Statutorily Mandated Designation of Difficult Development Areas and Qualified Census Tracts for 2022, 50548-50554 [2021-19498]
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Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices
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DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–6283–N–01]
Statutorily Mandated Designation of
Difficult Development Areas and
Qualified Census Tracts for 2022
Office of the Assistant
Secretary for Policy Development and
Research, Housing and Urban
Development (HUD).
ACTION: Notice.
AGENCY:
This document designates
‘‘Difficult Development Areas’’ (DDAs)
and ‘‘Qualified Census Tracts’’ (QCTs)
for purposes of the Low-Income
Housing Credit (LIHTC) under Internal
Revenue Code (IRC) Section 42. The
United States Department of Housing
and Urban Development (HUD) makes
new DDA and QCT designations
annually.
ADDRESSES: This notice and additional
information about DDAs and QCTs
including the lists of DDAs and QCTs
are available electronically on the
internet at https://www.huduser.gov/
portal/datasets/qct.html.
FOR FURTHER INFORMATION CONTACT: For
questions on how areas are designated
and on geographic definitions, contact
Michael K. Hollar, Senior Economist,
Public Finance and Regulatory Analysis
Division, Office of Policy Development
and Research, Department of Housing
and Urban Development, 451 Seventh
Street SW, Room 8216, Washington, DC
20410–6000; telephone number 202–
402–5878, or send an email to
Michael.K.Hollar@hud.gov. For specific
legal questions pertaining to Section 42,
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. For questions about the
‘‘HUBZone’’ program, contact Bruce
Purdy, Deputy 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 202–205–7554, or send an email
to hubzone@sba.gov. (These are not tollfree telephone numbers.) Additional
copies of this notice are available
through HUD User at, toll-free, 800–
245–2691 for a small fee to cover
duplication and mailing costs. A tollfree text telephone is available for the
telephone numbers above for persons
with hearing or speech impairments at
800–877–8339.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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I. This Notice
Under IRC Section 42(d)(5)(B)(iii)(I),
for purposes of the LIHTC, the Secretary
of HUD must designate DDAs, which are
areas with high construction, land, and
utility costs relative to area median
gross income (AMGI). 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. HUD makes the
designations of DDAs in this notice
based on modified Fiscal Year (FY) 2021
Small Area Fair Market Rents (Small
Area FMRs, SAFMRs), FY 2021
nonmetropolitan county FMRs, FY 2021
income limits, and 2010 Census
population counts, as explained below.
Similarly, under IRC Section
42(d)(5)(B)(ii)(I), the Secretary of HUD
must designate QCTs, which are areas
where either 50 percent or more of the
households have an income less than 60
percent of the AMGI for such year or
have a poverty rate of at least 25
percent. This notice designates QCTs
based on new income and poverty data
released in the American Community
Survey (ACS). Specifically, HUD relies
on the most recent three sets of ACS
data to ensure that anomalous estimates,
due to sampling, do not affect the QCT
status of tracts.
II. Data Used To Designate DDAs
HUD uses data from the 2010 Census
on total population of metropolitan
areas, metropolitan ZIP Code Tabulation
Areas (ZCTAs), and nonmetropolitan
areas in the designation of DDAs. The
Office of Management and Budget
(OMB) published updated metropolitan
areas in OMB Bulletin No. 17–01 on
August 15, 2017. FY 2021 FMRs and FY
2021 income limits HUD uses 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. HUD calculates Small Area
FMRs for the ZCTAs, or portions of
ZCTAs within the metropolitan areas
defined by OMB Bulletin No. 17–01.
III. Data HUD Uses To Designate QCTs
HUD uses data from the 2010 Census
on total population of census tracts,
metropolitan areas, and the
nonmetropolitan parts of states in the
designation of QCTs. The FY 2021
income limits HUD uses to designate
QCTs are based on these MSA
definitions with modifications to
account for substantial differences in
rental housing markets (and in some
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cases median income levels) within
MSAs. In this QCT designation, HUD
uses the OMB metropolitan area
definitions published in OMB Bulletin
No. 17–01, without modification for
purposes of evaluating how many
census tracts can be designated under
the population cap but uses the HUDmodified 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
65,000 persons, such as census tracts.
Due to sample-related anomalies in
estimates from year to year, HUD
utilizes three sets of ACS tabulations to
ensure that anomalous estimates do not
affect QCT status.
IV. Background
The U.S. Department of the Treasury
(Treasury) and the Internal Revenue
Service (IRS) are authorized to interpret
and enforce the provisions of IRC
Section 42. 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
below. 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.
V. Summary of the Low-Income
Housing Credit
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A. Determining Eligibility
The LIHTC is a tax incentive intended
to increase the availability of lowincome rental housing. IRC Section 42
provides an income tax credit to certain
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. Section 42
allows each state 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 allocated
to qualified states as additional credit.
State and local housing agencies
allocate the state’s credit ceiling among
low-income housing buildings whose
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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 based on the use of
tax-exempt bond proceeds do not
reduce the credits available from the
credit ceiling. See IRC Section 42(h)(4).
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. Prior to the
enactment of the Consolidated
Appropriations Act, 2018 (the 2018
Act), under IRC Section 42(g), a building
was required to meet one of two tests to
be eligible for the LIHTC; either: (1) 20
percent of the units must be rentrestricted and occupied by tenants with
incomes no higher than 50 percent of
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 ‘‘rentrestricted’’ 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 lowincome character of the building for at
least an additional 15 years.
