[Federal Register Volume 75, Number 174 (Thursday, September 9, 2010)]
[Notices]
[Pages 54902-54906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22535]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5432-N-01]


Statutorily Mandated Designation of Difficult Development Areas 
and Qualified Census Tracts for 2011

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

ACTION: Notice.

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SUMMARY: This document designates ``Difficult Development Areas'' 
(DDAs) for purposes of the Low-Income Housing Tax Credit (LIHTC) under 
Section 42 of the Internal Revenue Code of 1986 (IRC) (26 U.S.C. 42). 
The United States Department of Housing and Urban Development (HUD) 
makes new DDA designations annually. The designations of ``Qualified 
Census Tracts'' (QCTs) under IRC Section 42 published October 6, 2009, 
remain in effect.

FOR FURTHER INFORMATION CONTACT: For questions on how areas are 
designated and on geographic definitions, contact Michael K. Hollar, 
Senior Economist, Economic Development and Public Finance Division, 
Office of Policy Development and Research, Department of Housing and 
Urban Development, 451 Seventh Street, SW., Room 8234, Washington, DC 
20410-6000; telephone number 202-402-5878, or send an e-mail to 
[email protected]. For specific legal questions pertaining to 
Section 42, contact Branch 5, Office of the Associate Chief Counsel, 
Passthroughs and Special Industries, Internal Revenue Service, 1111 
Constitution Avenue, NW., Washington, DC 20224; telephone number 202-
622-3040, fax number 202-622-4753. For questions about the ``HUB 
Zones'' program, contact Mariana Pardo, Assistant Administrator for 
Procurement Policy, Office of Government Contracting, Small Business 
Administration, 409 Third Street, SW., Suite 8800, Washington, DC 
20416; telephone number 202-205-8885, fax number 202-205-7167, or send 
an e-mail to [email protected]. A text telephone is available for persons 
with hearing or speech impairments at 202-708-8339. (These are not 
toll-free telephone numbers.) Additional copies of this notice are 
available through HUD User at 800-245-2691 for a small fee to cover 
duplication and mailing costs.
    Copies Available Electronically: This notice and additional 
information about DDAs and QCTs are available electronically on the 
Internet at http://www.huduser.org/datasets/qct.html.

SUPPLEMENTARY INFORMATION:

This Document

    This notice designates DDAs for each of the 50 states, the District 
of Columbia, Puerto Rico, American Samoa, Guam, the Northern Mariana 
Islands, and the U.S. Virgin Islands. The designations of DDAs in this 
notice are based on final Fiscal Year (FY) 2010 Fair Market Rents 
(FMRs), FY2010 income limits, and 2000 Census population counts, as 
explained below. In accordance with the Gulf Opportunity Zone Act of 
2005 (GO Zone Act) (Pub. L. 109-135, approved December 21, 2005), as 
amended by the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, 
and Iraq Accountability Appropriations Act of 2007, (Pub.L.110-28, 
approved, May 25, 2007), GO Zone DDAs expire on December 31, 2010. 
Thus, this notice does not designate GO Zone DDAs.

2000 Census

    Data from the 2000 Census on total population of metropolitan areas 
and nonmetropolitan areas are used in the designation of DDAs. The 
Office of Management and Budget (OMB) first published new metropolitan 
area definitions incorporating 2000 Census data in OMB Bulletin No. 03-
04 on June 6, 2003, and updated them periodically through OMB Bulletin 
No. 09-01 on November 20, 2008. The FY2010 FMRs and FY2010 income 
limits used to designate DDAs are based on these new 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.

Background

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

Summary of the Low-Income Housing Tax Credit

    The LIHTC is a tax incentive intended to increase the availability 
of low-income housing. IRC Section 42 provides an income tax credit to 
owners of newly constructed or substantially rehabilitated low-income 
rental housing projects. The dollar amount of the LIHTC available for 
allocation by each state (credit ceiling) is limited by population. 
Each state is allowed a credit ceiling based on a statutory formula 
indicated at IRC Section 42(h)(3). States may carry forward unallocated 
credits derived from the credit ceiling for one year; however, to the 
extent such unallocated credits are not used by then, the credits go 
into a national pool to be redistributed to states as additional 
credit. State and local housing agencies allocate the state's credit 
ceiling among low-income housing buildings whose owners have applied 
for the credit. Besides IRC Section 42 credits derived from the

