81 FR 68297 - Section 108 Loan Guarantee Program: Announcement of Fee To Cover Credit Subsidy Costs
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Federal Register Volume 81, Issue 192 (October 4, 2016)
Federal Register Volume 81, Issue 192 (October 4, 2016)
| Page Range | 68297-68299 | |
| FR Document | 2016-23986 |
[Federal Register Volume 81, Number 192 (Tuesday, October 4, 2016)] [Rules and Regulations] [Pages 68297-68299] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-23986] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 570 [Docket No. FR-5767-N-05] RIN 2506-AC35 Section 108 Loan Guarantee Program: Announcement of Fee To Cover Credit Subsidy Costs AGENCY: Office of the Assistant Secretary for Community Planning and Development, HUD. ACTION: Announcement of fee. ----------------------------------------------------------------------- SUMMARY: This document announces the fee that HUD will collect from borrowers of loans guaranteed under HUD's Section 108 Loan Guarantee Program (Section 108 Program) to offset the credit subsidy costs of the guaranteed loans pursuant to commitments awarded in FY 2017. DATES: Effective Date: November 3, 2016. FOR FURTHER INFORMATION CONTACT: Paul Webster, Director, Financial Management Division, Office of Block Grant Assistance, Office of Community Planning and Development, Department of Housing and Urban Development, 451 7th Street, SW., Room 7180, Washington, DC 20410; telephone number 202-402-4563 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number through TTY by calling the toll-free Federal Relay Service at 800-877- 8339. FAX inquiries (but not comments) may be sent to Mr. Webster at 202-708-1798 (this is not a toll-free number). SUPPLEMENTARY INFORMATION: I. Background The Consolidated and Further Continuing Appropriations Act, 2015 (Public Law 113-235, approved December 16, 2014) (2015 Appropriations Act) provided that ``the Secretary shall collect fees from borrowers . . . to result in a credit subsidy cost of zero for guaranteeing'' Section 108 loans. The Continuing Appropriations Act, 2016 (Public Law 114-53, approved September 30, 2015) continued the 2015 provision. This continued funding act was followed by The Consolidated Appropriations Act, 2016, Public Law 114-133, approved December 18, 2015) (2016 Appropriations Act), which had identical language regarding Section 108 credit subsidy to the 2015 Appropriations Act. The fiscal year 2017 HUD appropriations bills under consideration in the House of Representatives (H.R. 5394), and the Senate (S. 2844) also have identical language regarding the credit subsidy for the Section 108 Program, and it is expected that, when enacted, the final fiscal year 2017 appropriations act will as well. On November 3, 2015, HUD published a final rule (80 FR 67626) following a February 5, 2015 proposed rule (80 FR 6470) that amended the Section 108 Program regulations at 24 CFR part 570 to establish additional procedures, including procedures for determining the amount of the fee and for a 30-day public comment process when HUD adopts changes to the assumptions underlying the fee calculation or if the fee structure itself raises new considerations for borrowers. HUD is required to collect fees from Section 108 borrowers when necessary to offset the credit subsidy costs to the Federal government to guarantee Section 108 loans. Following [[Page 68298]] consideration of the public comments submitted in response to HUD's February 5, 2015 proposed rule (80 FR 6469) that proposed the fee required to offset the credit subsidy costs, on November 3, 2015, HUD issued an announcement of fee (80 FR 67634) to set the fee for Section 108 loan disbursements under loan guarantee commitments awarded in FY 2016 at 2.58 percent of the principal amount of the loan. II. FY 2017 Fee: 2.59 Percent of the Principal Amount of the Loan This document sets the fee for Section 108 loan disbursements under loan guarantee commitments awarded in FY 2017 at 2.59 percent of the principal amount of the loan. This amount was proposed in the President's FY 2017 budget.\1\ HUD will collect this fee from borrowers of loans guaranteed under the Section 108 Program to offset the credit subsidy costs of the guaranteed loans pursuant to commitments awarded in FY 2017, as authorized by the 2017 appropriations act. --------------------------------------------------------------------------- \1\ The FY 2017 President's Budget for HUD is available at: https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/hud.pdf. The fee is specified in table 6 of the Federal Credit Supplement to the 2017 budget and is available at: https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/cr_supp.pdf --------------------------------------------------------------------------- For this fee document, HUD is not changing the underlying assumptions or creating new considerations for borrowers. The calculation of the FY 2017 fee uses the same fee calculation model as the FY 2016 announcement of fee, but incorporates updated information regarding the composition of the Section 108 portfolio and the timing of the estimated future cash flows for defaults and recoveries. The calculation of the fee is also affected by the discount rates required to be used by HUD when calculating the present value of the future cash flows as part of the Federal budget process. As described in 24 CFR 570.712(b), HUD's credit subsidy calculation is based on the amount required to fully offset the credit subsidy cost to the Federal government associated with making a Section 108 loan guarantee. As a result, HUD's credit subsidy cost calculations incorporated assumptions based on: (i) data on default frequency for municipal debt where such debt is comparable