The 2018 Act added a third test, the
average income test. See IRC Section
42(g)(1), as amended by Public Law
115–141, Division T, Section 103(a)(1)
(March 23, 2018). A building meets the
minimum requirements of the average
income test if 40 percent or more (25
percent or more in the case of a project
located in a high cost housing area as
described in IRC Section 142(d)(6)) of
the residential units in such project are
both rent-restricted and occupied by
individuals whose income does not
exceed the imputed income limitation
designated by the taxpayer with respect
to the respective unit. The taxpayer
designates the imputed income
limitation for each unit. The designated
imputed income limitation of any unit
is determined in 10-percentage-point
increments, and may be designated as
20, 30, 40, 50, 60, 70, or 80 percent of
AMGI. The average of the imputed
income limitations designated must not
exceed 60 percent of AMGI. See IRC
Section 42(g)(1)(C).
B. Calculating the LIHTC
The LIHTC reduces income tax
liability dollar-for-dollar. It is taken
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50549
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 tax credit rates are
determined monthly under procedures
specified in IRC Section 42 and cannot
be less than 9 percent of the qualified
basis of new buildings that are not
federally subsidized, and not less than
4 percent of the qualified basis of
buildings that are federally subsidized.
Individuals can use the credits up to a
deduction equivalent of $25,000 (the
actual maximum amount of credit that
an individual can claim depends on the
individual’s marginal tax rate). For
buildings placed in service after
December 31, 2007, individuals can use
the credits against the alternative
minimum tax. Corporations, other than
S or personal service corporations, can
use the credits against ordinary income
tax, and, for buildings placed in service
after December 31, 2007, against the
alternative minimum tax. These
corporations also can deduct losses from
the project.
The qualified basis represents the
product of the building’s ‘‘applicable
fraction’’ and its ‘‘eligible basis.’’ The
applicable fraction is based on the
number of low-income units in the
building as a percentage of the total
number of units, or based on the floor
space of low-income units as a
percentage of the total floor space of
residential units in the building. The
eligible basis is the adjusted basis
attributable to acquisition,
rehabilitation, or new construction costs
(depending on the type of LIHTC
involved). These costs include amounts
chargeable to a capital account that are
incurred prior to the end of the first
taxable year in which the qualified lowincome building is placed in service or,
at the election of the taxpayer, the end
of the succeeding taxable year. In the
case of buildings located in designated
DDAs or designated QCTs, or for credits
awarded from the state’s per capita
allocation, buildings designated by the
state agency, eligible basis may be
increased up to 130 percent from what
it would otherwise be. This means that
the available credits also may 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 (70
percent × 130 percent).
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C. Defining Difficult Development Areas
(DDAs) and Qualified Census Tracts
(QCTs)
As stated above, 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. See IRC
Section 42(d)(5)(B)(iii).
Similarly, IRC Section 42 defines a
QCT as an area designated by the
Secretary of HUD where, for the most
recent year for which census data are
available on household income in such
tract, either 50 percent or more of the
households in the tract have an income
which is less than 60 percent of the
AMGI or the tract’s poverty rate is at
least 25 percent. All designated QCTs in
a single metropolitan area or
nonmetropolitan area (taken together)
may not contain more than 20 percent
of the population of that metropolitan or
nonmetropolitan area. Thus, unlike the
restriction on DDA designations, QCTs
are restricted by the total population of
each individual area as opposed to the
aggregate population across all
metropolitan areas and nonmetropolitan
areas. See IRC Section 42(d)(5)(B)(ii).
IRC Section 42(d)(5)(B)(v) allows
states to award an increase in basis up
to 30 percent to buildings located
outside of federally designated DDAs
and QCTs if the increase is necessary to
make the building financially feasible.
This state discretion applies only to
buildings allocated credits under the
state housing credit ceiling and is not
permitted for buildings receiving credits
entirely in connection with tax-exempt
bonds. Rules for such designations shall
be set forth in the LIHTC-allocating
agencies’ qualified allocation plans
(QAPs). See IRC Section 42(m).
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VI. Explanation of HUD Designation
Method
A. 2022 Difficult Development Areas
In developing the 2022 list of DDAs,
as required by IRC Section
42(d)(5)(B)(iii), 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 17–01 on August 15, 2017, with
modifications, as described below. In
keeping with past practice of basing the
coming year’s DDA designations on data
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from the preceding year, the basis for
these comparisons is the FY 2021 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 FY 2021 FMRs used for the Housing
Choice Voucher (HCV) program. For
metropolitan DDAs, HUD used Small
Area FMRs based on three annual
releases of ACS data, to compensate for
statistical anomalies which affect
estimates for some ZCTAs. For nonmetropolitan DDAs, HUD used the FY
2021 FMRs released on August 14, 2020
and effective on October 1, 2020 (85 FR
49666) as updated by the March 19,
2020 publication effective April 1, 2021
(86 FR 14953).
In formulating the FY 2021 FMRs and
VLILs, HUD modified the current OMB
definitions of MSAs to account for
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 were previously in
separate FMR areas. All counties added
to metropolitan areas are treated as
HMFAs with rents and incomes based
on their own county data, where
available. HUD no longer requires
recent-mover rents to differ by five
percent or more in order to form a new
HMFA. 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 FY 2021 FMR areas and
FMRs are available at https://
www.huduser.gov/portal/datasets/
fmr.html#2021. Complete details on
HUD’s process for determining FY 2021
income limits are available at https://
www.huduser.gov/portal/datasets/
il.html#2021.)
HUD’s unit of analysis for designating
metropolitan DDAs consists of ZCTAs,
whose Small Area FMRs 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; 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
designations follows:
1. Calculate FMR-to-Income Ratios.
For each metropolitan ZCTA and each
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nonmetropolitan county, HUD
calculated a ratio of housing costs to
income. HUD used a modified FY 2021
two-bedroom Small Area FMR for
ZCTAs, a modified FY 2021 twobedroom FMR for non-metropolitan
counties, and the FY 2021 four-person
VLIL for this calculation.