[[Page 54903]]

credit ceiling, states may also provide IRC Section 42 credits to 
owners of buildings based on the percentage of certain building costs 
financed by tax-exempt bond proceeds. Credits provided under the tax-
exempt bond ``volume cap'' do not reduce the credits available from the 
credit ceiling.
    The credits allocated to a building are based on the cost of units 
placed in service as low-income units under particular minimum 
occupancy and maximum rent criteria. In general, a building must meet 
one of two thresholds to be eligible for the LIHTC; either: (1) 20 
percent of the units must be rent-restricted and occupied by tenants 
with incomes no higher than 50 percent of the Area Median Gross Income 
(AMGI), or (2) 40 percent of the units must be rent-restricted and 
occupied by tenants with incomes no higher than 60 percent of AMGI. The 
term ``rent-restricted'' means that gross rent, including an allowance 
for tenant-paid utilities, cannot exceed 30 percent of the tenant's 
imputed income limitation (i.e., 50 percent or 60 percent of AMGI). The 
rent and occupancy thresholds remain in effect for at least 15 years, 
and building owners are required to enter into agreements to maintain 
the low-income character of the building for at least an additional 15 
years.
    The LIHTC reduces income tax liability dollar-for-dollar. It is 
taken annually for a term of 10 years and is intended to yield a 
present value of either: (1) 70 percent of the ``qualified basis'' for 
new construction or substantial rehabilitation expenditures that are 
not federally subsidized (as defined in Section 42(i)(2)), or (2) 30 
percent of the qualified basis for the cost of acquiring certain 
existing buildings or projects that are federally subsidized. The 
actual credit rates are adjusted monthly for projects placed in service 
after 1987 under procedures specified in IRC Section 42. Individuals 
can use the credits up to a deduction equivalent of $25,000 (the actual 
maximum amount of credit that an individual can claim depends on the 
individual's marginal tax rate). For buildings placed in service after 
December 31, 2007, individuals can use the credits against the 
alternative minimum tax. Corporations, other than S or personal service 
corporations, can use the credits against ordinary income tax, and, for 
buildings placed in service after December 31, 2007, against the 
alternative minimum tax. These corporations also can deduct losses from 
the project.
    The qualified basis represents the product of the building's 
``applicable fraction'' and its ``eligible basis.'' The applicable 
fraction is based on the number of low-income units in the building as 
a percentage of the total number of units, or based on the floor space 
of low-income units as a percentage of the total floor space of 
residential units in the building. The eligible basis is the adjusted 
basis attributable to acquisition, rehabilitation, or new construction 
costs (depending on the type of LIHTC involved). These costs include 
amounts chargeable to a capital account that are incurred prior to the 
end of the first taxable year in which the qualified low-income 
building is placed in service or, at the election of the taxpayer, the 
end of the succeeding taxable year. In the case of buildings located in 
designated DDAs or designated QCTs, eligible basis can be increased up 
to 130 percent from what it would otherwise be. This means that the 
available credits also can be increased by up to 30 percent. For 
example, if a 70 percent credit is available, it effectively could be 
increased to as much as 91 percent.
    IRC Section 42 defines a DDA as any area designated by the 
Secretary of HUD as an area that has high construction, land, and 
utility costs relative to the AMGI. All designated DDAs in metropolitan 
areas (taken together) may not contain more than 20 percent of the 
aggregate population of all metropolitan areas, and all designated 
areas not in metropolitan areas may not contain more than 20 percent of 
the aggregate population of all nonmetropolitan areas.
    IRC Section 42(d)(5)(B)(v) allows states to award an increase in 
basis up to 30 percent to buildings located outside of federally 
designated DDAs and QCTs if the increase is necessary to make the 
building financially feasible. This state discretion applies only to 
buildings allocated credits under the state housing credit ceiling and 
is not permitted for buildings receiving credits in connection with 
tax-exempt bonds. Rules for such designations shall be set forth in the 
LIHTC-allocating agencies' qualified allocation plans (QAPs).

