80 FR 78749 - Statutorily Mandated Designation of Difficult Development Areas and Qualified Census Tracts: Revision of Effective Date for 2015 Designations

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 80, Issue 242 (December 17, 2015)

This document revises the effective date for designations of ``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) published on October 3, 2014 (79 FR 59855). This Notice extends from 365 days to 730 days the period for which the 2015 lists of QCTs and DDAs are effective for projects located in areas not on the 2016 list of DDAs or QCTs, published November 24, 2015, at 80 FR 73201, but having submitted applications while the area was a 2015 QCT or DDA.

[Federal Register Volume 80, Number 242 (Thursday, December 17, 2015)]
[Notices]
[Pages 78749-78751]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-31766]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5815-N-02]


Statutorily Mandated Designation of Difficult Development Areas 
and Qualified Census Tracts: Revision of Effective Date for 2015 
Designations

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

ACTION: Notice.

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SUMMARY: This document revises the effective date for designations of 
``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) published on 
October 3, 2014 (79 FR 59855). This Notice extends from 365 days to 730 
days the period for which the 2015 lists of QCTs and DDAs are effective 
for projects located in areas not on the 2016 list of DDAs or QCTs, 
published November 24, 2015, at 80 FR 73201, but having submitted 
applications while the area was a 2015 QCT or DDA.

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 extends from 365 days to 730 days the period for which 
the 2015 lists of QCTs and DDAs are effective for projects located in 
areas not on the 2016 list of DDAs or QCTs, published November 24, 
2015, at 80 FR 73201, but having submitted applications while the area 
was a 2015 QCT or DDA 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 actual designations of 2015 
QCTs and DDAs are not affected by this notice. HUD is revising the 
effective date of the 2015 QCTs and DDAs at this time to aid the 
transition to Small Difficult Development Areas as announced in a 
notice designating 2016 QCTs and DDAs published at 80 FR 73201 and 
otherwise ensure that LIHTC and bond-financed projects relying on 2015 
QCT or DDA designations and not in areas designated as 2016 QCTs and 
DDAs, but unable to meet the 365-day requirement of the original 
effective date of the 2015 QCT and DDA designations, may still be 
completed within 730 days.
    The sections entitled ``Effective Date'' and ``Interpretive 
Examples of Effective Date'' of the 2015 DDA and QCT designations as 
published October 3, 2014 at 79 FR 59855 are hereby revised to read as 
follows:

Effective Date

    The 2015 lists of QCTs and DDAs are effective:
    (1) For allocations of credit after December 31, 2014; or
    (2) for purposes of IRC Section 42(h)(4), if the bonds are issued 
and the building is placed in service after December 31, 2014.
    If an area is not on a subsequent list of DDAs, the 2015 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, 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;

[[Page 78750]]

    (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 2015 DDA that is NOT a 
designated DDA in 2016 or 2017. A complete application for tax credits 
for Project A is filed with the allocating agency on November 15, 2015. 
Credits are allocated to Project A on October 30, 2017. Project A is 
eligible for the increase in basis accorded a project in a 2015 DDA 
because the application was filed BEFORE January 1, 2016 (the effective 
date for the 2016 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 2015 DDA that is NOT a 
designated DDA in 2016, 2017, or 2018. A complete application for tax 
credits for Project B is filed with the allocating agency on December 
1, 2015. Credits are allocated to Project B on March 30, 2018. Project 
B is NOT eligible for the increase in basis accorded a project in a 
2015 DDA because, although the application for an allocation of tax 
credits was filed BEFORE January 1, 2016 (the effective date of the 
2016 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 2015 DDA that was not a DDA in 
2014. Project C was placed in service on November 15, 2014. A complete 
application for tax-exempt bond financing for Project C is filed with 
the bond-issuing agency on January 15, 2015. The bonds that will 
support the permanent financing of Project C are issued on September 
30, 2015. Project C is NOT eligible for the increase in basis otherwise 
accorded a project in a 2015 DDA, because the project was placed in 
service BEFORE January 1, 2015.
    (Case D) Project D is located in an area that is a DDA in 2015, but 
is NOT a DDA in 2016, 2017, or 2018. A complete application for tax-
exempt bond financing for Project D is filed with the bond-issuing 
agency on October 30, 2015. Bonds are issued for Project D on April 30, 
2017, but Project D is not placed in service until January 30, 2018. 
Project D is eligible for the increase in basis available to projects 
located in 2015 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, 2017, 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 2015 DDA 
that is NOT a designated DDA in 2016. The first phase of Project E 
received an allocation of credits in 2015, pursuant to an application 
filed March 15, 2015, which describes the multiphase composition of the 
project. An application for tax credits for the second phase Project E 
is filed with the allocating agency by the same entity on March 15, 
2016. 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, 
2016. 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 2015 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 2015 DDA 
that is NOT a designated DDA in 2016. The first phase of Project F 
received an allocation of credits in 2015, pursuant to an application 
filed March 15, 2015, which does not describe the multiphase 
composition of the project. An application for tax credits for the 
second phase of Project F is filed with the allocating agency by the 
same entity on March 15, 2017. Credits are allocated to the second 
phase of Project F on October 30, 2017. 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 2015 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

[[Page 78751]]

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: December 10, 2015.
Katherine M. O'Regan,
Assistant Secretary for Policy Development and Research.
[FR Doc. 2015-31766 Filed 12-16-15; 8:45 am]
 BILLING CODE 4210-67-P