The modified FY 2021 two-bedroom
Small Area FMRs for ZCTAs differ from
the FY 2021 Small Area FMRs in four
ways. First, HUD did not limit the Small
Area FMR to 150 percent of its
metropolitan area FMR. Second, HUD
did not limit annual decreases in Small
Area FMRs to ten percent, which was
first applied in the FY 2018 FMR
calculations. Third, HUD adjusted the
Small Area FMRs in New York City
using the New York City Housing and
Vacancy Survey, which is conducted by
the U.S. Census Bureau, to adjust for the
effect of local rent control and
stabilization regulations. No other
jurisdictions have provided HUD with
data that could be used to adjust Small
Area FMRs for rent control or
stabilization regulations.1 Finally, the
Small Area FMRs are not limited to the
State non-metropolitan minimum FMR.
The FY 2021 two-bedroom FMR for
non-metropolitan counties was
modified only by removing the state
non-metropolitan minimum FMR.
The numerator of the ratio,
representing the development cost of
housing, was the area’s FY 2021 FMR,
or Small Area FMR 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
rental unit.
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).
2. Sort Areas by Ratio and Exclude
Unsuitable Areas. The ratios of the
FMR, or Small Area FMR, to the LIHTC
income-based rent limit were arrayed in
descending order, separately, for ZCTAs
and for nonmetropolitan counties.
ZCTAs with populations less than 100
were excluded in order to avoid
designating areas unsuitable for
residential development, such as ZCTAs
containing airports.
3. Select Areas with Highest Ratios
and Exclude QCTs. The DDAs are those
areas with the highest ratios that
cumulatively comprise 20 percent of the
1 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 Small Area
FMRs in those jurisdictions.
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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 2022 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
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 the list of QCTs, HUD
used 2010 Census 100-percent count
data on total population, total
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households, and population in
households; the median household
income and poverty rate as estimated in
the 2013–2017, 2014–2018 and 2015–
2019 ACS tabulations; the FY 2021 Very
Low-Income Limits (VLILs) computed at
the HMFA level to determine tract
eligibility; and the MSA definitions
published in OMB Bulletin No. 17–01
on August 15, 2017, for determining
how many eligible tracts can be
designated under the statutory 20
percent population cap.
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 FY 2006 and
thereafter, are established at the HMFA
level. 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.
HUD determined the QCTs as follows:
1. Calculate 60 percent AMGI. To be
eligible to be designated a QCT, a
census tract must have 50 percent of its
households with incomes below 60
percent of 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 ACS 5-year
tabulations 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 FY 2021
VLIL adjusted for inflation to match the
ACS estimates, which are adjusted to
the value of the dollar in the last year
of the 5-year group.
2. Determine Whether Census Tracts
Have Less than 50 percent of
Households Below 60 percent AMGI. 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) adjusting the
income standard 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
(2013–2017, 2014–2018 and 2015–
2019). HUD did not consider estimates
of median household income to be
statistically reliable unless the margin of
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50551
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 three ACS
tabulations. 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.
3. Estimate Poverty Rate. For each
census tract, HUD determined the
poverty rate in each of the three releases
of ACS tabulations (2013–2017, 2014–
2018 and 2015–2019) 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
applies a data quality standard for
evaluating ACS poverty rate data in
designating the 2022 QCTs. 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. 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. Designate QCTs Where 20 percent
or Less of Population Resides in Eligible
Census Tracts. 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. Designate QCTs Where More than
20 percent of Population Resides in
Eligible Census Tracts. In areas where
more than 20 percent of the population
resides in eligible census tracts, census
tracts are designated as QCTs in
accordance with the following
procedure:
a. The statistically reliable income
and poverty criteria are each averaged
over the three ACS tabulations (2013–
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2017, 2014–2018 and 2015–2019).
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; a different pair of
years may be used to meet each
criterion. The second group includes
tracts that satisfy either the income
criterion in at least two of the three
years, 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.
c. HUD ranked tracts in the first group
from highest to lowest by the average of
the ratios of the tract averagehousehold-size-adjusted income limit to
the median household income. Then,
HUD ranked tracts in the first group
from highest to lowest by the average of
the poverty rates. HUD averaged the two
ranks to yield a combined rank. HUD
then sorted the tracts 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, HUD ranked more populous tracts
above less populous ones.
d. HUD ranked tracts in the second
group from highest to lowest by the
average of the ratios of the tract averagehousehold-size-adjusted income limit to
the median household income. Then,
HUD ranked tracts in the second group
from highest to lowest by the average of
the poverty rates. HUD then averaged
the two ranks to yield a combined rank.
HUD then sorted the tracts 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, HUD ranked more
populous tracts above less populous
ones.
e. HUD stacked the ranked first group
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, HUD identified census tracts as
designated until the designation of an
additional tract would cause the 20
percent limit to be exceeded. If HUD
does not designate a census tract
because doing so would raise the
percentage above 20 percent, HUD then
considers subsequent eligible census
tracts to determine if one or more
eligible census tract(s) with smaller
population(s) could be designated
without exceeding the 20 percent limit.
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D. Exceptions to OMB Definitions of
MSAs and Other Geographic Matters
As stated in OMB Bulletin 17–01,
defining metropolitan areas:
‘‘OMB establishes and maintains the
delineations of Metropolitan Statistical
Areas, . . . solely for statistical
purposes. . . . OMB does not take into
account or attempt to anticipate any nonstatistical uses that may be made of the
delineations[.] 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 delineations are appropriate
for such use. An agency using the statistical
delineations in a nonstatistical program may
modify the delineations, but only for the
purposes of that program. In such cases, any
modifications should be clearly identified as
delineations from the OMB statistical area
delineations in order to avoid confusion.’’
