BEFORE THE DEPARTMENT OF COMMERCE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 8.111.602 and 8.111.603 pertaining to the low income housing tax credit program
NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT
TO: All Concerned Persons
1. On November 28, 2012, at 9:00 a.m., the Department of Commerce will hold a public hearing in Room 504A of the Park Avenue Building at 301 South Park Avenue, Helena, Montana, to consider the proposed amendment of the above-stated rules.
2. The Department of Commerce will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact Department of Commerce no later than 5:00 p.m. on November 20, 2012, to advise us of the nature of the accommodation that you need. Please contact Paula Loving, Board of Housing, Department of Commerce, 301 South Park Avenue, P.O. Box 200528, Helena, Montana, 59620-0528; telephone (406) 841-2840; fax (406) 841-2841; TDD (406) 841-2702; or e-mail email@example.com.
3. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:
(1) and (2) remain the same.
(3) "QAP" means the board's "Low Income Housing Tax Credit Program
2012 2013 Qualified Allocation Plan," which sets forth the application process, evaluation criteria, and selection criteria considerations used by the board for determining housing priorities and the evaluation and selection of projects to receive awards for allocation of tax credits for calendar year 2012 2013, copies of which may be obtained by contacting the Board of Housing by mail at P.O. Box 200528, Helena, MT 59620-0528, by telephone at (406) 841-2845 or (406) 841-2838, or at the board's web site www.housing.mt.gov.
(4) remains the same.
AUTH: 90-6-106, MCA
IMP: 90-6-104, MCA
REASON: The proposed amendments to ARM 8.111.602 are necessary to update the Qualified Allocation Plan (QAP) definition to reference the 2013 Qualified Allocation Plan for the Low Income Housing Tax Credit Program and to more accurately describe the contents of the QAP. Low income housing tax credits are allocated by the federal government to the states, according to their population, for allocation to particular buildings by each state's housing credit agency. The Low Income Housing Tax Credit Program (Program) is administered and tax credits are allocated by a state's housing credit agency. The Montana Board of Housing is Montana's housing credit agency for purposes of the Program. Federal law requires that the tax credits allocated to the state by the federal government must be allocated by the state pursuant to a "qualified allocation plan" or "QAP".
Prior to publication of this notice, the board conducted several public meetings to consider suggestions and comments regarding the provisions of the 2013 QAP. Thereafter, at its August 16, 2012 meeting, the board considered and approved public notice and distribution of the proposed 2013 QAP. Public notice of the proposed 2013 QAP and of the opportunity for public comment was published and distributed on September 5, 2012. At its October 15, 2012 meeting in Missoula, Montana, after considering written and oral public comment on the proposed 2013 QAP and approving various changes in response to comments, the board approved the 2013 QAP for submission to and approval by the Montana Governor, as required by the federal tax credit statute, 26 U.S.C. § 42. The 2013 QAP was submitted to the Governor by the board on October 18, 2012 and was approved by the Governor.
A copy of the 2013 QAP is available on the internet at
http://housing.mt.gov/About/MF/lihtcallocation.mcpx or by requesting a copy from: Mary Bair, Board of Housing, Department of Commerce, 301 South Park Avenue, P.O. Box 200528, Helena, Montana, 59620-0528; telephone (406) 841-2845; fax (406) 841-2841; or e-mail firstname.lastname@example.org.
In addition to considering comment and approving revisions in other areas, at its October 15, 2012 meeting, the board addressed one particularly urgent issue. The board received comment regarding the proposed 2013 QAP from applicants that were awarded tax credits in 2012. The viability of projects that received awards of 2012 tax credits has been seriously threatened as a result of the filing of a lawsuit by an unsuccessful 2012 applicant. Because of uncertainty resulting from the pending lawsuit, potential investors have declined to commit to or advance funds for the projects. If these projects are not able to move forward very soon, in some cases within the next 30 days, they may lose their window of opportunity to proceed. As a result, the corresponding 2012 tax credits could revert to the federal government and become unavailable for allocation in the state of Montana. It is unknown when the litigation will be resolved.
These commenters requested that language be added to the 2013 QAP to allow allocation of tax credits from a future year in the event that a court were to invalidate prior tax credit awards or order an award of tax credits to an unsuccessful applicant. One commenter provided an example of such a forward allocation provision from another state.
At its October 15, 2012 meeting, the board considered and approved 2013 QAP language providing a Corrective Award set-aside provision to make available sufficient additional credits for any award required by a court based upon a legal challenge to a prior award determination. This language creates a priority set-aside of credits to fund such awards, first using returned or unreserved credits from a prior year and then current year credits.
This set-aside language provides for an award of tax credits to a prior unsuccessful applicant that has obtained a court order requiring an award. The language also provides for an award from this set-aside to an applicant who previously received an award and entered into a reservation agreement with the board prior to the court order, where the prior award has been invalidated by a court. An award could be made to such applicant from the set-aside unless a court has determined that such applicant was not eligible or qualified to receive an award under the applicable QAP.
