[Federal Register Volume 64, Number 128 (Tuesday, July 6, 1999)]
[Notices]
[Pages 36389-36391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17180]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-4401-N-02]
Change in Effective Date in 1999 Notice for Designation of
Difficult Development Areas Under Section 42 of the Internal Revenue
Code of 1986
AGENCY: Office of the Secretary, HUD.
ACTION: Notice.
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SUMMARY: This document amends the Notice for the Designation of
Difficult Development Areas, published December 9, 1998 (the 1999
Notice,) by extending 1998 eligibility for areas that were designated
as 1998 Difficult Development Areas in the Notice published October 21,
1997 (the 1998 Notice) but were not designated as difficult development
areas in the 1999 Notice. This amendment is limited to buildings
described in section 42(h)(4)(B) of the Internal Revenue Code of 1986
(the Code) and located in a 1998 Difficult Development Area. The
amendment is necessary because publication of the 1999 Notice three
weeks prior to the effective date of the 1999 Notice did not provide
adequate notice to affected entities. This Notice does not change the
effective date in the 1999 Notice for (1) areas designated as Difficult
Development Areas in the 1999 Notice that were not Difficult
Development Areas in the 1998 Notice, or (2) that were Difficult
Development Areas in both the 1998 Notice and the 1999 Notice.
FOR FURTHER INFORMATION CONTACT: With questions related narrowly to the
issue of the effective date for areas that lost 1998 Difficult
Development Area designations, Frederick J. Eggers, Deputy Assistant
Secretary for Economic Affairs, Office of Policy Development and
Research, 451 Seventh Street, SW, Washington, DC 20410, telephone (202)
708-3080, e-mail Frederick J.__Eggers@hud.gov. With questions on how
areas are designated and on geographic definitions, Kurt G. Usowski,
Economist, Division of Economic Development and Public Finance, Office
of Policy Development and Research, Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC 20410, telephone
(202) 708-0426, e-mail Kurt G.__Usowski@hud.gov. A text telephone is
available for persons with hearing or speech impairments at (202) 708-
9300. (These are not toll-free telephone numbers.) Additional copies of
this notice are available through HUDUSER at (800) 245-2691 for a small
fee to cover duplication and mailing costs.
Copies Available Electronically: This notice is available
electronically on the Internet (World Wide Web) at http://
www.huduser.org/ under the heading ``Data Available from HUDUser.''
SUPPLEMENTARY INFORMATION:
Background
On October 21, 1997 (62 FR 54732), HUD published in the Federal
Register a Notice Designating Difficult Development Areas for calendar
year 1998 (the 1998 Notice). The 1998 Notice provided that, in the case
of a building described in section 42(h)(4)(B) of the Code, the list
(of Difficult Development Areas) is effective if the bonds are issued
and the building is placed in service after December 31, 1997.
On December 9, 1998 (64 FR 68116), HUD published in the Federal
Register the Notice Designating Difficult Development Areas for
calendar year 1999 (the 1999 Notice). The 1999 Notice provided that, in
the case of a building described in section 42(h)(4)(B) of the Code,
the list (of Difficult Development Areas) is effective if the bonds are
issued and the building is placed in service after December 31, 1998.
Section 42(d)(5)(C) of the Code defines a Difficult Development
Area as any area designated by the Secretary of HUD as an area that has
high construction, land, and utility costs relative to the area gross
median income. All designated Difficult Development Areas in
metropolitan statistical areas or primary metropolitan statistical
areas (MSAs/PMSAs) may not contain more than 20 percent of the
aggregate population of all MSAs/PMSAs, and all designated areas not in
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metropolitan areas may not contain more than 20 percent of the
aggregate population of all nonmetropolitan counties. In the case of
buildings located in designated Difficult Development Areas, eligible
basis can be increased by up to 130 percent of what it would otherwise
be. This means that the available Low-Income Housing Tax Credit also
can be increased by up to 30 percent.
HUD typically issues a Notice in the Federal Register early in the
last quarter of a calendar year designating Difficult Development Areas
for the forthcoming calendar year. HUD uses a ranking procedure to
select Difficult Development Areas subject to the 20 percent population
cap. Because income and housing cost conditions change, new areas are
added to the list of designated Difficult Development Areas each year
and some old areas are dropped from the list. The list published on
December 9, 1998, dropped 9 metropolitan areas and 35 nonmetropolitan
counties from the list of Difficult Development Areas and added 3
metropolitan areas and 40 nonmetropolitan counties to the list of
Difficult Development Areas.