Following OMB guidance, HUD’s
estimation procedure for the FMRs and
income limits incorporates the current
OMB definitions of metropolitan CoreBased Statistical Areas (CBSAs) based
on the CBSA standards, as implemented
with 2010 Census data, but makes
adjustments to the definitions, in order
to separate subparts of these areas in
cases where counties were added to an
existing or newly defined metropolitan
area. In CBSAs where HUD establishes
subareas, it is HUD’s view that the
geographic extent of the housing
markets is not the same as the
geographic extent of the CBSAs.
In the New England states
(Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, and
Vermont), HUD defines HMFAs
according to county subdivisions or
minor civil divisions (MCDs), rather
than county boundaries. However, since
no part of an HMFA is outside an OMBdefined, county-based MSA, all New
England nonmetropolitan counties are
kept intact for purposes of designating
Nonmetropolitan DDAs.
VII. Future Designations
HUD designates DDAs annually as
updated HUD income limit and FMR
data are made public. HUD designates
QCTs annually as new income and
poverty rate data are released.
A. Effective Date
The 2022 lists of QCTs and DDAs are
effective:
(1) For allocations of credit after
December 31, 2021; 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, 2021.
If an area is not on a subsequent list
of QCTs or DDAs, the 2022 lists are
effective for the area if:
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(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;
(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
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defined in the QAP of the LIHTCallocating agency, or the annual percapita 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.
B. 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 QCT or DDA
status. The examples covering DDAs are
equally applicable to QCT designations.
(Case A) Project A is located in a 2022
DDA that is NOT a designated DDA in
2023 or 2024. A complete application
for tax credits for Project A is filed with
the allocating agency on November 15,
2022. Credits are allocated to Project A
on October 30, 2024. Project A is
eligible for the increase in basis
accorded a project in a 2022 DDA
because the application was filed
BEFORE January 1, 2023 (the assumed
effective date for the 2023 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 2022
DDA that is NOT a designated DDA in
2023 or 2024. A complete application
for tax credits for Project B is filed with
the allocating agency on December 1,
2022. Credits are allocated to Project B
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19:38 Sep 08, 2021
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on March 30, 2025. Project B is NOT
eligible for the increase in basis
accorded a project in a 2022 DDA
because, although the application for an
allocation of tax credits was filed
BEFORE January 1, 2023 (the assumed
effective date of the 2023 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 2022
DDA that was not a DDA in 2021.
Project C was placed in service on
November 15, 2021. A complete
application for tax-exempt bond
financing for Project C is filed with the
bond-issuing agency on January 15,
2022. The tax-exempt bonds that will
support the permanent financing of
Project C are issued on September 30,
2022. Project C is NOT eligible for the
increase in basis otherwise accorded a
project in a 2022 DDA, because the
project was placed in service BEFORE
January 1, 2022.
(Case D) Project D is located in an
area that is a DDA in 2022 but is NOT
a DDA in 2023 or 2024. A complete
application for tax-exempt bond
financing for Project D is filed with the
bond-issuing agency on October 30,
2022. Tax-exempt bonds are issued for
Project D on April 30, 2024, but Project
D is not placed in service until January
30, 2025. Project D is eligible for the
increase in basis available to projects
located in 2022 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 tax-exempt
bonds issued and buildings placed in
service) took place on April 30, 2024,
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
tax-exempt 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 2022 DDA that is
NOT a designated DDA or QCT in 2023.
The first phase of Project E received an
allocation of credits in 2022, pursuant to
an application filed March 15, 2022,
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
March 15, 2023. 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, 2023.
The aggregate amount of credits
allocated to the two phases of Project E
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50553
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 2022 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 2022 DDA that is
NOT a designated DDA in 2023 or 2024.
The first phase of Project F received an
allocation of credits in 2022, pursuant to
an application filed March 15, 2022,
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, 2024. Credits are allocated to
the second phase of Project F on
October 30, 2024. 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 2022
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
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Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices
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 and
QCTs 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 methods used in making such
designations. As a result, this notice is
not subject to review under the order.
Todd M. Richardson,
General Deputy Assistant Secretary for Policy
Development and Research.
[FR Doc. 2021–19498 Filed 9–8–21; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–6274–N–01]
Annual Indexing of Basic Statutory
Mortgage Limits for Multifamily
Housing Programs; Annual Indexing of
Substantial Rehabilitation Threshold
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, Housing and Urban
Development (HUD).
ACTION: Notice.
AGENCY:
In accordance with Section
206A of the National Housing Act, HUD
is providing notice of adjustment to the
Basic Statutory Mortgage Limits for
Multifamily Housing Programs for
Calendar Year 2021. HUD is also
providing notice of adjustment to the
per unit cost threshold for determining
substantial rehabilitation in the
Multifamily Housing Programs pursuant
to its administrative guidance for
Calendar Year 2021.
DATES: Effective January 1, 2021.
FOR FURTHER INFORMATION CONTACT:
Patricia M. Burke, Director, Office of
Multifamily Production, Department of
Housing and Urban Development, 451
Seventh Street SW, Washington, DC
20410–8000, telephone (202) 402–5693
(this is not a toll-free number). Hearing
or speech-impaired individuals may
access this number through TTY by
calling the toll-free Federal Information
Relay Service at (800) 877–8339.