Explanation of HUD Designation Methodology

A. Difficult Development Areas

    In developing the list of DDAs, HUD compared housing costs with 
incomes. HUD used 2000 Census population data and the MSA definitions, 
as published in OMB Bulletin No. 09-01 on November 20, 2008, 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 FY2010 HUD income limits 
for very low-income households (very low-income limits, or VLILs), 
which are based on 50 percent of AMGI, and final FY2010 FMRs used for 
the Housing Choice Voucher (HCV) program. In formulating the FY2010 
FMRs and VLILs, HUD modified the current OMB definitions of MSAs to 
account for substantial differences in rents among areas within each 
new MSA that were in different FMR areas under definitions used in 
prior years. HUD formed these ``HUD Metro FMR Areas'' (HMFAs) in cases 
where one or more of the parts of newly defined MSAs that previously 
were in separate FMR areas had 2000 Census base 40th-percentile recent-
mover rents that differed, by 5 percent or more, from the same 
statistic calculated at the MSA level. In addition, a few HMFAs were 
formed on the basis of very large differences in AMGIs among the MSA 
parts. All HMFAs are contained entirely within MSAs. All 
nonmetropolitan counties are outside of MSAs and are not broken up by 
HUD for purposes of setting FMRs and VLILs. (Complete details on HUD's 
process for determining FY2010 FMR areas and FMRs are available at 
http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr10. 
Complete details on HUD's process for determining FY2010 income limits 
are available at http://www.huduser.org/portal/datasets/il/il10/index.html.)
    HUD's unit of analysis for designating metropolitan DDAs, 
therefore, consists of: entire MSAs, in cases where these were not 
broken up into HMFAs for purposes of computing FMRs and VLILs; and 
HMFAs within the MSAs that were broken up for such purposes. Hereafter 
in this notice, the unit of analysis for designating metropolitan DDAs 
will be called the HMFA, and the unit of analysis for nonmetropolitan 
DDAs will be the nonmetropolitan county or county equivalent area. The 
procedure used in making the DDA calculations follows:
    1. For each HMFA and each nonmetropolitan county, a ratio was 
calculated. This calculation used the final FY2010 two-bedroom FMR and 
the FY2010 four-person VLIL.
    a. The numerator of the ratio was the area's final FY2010 FMR. In 
general, the FMR is based on the 40th-percentile gross rent paid by 
recent movers to live in a two-bedroom apartment. In metropolitan areas 
granted a FMR based on the 50th-percentile rent for purposes of 
improving the administration of HUD's HCV program (see 71 FR 5068), the 
40th-percentile rent was used to ensure nationwide consistency of 
comparisons.

[[Page 54904]]

    b. The denominator of the ratio was the monthly LIHTC income-based 
rent limit, which was calculated as 1/12 of 30 percent of 120 percent 
of the area's VLIL (where the VLIL was rounded to the nearest $50 and 
not allowed to exceed 80 percent of the AMGI in areas where the VLIL is 
adjusted upward from its 50 percent-of-AMGI base).
    2. The ratios of the FMR to the LIHTC income-based rent limit were 
arrayed in descending order, separately, for HMFAs and for 
nonmetropolitan counties.
    3. The DDAs are those with the highest ratios cumulative to 20 
percent of the 2000 population of all metropolitan areas and of all 
nonmetropolitan areas.

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. Exceptions to OMB Definitions of MSAs and Other Geographic Matters

    As stated in OMB Bulletin 09-01, defining metropolitan areas:

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

    Following OMB guidance, the estimation procedure for the FY2010 
FMRs incorporates the current OMB definitions of metropolitan areas 
based on the Core-Based Statistical Area (CBSA) standards, as 
implemented with 2000 Census data, but makes adjustments to the 
definitions, in order to separate subparts of these areas in cases 
where FMRs (and in a few cases, VLILs) would otherwise change 
significantly if the new area definitions were used without 
modification. In CBSAs where subareas are established, it is HUD's view 
that the geographic extent of the housing markets are not yet the same 
as the geographic extent of the CBSAs, but may approach becoming so as 
the social and economic integration of the CBSA component areas 
increases.
    The geographic baseline for the new estimation procedure is the 
CBSA Metropolitan Areas (referred to as Metropolitan Statistical Areas 
or MSAs) and CBSA Non-Metropolitan Counties (nonmetropolitan counties 
include the county components of Micropolitan CBSAs where the counties 
are generally assigned separate FMRs). The HUD-modified CBSA 
definitions allow for subarea FMRs within MSAs based on the boundaries 
of ``Old FMR Areas'' (OFAs) within the boundaries of new MSAs. (OFAs 
are the FMR areas defined for the FY2005 FMRs. Collectively, they 
include the June 30, 1999, OMB definitions of MSAs and Primary MSAs 
(old definition MSAs/PMSAs), metropolitan counties deleted from old 
definition MSAs/PMSAs by HUD for FMR-setting purposes, and counties and 
county parts outside of old definition MSAs/PMSAs referred to as 
nonmetropolitan counties). Subareas of MSAs are assigned their own FMRs 
when the subarea 2000 Census Base FMR differs significantly from the 
MSA 2000 Census Base FMR (or, in some cases, where the 2000 Census base 
AMGI differs significantly from the MSA 2000 Census Base AMGI). MSA 
subareas, and the remaining portions of MSAs after subareas have been 
determined, are referred to as ``HUD Metro FMR Areas (HMFAs),'' to 
distinguish such areas from OMB's official definition of MSAs.
    In the New England states (Connecticut, Maine, Massachusetts, New 
Hampshire, Rhode Island, and Vermont), HMFAs are defined according to 
county subdivisions or minor civil divisions (MCDs), rather than county 
boundaries. However, since no part of an HMFA is outside an OMB-
defined, county-based MSA, all New England nonmetropolitan counties are 
kept intact for purposes of designating Nonmetropolitan DDAs.
    For the convenience of readers of this notice, the geographical 
definitions of designated Metropolitan DDAs are included in the list of 
DDAs.
    The Census Bureau provides no tabulations of 2000 Census data for 
Broomfield County, Colorado, an area that was created from parts of 
four Colorado counties when the city of Broomfield became a county in 
November 2001. Broomfield County is made up of former parts of Adams, 
Boulder, Jefferson, and Weld counties. The boundaries of Broomfield 
County are similar, but not identical to, the boundaries of the city of 
Broomfield at the time of the 2000 Census. In OMB metropolitan area 
definitions and, therefore, for purposes of this notice, Broomfield 
County is included as part of the Denver-Aurora, CO MSA. Census tracts 
in Broomfield County include the parts of the Adams, Boulder, 
Jefferson, and Weld County census tracts that were within the 
boundaries of the city of Broomfield according to the 2000 Census, plus 
parts of three Adams County tracts (85.15, 85.16, and 85.28), and one 
Jefferson County tract (98.25) that were not within any municipality 
during the 2000 Census but which, according to Census Bureau maps, are 
within the boundaries of Broomfield County. Data for Adams, Boulder, 
Jefferson, and Weld counties and their census tracts were adjusted to 
exclude the data assigned to Broomfield County and its census tracts.

[[Page 54905]]

Future Designations

    DDAs are designated annually as updated income and FMR data are 
made public. QCTs are designated periodically as new data become 
available, or as metropolitan area definitions change.

Effective Date

    The 2011 lists of DDAs are effective:
    (1) For allocations of credit after December 31, 2010; 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, 2010.
    If an area is not on a subsequent list of DDAs, the 2011 lists are 
effective for the area if:
    (1) The allocation of credit to an applicant is made no later than 
the end of the 365-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 365-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 defined in the 
Qualified Allocation Plan (QAP) of the LIHTC-allocating agency, or the 
annual per-capita credit authority of the LIHTC allocating agency, and 
is the reason the applicant must request multiple allocations over 2 or 
more years; and
    (3) All applications for LIHTC for buildings on the site are made 
in immediately consecutive years.
    Members of the public are hereby reminded that the Secretary of 
Housing and Urban Development, or the Secretary's designee, has sole 
legal authority to designate DDAs and QCTs, by publishing lists of 
geographic entities as defined by, in the case of DDAs, 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.
    The designations of ``Qualified Census Tracts'' under IRC Section 
42, published October 6, 2009 (74 FR 51304), remain in effect. The 
above language regarding 2011 and subsequent designations of DDAs also 
applies to the designations of QCTs published October 6, 2009 (74 FR 
51304) and to subsequent designations of QCTs.

