materials
                                                  that may be allocated to an applicant in                Endangered Species; Receipt of                        concerning any of the applications to
                                                  one year under the allocating agency’s                  Applications for Permit                               the contact listed under ADDRESSES.
                                                  QAP. The second phase of Project F is,                                                                        Please include the Federal Register
                                                  therefore, NOT eligible for the increase                AGENCY:     Fish and Wildlife Service,                notice publication date, the PRT-
                                                  in basis accorded a project in a 2016                   Interior.                                             number, and the name of the applicant
                                                  DDA, since it does not meet all of the                                                                        in your request or submission. We will
                                                  conditions for a multiphase project, as                 ACTION: Notice of receipt of applications             not consider requests or comments sent
                                                  defined in this notice. The original                    for permit.                                           to an email or address not listed under
                                                  application for credits for the first phase                                                                   ADDRESSES. If you provide an email
                                                  did not describe the multiphase                         SUMMARY:  We, the U.S. Fish and                       address in your request for copies of
                                                  composition of the project. Also, the                   Wildlife Service, invite the public to                applications, we will attempt to respond
                                                  application for credits for the second                  comment on the following applications                 to your request electronically.
                                                  phase of Project F was not made in the                  to conduct certain activities with                       Please make your requests or
                                                  year immediately following the first                    endangered species. With some                         comments as specific as possible. Please
                                                  phase application year.                                 exceptions, the Endangered Species Act                confine your comments to issues for
                                                                                                          (ESA) prohibits activities with listed                which we seek comments in this notice,
                                                  Findings and Certifications                             species unless Federal authorization is               and explain the basis for your
                                                  Environmental Impact                                    acquired that allows such activities.                 comments. Include sufficient
                                                                                                                                                                information with your comments to
                                                     This notice involves the                             DATES: We must receive comments or                    allow us to authenticate any scientific or
                                                  establishment of fiscal requirements or                 requests for documents on or before                   commercial data you include.
                                                  procedures that are related to rate and                 December 24, 2015.                                       The comments and recommendations
                                                  cost determinations and do not                          ADDRESSES:   Submitting Comments: You                 that will be most useful and likely to
                                                  constitute a development decision                       may submit comments by one of the                     influence agency decisions are: (1)
                                                  affecting the physical condition of                     following methods:                                    Those supported by quantitative
                                                  specific project areas or building sites.                                                                     information or studies; and (2) Those
                                                  Accordingly, under 40 CFR 1508.4 of                       • Federal eRulemaking Portal: http://               that include citations to, and analyses
                                                  the regulations of the Council on                       www.regulations.gov. Follow the                       of, the applicable laws and regulations.
                                                  Environmental Quality and 24 CFR                        instructions for submitting comments                  We will not consider or include in our
                                                  50.19(c)(6) of HUD’s regulations, this                  on Docket No. FWS–HQ–IA–2015–0166.                    administrative record comments we
                                                  notice is categorically excluded from                      • U.S. mail or hand-delivery: Public               receive after the close of the comment
                                                  environmental review under the                          Comments Processing, Attn: Docket No.                 period (see DATES) or comments
                                                  National Environmental Policy Act of                    FWS–HQ–IA–2015–0166; U.S. Fish and                    delivered to an address other than those
                                                  1969 (42 U.S.C. 4321).                                  Wildlife Service Headquarters, MS:                    listed above (see ADDRESSES).
                                                  Federalism Impact                                       BPHC; 5275 Leesburg Pike, Falls
                                                                                                                                                                B. May I review comments submitted by
                                                                                                          Church, VA 22041–3803.
                                                                                                                                                                others?
                                                     Executive Order 13132 (entitled                      When submitting comments, please
                                                  ‘‘Federalism’’) prohibits an agency from                                                                         Comments, including names and
                                                                                                          indicate the name of the applicant and                street addresses of respondents, will be
                                                  publishing any policy document that                     the PRT# you are commenting on. We
                                                  has federalism implications if the                                                                            available for public review at the street
                                                                                                          will post all comments on http://                     address listed under ADDRESSES. The
                                                  document either imposes substantial                     www.regulations.gov. This generally
                                                  direct compliance costs on state and                                                                          public may review documents and other
                                                                                                          means that we will post any personal                  information applicants have sent in
                                                  local governments and is not required                   information you provide us (see the
                                                  by statute, or the document preempts                                                                          support of the application unless our
                                                                                                          Public Comments section below for                     allowing viewing would violate the
                                                  state law, unless the agency meets the                  more information). Viewing Comments:
                                                  consultation and funding requirements                                                                         Privacy Act or Freedom of Information
                                                                                                          Comments and materials we receive will                Act. Before including your address,
                                                  of section 6 of the executive order. This               be available for public inspection on
                                                  notice merely designates DDAs as                                                                              phone number, email address, or other
                                                                                                          http://www.regulations.gov, or by                     personal identifying information in your
                                                  required under IRC Section 42, as
                                                                                                          appointment, between 8 a.m. and 4                     comment, you should be aware that
                                                  amended, for the use by political
                                                                                                          p.m., Monday through Friday, except                   your entire comment—including your
                                                  subdivisions of the states in allocating
                                                                                                          Federal holidays, at the U.S. Fish and                personal identifying information—may
                                                  the LIHTC. This notice also details the
                                                                                                          Wildlife Service, Division of                         be made publicly available at any time.
                                                  technical method used in making such
                                                                                                          Management Authority, 5275 Leesburg                   While you can ask us in your comment
                                                  designations. As a result, this notice is
                                                                                                          Pike, Falls Church, VA 22041–3803;
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                                                  not subject to review under the order.                                                                        to withhold your personal identifying
                                                                                                          telephone 703–358–2095.                               information from public review, we
                                                    Dated: November 19, 2015.
                                                                                                          FOR FURTHER INFORMATION CONTACT:                      cannot guarantee that we will be able to
                                                  Katherine M. O’Regan,                                                                                         do so.
                                                  Assistant Secretary for Policy Development
                                                                                                          Brenda Tapia, (703) 358–2104
                                                  and Research.                                           (telephone); (703) 358–2281 (fax);                    II. Background
                                                                                                          DMAFR@fws.gov (email).
                                                  [FR Doc. 2015–29953 Filed 11–20–15; 11:15 am]                                                                    To help us carry out our conservation
                                                  BILLING CODE 4210–67–P                                  SUPPLEMENTARY INFORMATION:                            responsibilities for affected species, and


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Document Created: 2015-12-14 14:09:04
Document Modified: 2015-12-14 14:09:04
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionNotice.
ContactFor 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 [email protected] 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- 317-4137, fax number 202-317-6731. For questions about the ``HUB Zone'' program, contact Mariana Pardo, Director, HUBZone Program, Office of Government Contracting and Business Development, U.S. Small Business Administration, 409 Third Street SW., Suite 8800, Washington, DC 20416; telephone number 202-205-2985, fax number 202-481-6443, or send an email to [email protected] A text telephone is available for persons with hearing or speech impairments at 800-877-8339. (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.
FR Citation80 FR 73201 

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