SUPPLEMENTARY INFORMATION: Section
206A of the National Housing Act (12
U.S.C. 1712a) provides authority for the
annual adjustment for the following
FHA multifamily statutory dollar limits:
I. Section 207(c)(3)(A) (12 U.S.C.
1713(c)(3)(A));
II. Section 213(b)(2)(A) (12 U.S.C.
1715e(b)(2)(A));
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SUMMARY:
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19:38 Sep 08, 2021
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III. Section 220(d)(3)(B)(iii)(I) (12 U.S.C.
1715k(d)(3)(B)(iii)(I));
IV. Section 221(d)(4)(ii)(I) (12 U.S.C.
1715l(d)(4)(ii)(I));
V. Section 231(c)(2)(A) (12 U.S.C.
1715v(c)(2)(A)); and
VI. Section 234(e)(3)(A) (12 U.S.C.
1715y(e)(3)(A)).
Section 206A goes on to state that the
preceding
‘‘Dollar Amounts’’ shall be adjusted
annually (commencing in 2004) on the
effective date of the Federal Reserve Board’s
adjustment of the $400 figure in the Home
Ownership and Equity Protection Act of 1994
(HOEPA). The adjustment of the Dollar
Amounts shall be calculated using the
percentage change in the Consumer Price
Index for All Urban Consumers (CPI–U) as
applied by the Federal Reserve Board for
purposes of the above-described HOEPA
adjustment.
(b) Notification
The Federal Reserve Board on a timely
basis shall notify the Secretary, or his
designee, in writing of the adjustment
described in subsection (a) and of the
effective date of such adjustment in order to
permit the Secretary to undertake publication
in the Federal Register of corresponding
adjustments to the Dollar Amounts. The
dollar amount of any adjustment shall be
rounded to the next lower dollar.
Note that 206A has not been updated
to reflect the fact that HOEPA has been
revised to use $1,000 as the basis for the
adjustment rather than $400, and the
Consumer Finance Protection Bureau
has replaced the Federal Reserve Board
in administering the adjustment. These
changes were made by the Dodd-Frank
Wall Street Reform and Consumer
Protection Act’s amendments to the
Truth in Lending Act, as further
explained in the regulatory
implementation of said changes found
in 78 FR 6856, 6879 (Jan. 31, 2013).
The percentage change in the CPI–U
used for the HOEPA adjustment is a 0.3
percent increase and the effective date
of the HOEPA adjustment is January 1,
2021. The Dollar Amounts under
Section 206A have been adjusted
correspondingly and have an effective
date of January 1, 2021.
These revised statutory limits may be
applied to FHA multifamily mortgage
insurance applications submitted or
amended on or after January 1, 2021, so
long as the loan has not been initially
endorsed.
The adjusted Dollar Amounts for
Calendar Year 2021 are shown below.
To implement the Consumer Finance
Protection Bureau’s adjustment, a onetime proration is required to the 0.3
percent figure, which was computed
from April 2019 to April 2020 (see 85
FR 50944, Aug. 19, 2020). Because
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Sfmt 4703
HUD’s previous Dollar Amounts
utilized CPI–U data through December
2019, only interim CPI–U data from
January 2020 through April 2020 is
reflected in the table calculations. The
overall impact of this adjustment
resulted in no change for Calendar Year
2021, because CPI–U showed minor
inflation of 1 percent in January and
February 2020, but was fully offset by
minor deflation of 1% in March and
April 2020, associated with COVID–19
pandemic economic disruptions.
Moving forward in future years HUD
will continue to utilize the CFPB’s time
period (April to April) used for the
HOEPA CPI–U adjustment, which is
typically published in the August
preceding the following January
effective date.
Basic Statutory Mortgage Limits for
Calendar Year 2021 Multifamily Loan
Program
Section 207—Multifamily Housing;
Section 207 pursuant to Section 223(f)—
Purchase or Refinance Housing; and,
Section 220—Housing in Urban
Renewal Areas
Bedrooms
0 ................
1 ................
2 ................
3 ................
4+ ..............
Non-elevator
$54,892
60,807
72,633
89,525
101,352
Elevator
$64,026
70,944
86,990
108,951
123,193
Section 213—Cooperatives
Bedrooms
0 ................
1 ................
2 ................
3 ................
4+ ..............
Non-elevator
$59,488
68,592
82,723
105,887
117,966
Elevator
$63,342
71,764
87,265
112,895
123,927
Section 234—Condominium Housing
Bedrooms
0 ................
1 ................
2 ................
3 ................
4+ ..............
Non-elevator
$60,702
69,991
84,411
108,050
120,372
Elevator
$63,881
73,230
89,049
115,201
126,454
Section 221(d)(4)—Moderate Income
Housing
Bedrooms
0 ................
1 ................
2 ................
3 ................
4+ ..............
Non-elevator
$54,628
62,013
74,959
94,085
106,314
Elevator
$59,010
67,649
82,262
106,418
116,817
Section 231—Housing for the Elderly
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Agencies
[Federal Register Volume 86, Number 172 (Thursday, September 9, 2021)]
[Notices]
[Pages 50548-50554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19498]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6283-N-01]
Statutorily Mandated Designation of Difficult Development Areas
and Qualified Census Tracts for 2022
AGENCY: Office of the Assistant Secretary for Policy Development and
Research, Housing and Urban Development (HUD).
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This document designates ``Difficult Development Areas''
(DDAs) and ``Qualified Census Tracts'' (QCTs) for purposes of the Low-
Income Housing Credit (LIHTC) under Internal Revenue Code (IRC) Section
42. The United States Department of Housing and Urban Development (HUD)
makes new DDA and QCT designations annually.
ADDRESSES: This notice and additional information about DDAs and QCTs
including the lists of DDAs and QCTs are available electronically on
the internet at https://www.huduser.gov/portal/datasets/qct.html.