Interpretive Examples of Effective Date

    For the convenience of readers of this notice, interpretive 
examples are provided below to illustrate the consequences of the 
effective date in areas that gain or lose DDA status. The examples 
covering DDAs are equally applicable to QCT designations.
    (Case A) Project A is located in a 2011 DDA that is NOT a 
designated DDA in 2012. A complete application for tax credits for 
Project A is filed with the allocating agency on November 15, 2011. 
Credits are allocated to Project A on October 30, 2012. Project A is 
eligible for the increase in basis accorded a project in a 2011 DDA 
because the application was filed BEFORE January 1, 2012 (the assumed 
effective date for the 2012 DDA lists), and because tax credits were 
allocated no later than the end of the 365-day period after the filing 
of the complete application for an allocation of tax credits.
    (Case B) Project B is located in a 2011 DDA that is NOT a 
designated DDA in 2012 or 2013. A complete application for tax credits 
for Project B is filed with the allocating agency on December 1, 2011. 
Credits are allocated to Project B on March 30, 2013. Project B is NOT 
eligible for the increase in basis accorded a project in a 2011 DDA 
because, although the application for an allocation of tax credits was 
filed BEFORE January 1, 2012 (the assumed effective date of the 2012 
DDA lists), the tax credits were allocated later than the end of the 
365-day period after the filing of the complete application.
    (Case C) Project C is located in a 2011 DDA that was not a DDA in 
2010. Project C was placed in service on November 15, 2010. A complete 
application for tax-exempt bond financing for Project C is filed with 
the bond-issuing agency on January 15, 2011. The bonds that will 
support the permanent financing of Project C are issued on September 
30, 2011. Project C is NOT eligible for the increase in basis otherwise 
accorded a project in a 2011 DDA, because the project was placed in 
service BEFORE January 1, 2011.
    (Case D) Project D is located in an area that is a DDA in 2011, but 
is NOT a DDA in 2012. A complete application for tax-exempt bond 
financing for Project D is filed with the bond-issuing agency on 
October 30, 2011. Bonds are issued for Project D on April 30, 2012, but 
Project D is not placed in service until January 30, 2013. Project D is 
eligible for the increase in basis available to projects located in 
2011 DDAs because: (1) One of the two events necessary for triggering 
the effective date for buildings

[[Page 54906]]

described in Section 42(h)(4)(B) of the IRC (the two events being bonds 
issued and buildings placed in service) took place on April 30, 2012, 
within the 365-day period after a complete application for tax-exempt 
bond financing was filed, (2) the application was filed during a time 
when the location of Project D was in a DDA, and (3) both the issuance 
of the bonds and placement in service of Project D occurred after the 
application was submitted.
    (Case E) Project E is a multiphase project located in a 2011 DDA 
that is NOT a designated DDA in 2012. The first phase of Project E 
received an allocation of credits in 2011, pursuant to an application 
filed March 15, 2011, which describes the multiphase composition of the 
project. An application for tax credits for the second phase Project E 
is filed with the allocating agency by the same entity on March 15, 
2012. 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, 
2012. 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 2011 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 2011 DDA 
that is NOT a designated DDA in 2012. The first phase of Project F 
received an allocation of credits in 2011, pursuant to an application 
filed March 15, 2011, 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, 2013. Credits are allocated to the second 
phase of Project F on October 30, 2013. 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 2011 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

    In accordance with 40 CFR 1508.4 of the regulations of the Council 
on Environmental Quality and 24 CFR 50.19(c)(6) of HUD's regulations, 
the policies and procedures contained in this notice provide for the 
establishment of fiscal requirements or procedures that do not 
constitute a development decision affecting the physical condition of 
specific project areas or building sites and, therefore, are 
categorically excluded from the requirements of the National 
Environmental Policy Act, except for extraordinary circumstances, and 
no Finding of No Significant Impact is required.

Federalism Impact

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

    Dated: September 1, 2010.
Raphael W. Bostic,
Assistant Secretary for Policy Development and Research.
[FR Doc. 2010-22535 Filed 9-8-10; 8:45 am]
BILLING CODE 4210-67-P