to loans in the Section 108 loan portfolio; (ii) data on recovery rates on collateral security for comparable municipal debt; (iii) the expected composition of the Section 108 portfolio by end users of the guaranteed loan funds (e.g., third party borrowers and public entities); and (iv) other factors that HUD determined were relevant to this calculation (e.g., assumptions as to loan disbursement and repayment patterns). Taking these factors into consideration, HUD determined that the fee for disbursements made under loan guarantee commitments awarded in FY 2017 will be 2.59 percent, which will be applied only at the time of loan disbursements. Note that future documents may provide for a combination of up-front and periodic fees for loan guarantee commitments awarded in future fiscal years but, if so, will provide the public an opportunity to comment if appropriate under 24 CFR 570.712(b)(2). The expected cost of a Section 108 loan guarantee is difficult to estimate using historical program data because there have been no defaults in the history of the program that required HUD to invoke its full faith and credit guarantee or use the credit subsidy reserved each year for future losses.\2\ This is due to a variety of factors, including the availability of Community Development Block Grant (CDBG) funds as security for HUD's guarantee as provided in 24 CFR 570.705(b). As authorized by Section 108 of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5308), borrowers may make payments on Section 108 loans using CDBG grant funds. Borrowers may also make Section 108 loan payments from other anticipated sources but continue to have CDBG funds available should they encounter shortfalls in the anticipated repayment source. Despite the program's history of no defaults, federal credit budgeting principles require that the availability of CDBG funds to repay the guaranteed loans cannot be assumed in the development of the credit subsidy cost estimate (see 80 FR 67629, November 3, 2015). Thus, the estimate must incorporate the risk that alternative sources are used to repay the guaranteed loan in lieu of CDBG funds, and that those sources may be insufficient. Based on the rate that CDBG funds are used annually for repayment of loan guarantees, HUD's calculation of the credit subsidy cost must take into account the possibility of future defaults if those CDBG funds were not available. The fee of 2.59 percent of the principal amount of the loan will offset the expected cost to the government due to default, financing costs, and other relevant factors. To arrive at this measure, HUD analyzed data on comparable municipal debt over an extended 16 to 23-year period. The estimated rate is based on the default and recovery rates for general purpose municipal debt and industrial development bonds. The cumulative default rates on industrial development bonds (14.62 percent) were higher than the default rates on general purpose municipal debt (0.25 percent) during the period from which the data were taken. (The recovery rates for industrial development bonds and general purpose debt were 74.76 and 90.27 percent, respectively.) These two subsectors of municipal debt were chosen because their purposes and loan terms most closely resemble those of Section 108 guaranteed loans. In this regard, Section 108 guaranteed loans can be broken down into two categories: (1) loans that finance public infrastructure and activities to support subsidized housing (other than financing new construction) and (2) other development projects (e.g., retail, commercial, industrial). The 2.59 percent fee was derived by weighting the default and recovery data for general purpose municipal debt and the data for industrial development bonds according to the expected composition of the Section 108 portfolio by corresponding project type. Based on the dollar amount of Section 108 loan guarantee commitments awarded during the period from FY 2011 through FY 2015, HUD expects that 25 percent of the Section 108 portfolio will be similar to general purpose municipal debt and 75 percent of the portfolio will be similar to industrial development bonds. In setting the fee at 2.59 percent of the principal amount of the guaranteed loan, HUD expects that the amount generated will fully offset the cost to the Federal government associated with making guarantee commitments awarded in FY 2017. Note that the FY 2017 fee represents only a .01 percent increase over the FY 2016 fee of 2.58 percent. This is due primarily to updated loan repayment patterns and discount rates used in calculating the present value of cash flows. These are variable that ordinarily are modified in the credit subsidy calculation. --------------------------------------------------------------------------- \2\ U.S. Department of Housing and Urban Development, Study of HUD's Section 108 Loan Guarantee Program, (prepared by Econometrica, Inc. and The Urban Institute), September 2012. --------------------------------------------------------------------------- This document establishes a rate that does not constitute a development decision that affects the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this document is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321). [[Page 68299]] Dated: September 28, 2016. Harriet Tregoning, Principal Deputy Assistant, Secretary for Community Planning and Development. [FR Doc. 2016-23986 Filed 10-3-16; 8:45 am] BILLING CODE 4210-67-P
![Federal Register / Vol. 81, No. 192 / Tuesday, October 4, 2016 / Rules and Regulations 68297
risks. For example, available quality requesting exemption for a method, DATES: Effective Date: November 3,
control materials may contain glucose metallic reduction, glucose (urinary, 2016.