FOR FURTHER INFORMATION CONTACT: For questions on how areas are
designated and on geographic definitions, contact Michael K. Hollar,
Senior Economist, Public Finance and Regulatory Analysis Division,
Office of Policy Development and Research, Department of Housing and
Urban Development, 451 Seventh Street SW, Room 8216, Washington, DC
20410-6000; telephone number 202-402-5878, or send an email to
[email protected]. For specific legal questions pertaining to
Section 42, 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. For questions
about the ``HUBZone'' program, contact Bruce Purdy, Deputy 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 202-205-7554, or
send an email to [email protected]. (These are not toll-free telephone
numbers.) Additional copies of this notice are available through HUD
User at, toll-free, 800-245-2691 for a small fee to cover duplication
and mailing costs. A toll-free text telephone is available for the
telephone numbers above for persons with hearing or speech impairments
at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. This Notice
Under IRC Section 42(d)(5)(B)(iii)(I), for purposes of the LIHTC,
the Secretary of HUD must designate DDAs, which are areas with high
construction, land, and utility costs relative to area median gross
income (AMGI). 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. HUD makes the
designations of DDAs in this notice based on modified Fiscal Year (FY)
2021 Small Area Fair Market Rents (Small Area FMRs, SAFMRs), FY 2021
nonmetropolitan county FMRs, FY 2021 income limits, and 2010 Census
population counts, as explained below.
Similarly, under IRC Section 42(d)(5)(B)(ii)(I), the Secretary of
HUD must designate QCTs, which are areas where either 50 percent or
more of the households have an income less than 60 percent of the AMGI
for such year or have a poverty rate of at least 25 percent. This
notice designates QCTs based on new income and poverty data released in
the American Community Survey (ACS). Specifically, HUD relies on the
most recent three sets of ACS data to ensure that anomalous estimates,
due to sampling, do not affect the QCT status of tracts.
II. Data Used To Designate DDAs
HUD uses data from the 2010 Census on total population of
metropolitan areas, metropolitan ZIP Code Tabulation Areas (ZCTAs), and
nonmetropolitan areas in the designation of DDAs. The Office of
Management and Budget (OMB) published updated metropolitan areas in OMB
Bulletin No. 17-01 on August 15, 2017. FY 2021 FMRs and FY 2021 income
limits HUD uses 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. HUD calculates Small Area FMRs for
the ZCTAs, or portions of ZCTAs within the metropolitan areas defined
by OMB Bulletin No. 17-01.
III. Data HUD Uses To Designate QCTs
HUD uses data from the 2010 Census on total population of census
tracts, metropolitan areas, and the nonmetropolitan parts of states in
the designation of QCTs. The FY 2021 income limits HUD uses to
designate QCTs are based on these MSA definitions with modifications to
account for substantial differences in rental housing markets (and in
some
[[Page 50549]]
cases median income levels) within MSAs. In this QCT designation, HUD
uses the OMB metropolitan area definitions published in OMB Bulletin
No. 17-01, 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 65,000
persons, such as census tracts. Due to sample-related anomalies in
estimates from year to year, HUD utilizes three sets of ACS tabulations
to ensure that anomalous estimates do not affect QCT status.
IV. Background
The U.S. Department of the Treasury (Treasury) and the Internal
Revenue Service (IRS) are authorized to interpret and enforce the
provisions of IRC Section 42. 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 below. 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.
V. Summary of the Low-Income Housing Credit
A. Determining Eligibility
The LIHTC is a tax incentive intended to increase the availability
of low-income rental housing. IRC Section 42 provides an income tax
credit to certain 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. Section 42 allows each state 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 allocated to
qualified 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 based on the use of tax-exempt bond proceeds do not reduce the
credits available from the credit ceiling. See IRC Section 42(h)(4).
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. Prior to the enactment of the
Consolidated Appropriations Act, 2018 (the 2018 Act), under IRC Section
42(g), a building was required to meet one of two tests 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 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 2018 Act added a third test, the average income test. See IRC
Section 42(g)(1), as amended by Public Law 115-141, Division T, Section
103(a)(1) (March 23, 2018). A building meets the minimum requirements
of the average income test if 40 percent or more (25 percent or more in
the case of a project located in a high cost housing area as described
in IRC Section 142(d)(6)) of the residential units in such project are
both rent-restricted and occupied by individuals whose income does not
exceed the imputed income limitation designated by the taxpayer with
respect to the respective unit. The taxpayer designates the imputed
income limitation for each unit. The designated imputed income
limitation of any unit is determined in 10-percentage-point increments,
and may be designated as 20, 30, 40, 50, 60, 70, or 80 percent of AMGI.
The average of the imputed income limitations designated must not
exceed 60 percent of AMGI. See IRC Section 42(g)(1)(C).
B. Calculating the LIHTC
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 tax
credit rates are determined monthly under procedures specified in IRC
Section 42 and cannot be less than 9 percent of the qualified basis of
new buildings that are not federally subsidized, and not less than 4
percent of the qualified basis of buildings that are federally
subsidized. 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, or for credits awarded from the
state's per capita allocation, buildings designated by the state
agency, eligible basis may be increased up to 130 percent from what it
would otherwise be. This means that the available credits also may 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
(70 percent x 130 percent).
[[Page 50550]]
C. Defining Difficult Development Areas (DDAs) and Qualified Census
Tracts (QCTs)
As stated above, 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. See IRC Section
42(d)(5)(B)(iii).
Similarly, IRC Section 42 defines a QCT as an area designated by
the Secretary of HUD where, for the most recent year for which census
data are available on household income in such tract, either 50 percent
or more of the households in the tract have an income which is less
than 60 percent of the AMGI or the tract's poverty rate is at least 25
percent. All designated QCTs in a single metropolitan area or
nonmetropolitan area (taken together) may not contain more than 20
percent of the population of that metropolitan or nonmetropolitan area.