Determination
HUD recognizes that, with every new designation of Difficult
Development Areas, some metropolitan areas and nonmetropolitan counties
lose their designation and rental projects planned in these areas lose
their eligibility for the extra credit. State agencies and rental
project developers have adjusted to a system in which the future
availability of the extra credits is uncertain. HUD attempts to publish
the designation Notice early enough to allow State agencies and
developers to make informed decisions for the forthcoming year. HUD did
not publish the 1999 Notice until December 9, 1998, because the
Department had to revise the list after section 508 of the Quality
Housing and Work Responsibility Act of 1998 (Pub. L. 105-276, approved
October 21, 1998), changed the rules for designating Difficult
Development Areas as the rules apply to two counties. The late
publication of the 1999 Notice impeded the effectiveness of the
Difficult Development Area feature of the Low-Income Housing Tax
Credit. Accordingly, HUD has decided to amend the effective date
published in the 1999 Notice.
This amendment extends Difficult Development Area designations in
the 1998 Notice through August 20, 1999 for any building described in
section 42(h)(4)(B) of the Code that was located in a Difficult
Development Area in the 1998 Notice, but not in the 1999 Notice if the
bonds are issued or the building is placed in service before August 20,
1999. Therefore, for example, a building described in section
42(h)(4)(B) of the Code that was located in a Difficult Development
Area designated in the 1998 Notice, but not located in a Difficult
Development Area designated in the 1999 Notice, would be deemed to be
located in a Difficult Development Area if either the bonds are issued
or the building is placed in service from January 1, 1998 through
August 20, 1999.
This Notice is consistent with section 42(d)(5)(C)(iii)(II) of the
Code, which limits the cumulative population of metropolitan Difficult
Development Areas to 20 percent of the cumulative population of all
metropolitan areas and the cumulative population of nonmetropolitan
Difficult Development Areas to 20 percent of the cumulative population
of all nonmetropolitan counties. The 20 percent cap applies only to
Difficult Development Area designations made by HUD for a particular
year. The extension of time for the 1998 Difficult Development Areas
does not reflect a determination by HUD that an aggregate population
substantially in excess of 20 percent of the metropolitan or
nonmetropolitan population should be treated as Difficult Development
Areas for 1998. The notice is a ministerial administrative
accommodation which may, for a limited period of time, result in an
aggregate population slightly exceeding 20 percent of either the
metropolitan or nonmetropolitan population being designated for that
limited period of time. This temporary de minimis overlap of two
separate Difficult Development Area designations, each of which
complied with the 20 percent cap for the respective years in which
those designations were made, is consistent with the statutory intent
of the 20 percent limitation.
Moreover, HUD has consistently interpreted the 20 percent caps as
permitting minimal overruns because it is impossible to determine
whether the 20 percent cap has been exceeded, so long as the apparent
excess is small, due to measurement error. See 62 FR 203. Despite the
care and effort involved in a decennial census, the Census Bureau and
users of census data recognize that the population counts for a given
area are not precise. The actual extent of the measurement error is
unknown. Thus, there can be errors in both the numerator and the
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 variations
above the 20 percent limit. Here, similarly, a strict application of
the 20 percent cap would prevent the proposed accommodation and prevent
the efficient administration of the statute.
Effective Date
This amendment is effective immediately.
A governmental unit continues to be obligated under Sec. 42(m)(2)
of the Code to ensure that the amount of credit attributable to a
project affected by this Notice does not exceed the amount necessary
for the financial feasibility of the project and its viability as a
qualified low-income housing project throughout the credit period.
Other Matters
Environmental Impact
In accordance with 40 CFR 1508.4 of the CEQ regulations and 24 CFR
50.19(c)(6) of the HUD regulations, the policies and procedures
contained in this notice provide for the establishment of fiscal
requirements or procedures which do not constitute a development
decision that affects 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 a Finding of No Significant is not
required.
Regulatory Flexibility Act
In accordance with 5 U.S.C. 605(b) (the Regulatory Flexibility
Act), the undersigned hereby certifies that this notice does not have a
significant economic impact on a substantial number of small entities.
The notice involves the designation of Difficult Development Areas as
required by section 42 of the Code, as amended, for use by political
subdivisions of the States in allocating the Low-Income Housing Tax
Credit. This notice places no new requirements on the States, their
political subdivisions, or the applicants for the credit.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this notice will not have any substantial direct effects
on States or their political subdivisions, or the relationship between
the Federal government and the States, or on the
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distribution of power and responsibilities among the various levels of
government. As a result, the notice is not subject to review under the
order. The notice merely designates Difficult Development Areas as
required under section 42 of the Code, as amended, for the use by
political subdivisions of the States in allocating the Low-Income
Housing Tax Credit. The notice also details the technical methodology
used in making such designations.
Dated: July 1, 1999.
Andrew M. Cuomo,
Secretary.
[FR Doc. 99-17180 Filed 7-1-99; 2:55 pm]
BILLING CODE 4210-32-P