but do not contain other reducing sugars nonquantitative) test system in a reagent FOR FURTHER INFORMATION CONTACT: Paul
(e.g., galactose, lactose). Therefore, such tablet format that is intended to measure Webster, Director, Financial
materials might not readily detect an glucosuria (glucose in urine) from the Management Division, Office of Block
issue with the device’s safety or premarket notification requirements. Grant Assistance, Office of Community
effectiveness in detecting other reducing Manufacturers of this device type must Planning and Development, Department
sugars, before causing harm. The continue to submit and receive FDA of Housing and Urban Development,
petition provided insufficient clearance of a 510(k) before marketing 451 7th Street, SW., Room 7180,
information to support the position that their device, as well as comply with all Washington, DC 20410; telephone
changes in the device that could affect other applicable requirements under the number 202–402–4563 (this is not a toll-
safety and effectiveness will either be FD&C Act. free number). Individuals with speech
readily detectable or not materially
V. Reference or hearing impairments may access this
increase risks. Moreover, changes in the
number through TTY by calling the toll-
device that could affect safety and The following reference is on display free Federal Relay Service at 800–877–
effectiveness might materially increase in the Division of Dockets Management 8339. FAX inquiries (but not comments)
the risk of injury, incorrect diagnosis, or (HFA–305), Food and Drug may be sent to Mr. Webster at 202–708–
ineffective treatment given the device Administration, 5630 Fishers Lane, Rm. 1798 (this is not a toll-free number).
type’s intended uses. The petition also 1061, Rockville, MD 20852, and is
did not provide information to the SUPPLEMENTARY INFORMATION:
available for viewing by interested
contrary. The petition did not provide persons between 9 a.m. and 4 p.m., I. Background
any information regarding the fourth Monday through Friday; it is also The Consolidated and Further
factor. available electronically at http://
In addition to these four factors, FDA Continuing Appropriations Act, 2015
www.regulations.gov. FDA has verified (Public Law 113–235, approved
considers the ‘‘limitations on the Web site address, as of the date this
exemption.’’ Manufacturers of any December 16, 2014) (2015
document publishes in the Federal Appropriations Act) provided that ‘‘the
commercially distributed device for Register, but Web sites are subject to
which FDA has granted an exemption Secretary shall collect fees from
change over time. borrowers . . . to result in a credit
from the requirement of premarket
1. ‘‘Procedures for Class II Device subsidy cost of zero for guaranteeing’’
notification must still submit a
Exemptions from Premarket Notification, Section 108 loans. The Continuing
premarket notification to FDA prior to Guidance for Industry and CDRH Staff,’’
marketing the device when any of the Appropriations Act, 2016 (Public Law
February 1998, available at http://
limitations of exemption are exceeded. 114–53, approved September 30, 2015)
www.fda.gov/downloads/
The general limitations of exemption MedicalDevices/ continued the 2015 provision. This
from premarket notification contained DeviceRegulationandGuidance/ continued funding act was followed by
in § 862.9 (21 CFR 862.9) are broadly GuidanceDocuments/UCM080199.pdf. The Consolidated Appropriations Act,
applicable to in vitro diagnostic (IVD) 2016, Public Law 114–133, approved
Dated: September 28, 2016.
