E7-20525. Use of Indian Housing Block Grant Funds for Rental Assistance in Low-Income Housing Tax Credit Projects

AGENCY:

Office of the Assistant Secretary for Public and Indian Housing, HUD.

ACTION:

Final rule.

SUMMARY:

This final rule amends the Indian Housing Block Grant (IHBG) program regulations to specify the conditions under which IHBG funds may be used for project-based or tenant-based rental assistance. The final rule clarifies that such rental assistance may be provided in a manner consistent with assistance provided under section 8 of the United States Housing Act of 1937 on behalf of a tenant receiving assistance under the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA). This final rule follows publication of a June 8, 2007, proposed rule, and adopts the proposed rule without change. HUD received one public comment on the June 8, 2007, proposed rule, expressing unqualified support for the proposed regulatory changes.

DATES:

Effective Date: November 19, 2007.

FOR FURTHER INFORMATION CONTACT:

Deborah Lalancette, Director, Office of Grants Management, Office of Native American Programs, Department of Housing and Urban Development, 1670 Broadway, 23rd Floor, Denver, CO 80202-4801; telephone [phone] (this is not a toll-free number). Persons with hearing or speech impairments may access this number through TTY by calling the toll-free Federal Information Relay Service at [phone].

SUPPLEMENTARY INFORMATION:

I. Background

Under the Indian Housing Block Grant (IHBG) program, HUD makes assistance available to eligible Indian tribes for affordable housing activities. The amount of assistance made available to each Indian tribe is determined using an allocation formula, developed with the active participation of Indian tribes and using negotiated rulemaking procedures. An Indian tribe (or its tribally designated housing entity (TDHE)) may use its IHBG funds for a wide range of affordable housing activities, including the provision of project-based or tenant-based rental assistance for eligible families. The regulations governing the IHBG program are located in part 1000 of HUD's regulations in title 24 of the Code of Federal Regulations.

In 1986, Congress amended the Internal Revenue Code to create the Low Income Housing Tax Credit (LIHTC) (see 26 U.S.C. 42), a tax incentive to promote the development of affordable rental housing. Eligible projects receive Federal income tax credits over a 10-year period using a formula that, in part, takes into account certain eligible costs called “eligible basis.” Generally, Federal grants used with respect to a building, or for its operation thereof, result in a dollar-for-dollar decrease in eligible basis. However, the Internal Revenue Service (IRS) has recognized that certain types of Federal rental assistance payments are not Federal grants that require a reduction in a building's eligible basis. They include payments made pursuant to Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) (Section 8) and comparable programs or methods of rental assistance designated by the Secretary of the Treasury by publication in the Federal Register or in the Internal Revenue Bulletin. (See the income tax regulations at 26 CFR 1.42-16(b).)

HUD rental assistance programs (such as the project-based voucher program) address the requirements that apply when such program rental assistance is provided to tenants residing in LIHTC projects. However, the IHBG program regulations are silent with regard to the use of IHBG rental assistance in these projects. HUD has received requests from several Indian tribes and TDHEs that are IHBG recipients and wish to use their IHBG funds for LIHTC projects.

On June 8, 2007 (72 FR 31944), in response to these tribal requests, HUD published a proposed rule for public comment to specify the conditions under which IHBG funds may be used for tenant-based or project-based rental assistance.

II. This Final Rule

This final rule follows publication of the June 8, 2007, proposed rule and adopts the proposed rule without change. The public comment period on the proposed rule closed on August 7, 2007. HUD received a single public comment from a state housing finance agency, expressing unqualified support for the proposed regulatory changes.

The final rule adds a new § 1000.103 to clarify that IHBG funds may be used for project-based or tenant-based rental assistance. Further, the final rule clarifies that IHBG funds may be used for project-based or tenant-based rental assistance that is administered in a manner consistent with Section 8. Only the Secretary of the Treasury may make a determination that project-based or tenant-based rental assistance complies with the income tax regulations at 26 CFR 1.42-16(b) and, therefore, will not reduce the building's eligible basis. This final rule will allow for such determination to be made. This final rule does not limit the range of eligible activities that an Indian tribe or TDHE may undertake. It merely clarifies one permissible use of IHBG funds.

III. Findings and Certifications

Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. This rule would clarify that IHBG funds may be used for project-based or tenant-based rental assistance that is provided in a manner consistent with assistance provided under Section 8 of the United States Housing Act of 1937 on behalf of a tenant receiving assistance under NAHASDA. This rule would not impose new requirements on IHBG program participants. Accordingly, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities.

Environmental Impact

A Finding of No Significant Impact (FONSI) with respect to the environment was made at the proposed rule stage in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI remains applicable to this final rule and is available for public inspection between the hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the rule docket file by calling the Regulations Division at [phone] (this is not a toll-free number).

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits, to the extent practicable and permitted by law, an agency from promulgating a regulation that has federalism implications and either imposes substantial direct compliance costs on state and local governments and is not required by statute, or preempts state law, unless the relevant requirements of section 6 of the Executive Order are met. This rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt State law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments, and on the private sector. This rule would not impose any federal mandate on any state, local, or tribal government, or on the private sector, within the meaning of UMRA.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance number applicable to the program affected by this rule is 14.862.

List of Subjects in 24 CFR Part 1000

• Aged, community development block grants
• Grant programs—housing and community development
• Grant programs—Indians
• Indians
• Individuals with disabilities
• Public housing
• Reporting and recordkeeping requirements

For the reasons described in the preamble, HUD amends 24 CFR part 1000 to read as follows:

PART 1000—NATIVE AMERICAN HOUSING ACTIVITIES

1. The authority citation for part 1000 continues to read as follows:

Authority: 25 U.S.C. 1401 et seq. and 42 U.S.C. 3535(d).

2. Add § 1000.103 to read as follows:

§ 1000.103

How may IHBG funds be used for tenant-based or project-based rental assistance?

(a) IHBG funds may be used for project-based or tenant-based rental assistance.

(b) IHBG funds may be used for project-based or tenant-based rental assistance that is provided in a manner consistent with section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f).

(c) IHBG funds used for project-based or tenant-based rental assistance must comply with the requirements of NAHASDA and this part.

Dated: October 11, 2007.

Orlando J. Cabrera,

Assistant Secretary for Public and Indian Housing.