The language allows such awards to be made at any time during the year at a meeting of the board upon consideration of a final court order satisfying the criteria of the QAP set-aside language. Such an award is, of course, conditioned upon IRS authorization and allocation of tax credits for the state of Montana for the applicable year. The language also provides that the board will allocate credits in accordance with reservation agreements entered into by the board based upon prior awards, unless the board determines that it is precluded by court order from doing so.
This Corrective Award language is necessary to provide a mechanism and source of credits to address court challenges to tax credit awards. To meet the strict timelines for tax credit carryover and placement of projects in service, projects must move forward with development and construction quickly and diligently following an award of tax credits. These timelines cannot accommodate delay until litigation is resolved, which may take many months or even years. It is impractical at best to delay development and construction of projects receiving current awards until litigation is resolved. The Corrective Award addresses this problem by providing for an award from a future period to address the results of any legal challenge.
The Corrective Award language is also necessary to assure awardees and their investors to the greatest extent possible that successful awardees will receive tax credit allocations despite legal challenges brought by unsuccessful applicants. Although the board believes that the currently pending litigation lacks merit, the mere existence of such litigation and its attendant uncertainties has prevented projects from closing their investment transactions or receiving investor advances, effectively halting development and construction.
The approved language provides such assurance, first by making unawarded future credits available, so that there is no need to take previously awarded credits from a successful applicant so that the credits can be awarded to a challenger. The language provides further assurance by allowing the board to make a new allocation to previous successful awardees where the prior award has been invalidated by a court, unless the court has determined that such awardee did not meet the minimum threshold requirements for an award. The language also assures that the board will allocate credits in accordance with prior reservation agreements, unless precluded by court order from doing so.
The Corrective Award set-aside provisions are available for review in the above-referenced 2013 QAP at pages 18-20 (Section 7, Set Asides), with related language included at page 18 (Section 5 under "Requesting Additional Credits" and Section 6 regarding committing tax credits from future years) and p. 31 (Section 9 under "Reservation").
This Corrective Award language is necessary to provide a mechanism and source of credits to address court challenges to tax credit awards, and to provide the assurances necessary for applicants awarded tax credits in 2012 to obtain the necessary investment and complete their projects in time to receive the tax credit allocations. Without such provisions, some or all of the projects awarded credits are unlikely to be built, resulting in loss of the additional housing units expected to be made available to low income Montanans through the awarded credits.
The proposed amendment is necessary to allow for the tax credit application and allocation process in 2013. The 2013 QAP will govern the tax credit application and award process for the 2013 tax credit application cycle.
8.111.603 TAX CREDIT ALLOCATION PROCEDURE
(1) through (4) remain the same.
(5) At its regularly scheduled board meeting in the month of April or May of each year, the board will hear public comment and
hold a hearing to consider the allocation award of tax credits credit allocations in accordance with to those projects the applications for which meet the minimum criteria of the QAP. The award of tax credit allocations is not a contested case and the award hearing meeting is not a contested case hearing under Title 2, chapter 4, part 6, MCA.
(6) After scoring and formulation of recommendations by board staff, applicants will not be permitted to make additional presentations to the board but should be available to the board to answer questions regarding their respective applications and shall be provided an opportunity at the board meeting described in (5) to respond to any negative comments regarding their respective projects or applications.
(7) remains the same.
AUTH: 90-6-106, MCA
IMP: 90-6-104, MCA
REASON: The proposed amendments to ARM 8.111.603 are necessary to revise the award process to assure that applicants are provided an opportunity to respond to any negative comments presented to the board regarding their respective projects or applications. Without such an opportunity, negative comments may unfairly raise questions or suggest deficiencies regarding projects. Applicants should be provided opportunity to respond to negative comments to assure that the board is provided with complete information regarding any such issues.
The proposed amendments are also necessary to clarify the nature of the tax credit award process. There is no provision of law that requires that tax credits be awarded through a contested case hearing under the Montana Administrative Procedure Act (MAPA) and the current rule specifically provides that the award is not a contested case hearing. However, one unsuccessful applicant has argued that the word "hearing" in this rule constitutes a legal requirement for a hearing within the meaning of the MAPA definition of "contested case" in Mont. Code Ann. § 2-4-102(4). The intent of the rule is to provide for a board meeting with an opportunity for public comment, rather than a litigation-type hearing under MAPA contested case procedures. Accordingly, the proposed changes removing the misconstrued term "hearing" are necessary to further clarify that the award process is not a MAPA contested case hearing.
4. Concerned persons may submit their data, views, or arguments concerning the proposed action in writing to: Mary Bair, Board of Housing, Department of Commerce, 301 South Park Avenue, P.O. Box 200528, Helena, Montana, 59620-0528; telephone (406) 841-2845; fax (406) 841-2841; or e-mail email@example.com, and must be received no later than 5:00 p.m., December 6, 2012.
5. Mary Bair, Department of Commerce, has been designated to preside over and conduct this hearing.
6. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in section 4 above or may be made by completing a request form at any rules hearing held by the department.
7. An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.
8. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.
/s/ MARTY TUTTLE /s/ DORE SCHWINDEN
Marty Tuttle DORE SCHWINDEN
Rule Reviewer Director
Department of Commerce
Certified to the Secretary of State October 30, 2012.