devices classified under part 862 (21 December 18, 2015) (2016
Leslie Kux,
CFR part 862). Under § 862.9, the Appropriations Act), which had
Associate Commissioner for Policy. identical language regarding Section 108
exemption from the premarket
[FR Doc. 2016–23901 Filed 10–3–16; 8:45 am] credit subsidy to the 2015
notification requirements applies, in the
case of IVD devices, only to those BILLING CODE 4164–01–P Appropriations Act. The fiscal year
devices under part 862 for which 2017 HUD appropriations bills under
misdiagnosis, as a result of using the consideration in the House of
device, would not be associated with DEPARTMENT OF HOUSING AND Representatives (H.R. 5394), and the
high morbidity or mortality. FDA has URBAN DEVELOPMENT Senate (S. 2844) also have identical
previously assessed that this limitation language regarding the credit subsidy
is exceeded, and a premarket 24 CFR Part 570 for the Section 108 Program, and it is
notification is necessary to provide a expected that, when enacted, the final
reasonable assurance of the safety and [Docket No. FR–5767–N–05] fiscal year 2017 appropriations act will
effectiveness of an IVD device, when as well.
RIN 2506–AC35 On November 3, 2015, HUD
such device is intended for use in
screening or diagnosis of familial or Section 108 Loan Guarantee Program: published a final rule (80 FR 67626)
acquired genetic disorders, including Announcement of Fee To Cover Credit following a February 5, 2015 proposed
inborn errors of metabolism Subsidy Costs rule (80 FR 6470) that amended the
(§ 862.9(c)(2)) or intended for use in Section 108 Program regulations at 24
diabetes management (§ 862.9(c)(5)). AGENCY: Office of the Assistant CFR part 570 to establish additional
The copper reduction tablet test Secretary for Community Planning and procedures, including procedures for
described in the petition is intended for Development, HUD. determining the amount of the fee and
such uses and would likely exceed the ACTION: Announcement of fee. for a 30-day public comment process
limitations just described. when HUD adopts changes to the
asabaliauskas on DSK3SPTVN1PROD with RULES
Accordingly, for all of the foregoing SUMMARY: This document announces the assumptions underlying the fee
reasons, the petition failed to fee that HUD will collect from calculation or if the fee structure itself
demonstrate that a premarket borrowers of loans guaranteed under raises new considerations for borrowers.
submission is not necessary to provide HUD’s Section 108 Loan Guarantee HUD is required to collect fees from
a reasonable assurance of the safety and Program (Section 108 Program) to offset Section 108 borrowers when necessary
effectiveness of the device intended for the credit subsidy costs of the to offset the credit subsidy costs to the
such uses. Therefore, FDA is issuing guaranteed loans pursuant to Federal government to guarantee
this order denying the petition commitments awarded in FY 2017. Section 108 loans. Following
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![Federal Register / Vol. 81, No. 192 / Tuesday, October 4, 2016 / Rules and Regulations 68299
Dated: September 28, 2016. that is developed for use in a production chain management system and can be
Harriet Tregoning, process with respect to which the readily seen as part of the modern ‘‘front
Principal Deputy Assistant, Secretary for general credit eligibility requirements office.’’ This commenter noted that
Community Planning and Development. under section 41 are satisfied are modern inventory management software
[FR Doc. 2016–23986 Filed 10–3–16; 8:45 am] internal use software, but are not usually requires interaction with a
BILLING CODE 4210–67–P excluded under section 41(d)(4)(E) from number of third party vendors to ensure
the definition of qualified research and the correct flow of raw materials and a
are not subject to these regulations. corresponding flow of finished goods.
On January 20, 2015, the Treasury Additionally, the commenter added that
DEPARTMENT OF THE TREASURY
Department and the IRS published in inventory management is inherently
Internal Revenue Service the Federal Register (80 FR 2624, customer facing because it provides the
January 20, 2015) a notice of proposed proper amount of inventory to
26 CFR Part 1 rulemaking (REG–153656–03, 2015–5 customers at the point of sale at the
IRB 566) under section 41 (the proposed right time. Another commenter added
[TD 9786] regulations) relating to the research that marketing is an external-facing
credit. Comments responding to the function by nature, and software that
RIN 1545–BC70
proposed regulations were received and supports marketing is necessarily
Credit for Increasing Research a public hearing was held on April 17, intended to interact with third parties.