Thus, unlike the restriction on DDA designations, QCTs are restricted
by the total population of each individual area as opposed to the
aggregate population across all metropolitan areas and nonmetropolitan
areas. See IRC Section 42(d)(5)(B)(ii).
IRC Section 42(d)(5)(B)(v) allows states to award an increase in
basis up to 30 percent to buildings located outside of federally
designated DDAs and QCTs if the increase is necessary to make the
building financially feasible. This state discretion applies only to
buildings allocated credits under the state housing credit ceiling and
is not permitted for buildings receiving credits entirely in connection
with tax-exempt bonds. Rules for such designations shall be set forth
in the LIHTC-allocating agencies' qualified allocation plans (QAPs).
See IRC Section 42(m).
VI. Explanation of HUD Designation Method
A. 2022 Difficult Development Areas
In developing the 2022 list of DDAs, as required by IRC Section
42(d)(5)(B)(iii), 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 17-01 on August 15, 2017,
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 FY 2021 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
FY 2021 FMRs used for the Housing Choice Voucher (HCV) program. For
metropolitan DDAs, HUD used Small Area FMRs based on three annual
releases of ACS data, to compensate for statistical anomalies which
affect estimates for some ZCTAs. For non-metropolitan DDAs, HUD used
the FY 2021 FMRs released on August 14, 2020 and effective on October
1, 2020 (85 FR 49666) as updated by the March 19, 2020 publication
effective April 1, 2021 (86 FR 14953).
In formulating the FY 2021 FMRs and VLILs, HUD modified the current
OMB definitions of MSAs to account for 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 were previously in separate FMR areas. All counties added
to metropolitan areas are treated as HMFAs with rents and incomes based
on their own county data, where available. HUD no longer requires
recent-mover rents to differ by five percent or more in order to form a
new HMFA. 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 FY 2021 FMR areas and FMRs are available at
https://www.huduser.gov/portal/datasets/fmr.html#2021. Complete details
on HUD's process for determining FY 2021 income limits are available at
https://www.huduser.gov/portal/datasets/il.html#2021.)
HUD's unit of analysis for designating metropolitan DDAs consists
of ZCTAs, whose Small Area FMRs 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; 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 designations follows:
1. Calculate FMR-to-Income Ratios. For each metropolitan ZCTA and
each nonmetropolitan county, HUD calculated a ratio of housing costs to
income. HUD used a modified FY 2021 two-bedroom Small Area FMR for
ZCTAs, a modified FY 2021 two-bedroom FMR for non-metropolitan
counties, and the FY 2021 four-person VLIL for this calculation.
The modified FY 2021 two-bedroom Small Area FMRs for ZCTAs differ
from the FY 2021 Small Area FMRs in four ways. First, HUD did not limit
the Small Area FMR to 150 percent of its metropolitan area FMR. Second,
HUD did not limit annual decreases in Small Area FMRs to ten percent,
which was first applied in the FY 2018 FMR calculations. Third, HUD
adjusted the Small Area FMRs in New York City using the New York City
Housing and Vacancy Survey, which is conducted by the U.S. Census
Bureau, to adjust for the effect of local rent control and
stabilization regulations. No other jurisdictions have provided HUD
with data that could be used to adjust Small Area FMRs for rent control
or stabilization regulations.\1\ Finally, the Small Area FMRs are not
limited to the State non-metropolitan minimum FMR.
---------------------------------------------------------------------------
\1\ 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
Small Area FMRs in those jurisdictions.
---------------------------------------------------------------------------
The FY 2021 two-bedroom FMR for non-metropolitan counties was
modified only by removing the state non-metropolitan minimum FMR.
The numerator of the ratio, representing the development cost of
housing, was the area's FY 2021 FMR, or Small Area FMR 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 rental unit.
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).
2. Sort Areas by Ratio and Exclude Unsuitable Areas. The ratios of
the FMR, or Small Area FMR, to the LIHTC income-based rent limit were
arrayed in descending order, separately, for ZCTAs and for
nonmetropolitan counties. ZCTAs with populations less than 100 were
excluded in order to avoid designating areas unsuitable for residential
development, such as ZCTAs containing airports.
3. Select Areas with Highest Ratios and Exclude QCTs. The DDAs are
those areas with the highest ratios that cumulatively comprise 20
percent of the
[[Page 50551]]
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 2022 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 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 the 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 2013-2017, 2014-2018 and 2015-2019 ACS tabulations; the FY 2021
Very Low-Income Limits (VLILs) computed at the HMFA level to determine
tract eligibility; and the MSA definitions published in OMB Bulletin
No. 17-01 on August 15, 2017, for determining how many eligible tracts
can be designated under the statutory 20 percent population cap.
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 FY 2006 and thereafter, are established at the HMFA
level. 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.
HUD determined the QCTs as follows:
1. Calculate 60 percent AMGI. To be eligible to be designated a
QCT, a census tract must have 50 percent of its households with incomes
below 60 percent of 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 ACS 5-year
tabulations 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 FY 2021 VLIL adjusted for inflation to
match the ACS estimates, which are adjusted to the value of the dollar
in the last year of the 5-year group.
2. Determine Whether Census Tracts Have Less than 50 percent of
Households Below 60 percent AMGI. 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) adjusting the income
standard 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 (2013-2017, 2014-2018 and 2015-2019). 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 three ACS tabulations. 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.