Activities 2015. After consideration of all of the The Treasury Department and the IRS
comments received, these final understand that many modern software
AGENCY: Internal Revenue Service (IRS), regulations adopt the proposed systems perform more than back-office
Treasury. regulations as revised by this Treasury functions. These software systems
ACTION: Final regulations. decision. commonly provide benefits to vendors
and include functions that are customer
SUMMARY: This document contains final Summary of Comments and facing. Additionally, software with
regulations concerning the application Explanation of Provisions functions such as marketing or
of the credit for increasing research I. Definition of Internal Use Software inventory management may not provide
activities. These final regulations solely back-office functions, but may
The proposed regulations provided also contain functions that enable a
provide guidance on software that is
that software is developed by (or for the taxpayer to interact with third parties or
developed by (or for the benefit of) the
benefit of) the taxpayer primarily for to allow third parties to initiate
taxpayer primarily for internal use by
internal use if the software is developed functions or review data on the
the taxpayer (internal use software).
by the taxpayer for use in general and taxpayer’s system. Recognizing such
These final regulations also include
administrative functions that facilitate situations, the proposed regulations
examples to illustrate the application of
or support the conduct of the taxpayer’s provided rules under § 1.41–
the process of experimentation
trade or business. General and 4(c)(6)(iv)(C) (dual function rules) to
requirement to software. These final
administrative functions, as defined in evaluate whether software that has both
regulations will affect taxpayers engaged
the proposed regulations, are limited to back-office and front-office functions is
in research activities involving software.
(1) financial management functions, (2) developed primarily for internal use.
DATES: Effective date: These regulations human resource management functions,
are effective on October 4, 2016. The Treasury Department and the IRS
and (3) support services functions. continue to believe that functions such
Applicability date: For date of Financial management functions are
applicability see § 1.41–4(e). as inventory management, marketing,
functions that involve the financial legal services, and government
FOR FURTHER INFORMATION CONTACT: management of the taxpayer and the compliance services provide support to
Martha Garcia or Jennifer Records of the supporting recordkeeping. Human day-to-day operations of a taxpayer in
IRS Office of the Associate Chief resource management functions are carrying on business regardless of the
Counsel (Passthroughs and Special functions that manage the taxpayer’s taxpayer’s industry and that the benefits
Industries) at (202) 317–6853 (not a toll- workforce. Support services functions that such functions may provide to third
free number). are functions that support the day-to- parties are collateral and secondary. In
SUPPLEMENTARY INFORMATION: day operations of the taxpayer, such as addition, the Treasury Department and
data processing or facilities services. the IRS believe the dual function rules
Background Commenters expressed concern that in these final regulations sufficiently
This document contains final the list of general and administrative address these comments by allowing
regulations that amend the Income Tax functions in the proposed regulations taxpayers to identify subsets of elements
Regulations (26 CFR part 1) relating to was overly broad and included of dual function software that only
the credit for increasing research functions that do not represent ‘‘back- enable a taxpayer to interact with third
activities (research credit) under section office’’ functions. In particular, the parties or allow third parties to initiate
41 of the Internal Revenue Code (Code). commenters noted that inventory functions or review data. Accordingly,
Section 41(d)(4)(E) provides that, except management, marketing, legal services, the list of general and administrative
to the extent provided by regulations, and government compliance services functions provided in the proposed
research with respect to software that is can provide significant benefits to third regulations remains unchanged in the
asabaliauskas on DSK3SPTVN1PROD with RULES
developed by (or for the benefit of) the parties and may be developed to enable final regulations.
taxpayer primarily for internal use by a taxpayer to interact with third parties Another commenter referred to the tax
the taxpayer is excluded from the or to allow third parties to initiate software example in the preamble to the
definition of qualified research under functions or review data on the proposed regulations which notes that
section 41(d). Software that is taxpayer’s system. Specifically, one tax software developed by a company
developed for use in an activity that commenter noted that many inventory engaged in providing tax services to its
constitutes qualified research for management software applications are customers is not used by the taxpayer in
purposes of section 41(d) and software an integral part of a taxpayer’s supply general and administrative functions
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Document Created: 2016-10-04 03:03:35
Document Modified: 2016-10-04 03:03:35
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Announcement of fee. | |
| Contact | Paul Webster, Director, Financial Management Division, Office of Block Grant Assistance, Office of Community Planning and Development, Department of Housing and Urban Development, 451 7th Street, SW., Room 7180, Washington, DC 20410; telephone number 202-402-4563 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number through TTY by calling the toll-free Federal Relay Service at 800-877- 8339. FAX inquiries (but not comments) may be sent to Mr. Webster at 202-708-1798 (this is not a toll-free number). | |
| FR Citation | 81 FR 68297 | |
| RIN Number | 2506-AC35 |
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