3. Estimate Poverty Rate. For each census tract, HUD determined the
poverty rate in each of the three releases of ACS tabulations (2013-
2017, 2014-2018 and 2015-2019) 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 applies a data quality standard for evaluating ACS
poverty rate data in designating the 2022 QCTs. 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. 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. Designate QCTs Where 20 percent or Less of Population Resides in
Eligible Census Tracts. 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. Designate QCTs Where More than 20 percent of Population Resides
in Eligible Census Tracts. In areas where more than 20 percent of the
population resides in eligible census tracts, census tracts are
designated as QCTs in accordance with the following procedure:
a. The statistically reliable income and poverty criteria are each
averaged over the three ACS tabulations (2013-
[[Page 50552]]
2017, 2014-2018 and 2015-2019). 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; a different pair
of years may be used to meet each criterion. The second group includes
tracts that satisfy either the income criterion in at least two of the
three years, 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.
c. HUD ranked tracts in the first group 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, HUD ranked tracts in
the first group from highest to lowest by the average of the poverty
rates. HUD averaged the two ranks to yield a combined rank. HUD then
sorted the tracts 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, HUD ranked more populous tracts above less populous
ones.
d. HUD ranked tracts in the second group 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, HUD ranked tracts in
the second group from highest to lowest by the average of the poverty
rates. HUD then averaged the two ranks to yield a combined rank. HUD
then sorted the tracts 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, HUD ranked more populous tracts above less
populous ones.
e. HUD stacked the ranked first group 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, HUD identified census tracts as designated until the
designation of an additional tract would cause the 20 percent limit to
be exceeded. If HUD does not designate a census tract because doing so
would raise the percentage above 20 percent, HUD then considers
subsequent eligible census tracts to determine if one or more eligible
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 17-01, defining metropolitan areas:
``OMB establishes and maintains the delineations 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 delineations[.] 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 delineations are
appropriate for such use. An agency using the statistical
delineations in a nonstatistical program may modify the
delineations, but only for the purposes of that program. In such
cases, any modifications should be clearly identified as
delineations from the OMB statistical area delineations in order to
avoid confusion.''
Following OMB guidance, HUD's estimation procedure for the FMRs and
income limits incorporates the current OMB definitions of metropolitan
Core-Based Statistical Areas (CBSAs) based on the CBSA standards, as
implemented with 2010 Census data, but makes adjustments to the
definitions, in order to separate subparts of these areas in cases
where counties were added to an existing or newly defined metropolitan
area. In CBSAs where HUD establishes subareas, it is HUD's view that
the geographic extent of the housing markets is not the same as the
geographic extent of the CBSAs.
In the New England states (Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, and Vermont), HUD defines HMFAs 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.
VII. Future Designations
HUD designates DDAs annually as updated HUD income limit and FMR
data are made public. HUD designates QCTs annually as new income and
poverty rate data are released.
A. Effective Date
The 2022 lists of QCTs and DDAs are effective:
(1) For allocations of credit after December 31, 2021; 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, 2021.
If an area is not on a subsequent list of QCTs or DDAs, the 2022
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;
(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
[[Page 50553]]
defined in the 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.
B. 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 QCT or DDA status. The
examples covering DDAs are equally applicable to QCT designations.
(Case A) Project A is located in a 2022 DDA that is NOT a
designated DDA in 2023 or 2024. A complete application for tax credits
for Project A is filed with the allocating agency on November 15, 2022.
Credits are allocated to Project A on October 30, 2024. Project A is
eligible for the increase in basis accorded a project in a 2022 DDA
because the application was filed BEFORE January 1, 2023 (the assumed
effective date for the 2023 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 2022 DDA that is NOT a
designated DDA in 2023 or 2024. A complete application for tax credits
for Project B is filed with the allocating agency on December 1, 2022.
Credits are allocated to Project B on March 30, 2025. Project B is NOT
eligible for the increase in basis accorded a project in a 2022 DDA
because, although the application for an allocation of tax credits was
filed BEFORE January 1, 2023 (the assumed effective date of the 2023
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 2022 DDA that was not a DDA in
2021. Project C was placed in service on November 15, 2021. A complete
application for tax-exempt bond financing for Project C is filed with
the bond-issuing agency on January 15, 2022. The tax-exempt bonds that
will support the permanent financing of Project C are issued on
September 30, 2022. Project C is NOT eligible for the increase in basis
otherwise accorded a project in a 2022 DDA, because the project was
placed in service BEFORE January 1, 2022.
(Case D) Project D is located in an area that is a DDA in 2022 but
is NOT a DDA in 2023 or 2024. A complete application for tax-exempt
bond financing for Project D is filed with the bond-issuing agency on
October 30, 2022. Tax-exempt bonds are issued for Project D on April
30, 2024, but Project D is not placed in service until January 30,
2025. Project D is eligible for the increase in basis available to
projects located in 2022 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 tax-exempt bonds
issued and buildings placed in service) took place on April 30, 2024,
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 tax-exempt 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 2022 DDA
that is NOT a designated DDA or QCT in 2023. The first phase of Project
E received an allocation of credits in 2022, pursuant to an application
filed March 15, 2022, 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 March 15,
2023. 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,
2023. 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 2022 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 2022 DDA
that is NOT a designated DDA in 2023 or 2024. The first phase of
Project F received an allocation of credits in 2022, pursuant to an
application filed March 15, 2022, 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, 2024. Credits are allocated to the
second phase of Project F on October 30, 2024. 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 2022
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
[[Page 50554]]
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 and QCTs 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 methods used in making such designations. As a result, this
notice is not subject to review under the order.
Todd M. Richardson,
General Deputy Assistant Secretary for Policy Development and Research.
[FR Doc. 2021-19498 Filed 9-8-21; 8:45 am]
BILLING CODE 4210-67-P