Which year’s qualified census tract designations (“QCT”) are applicable under ARP and how should a city address changes in QCTs during the ARP-funded project?

Qualified Census Tracts (“QCTs”) are a common, readily accessible, and geographically granular method of identifying communities with a large proportion of low-income residents. Using an existing measure may speed implementation and decrease administrative burden, while identifying areas of need at a highly localized level.[1]

As per the U.S. Department of Housing and Urban Development (“HUD”) Federal Register Notice dated September 9, 2020, Statutorily Mandated Designation of Difficult Development Areas (“DDAs”) and Qualified Census Tracts for 2022, Section VIII Future Delegations, “HUD designates QCTs annually as new income and poverty rate data are released.”[2] In addition, “the 2022 lists of QCTs and DDAs are effective:

• For allocations of credit after December 31, 2021; or
• 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:

• 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 Low-Income Housing Tax Credit (“LIHTC”) allocating agency, and the submission is made before the effective date of the subsequent lists.

For purposes of IRC Section 42(h)(4), if:

• 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
• 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.”[3]

As outlined above, a QCT designation is good for at least two years (730 days after submission of an LIHTC application). Municipalities should check HUD notices to ensure they are using the most recent available data and should note this requirement in any policies and procedures for the program. As projects are implemented over a long period of time (implementation period), the municipality will likely only need to add the additional QCT designations. All previous designations will still apply, and they will not change going forward.[4]

The HUD, QCTs and DDAs can be located at: https://www.huduser.gov/portal/sadda/sadda_qct.html.

New or Modified Guidance

The Final Rule issued by the U.S. Department of the Treasury (“Treasury”) states that many different geographic, income-based, or poverty-based presumptions can continue to be used to designate disproportionately impacted populations or households. The Final Rule allows recipients to also presume that certain low-income households were disproportionately impacted by the pandemic, allowing additional flexibility to provide services to underserved households or communities, even those that may not be located within a QCT.[5] Data on household incomes is readily available at varying levels of geographic granularity (e.g., Census Tracts, counties).

Treasury notes that recipients may also identify other households, populations, and communities disproportionately impacted by the pandemic, in addition to those presumed to be disproportionately impacted.[6] The Final Rule recognizes categorical eligibility for the following programs and populations:

Impacted households: The Treasury will recognize a household as impacted if it otherwise qualifies for any of the following programs:

• Children’s Health Insurance Program (CHIP);
• Childcare Subsidies through the Child Care and Development Fund (CCDF) Program;
• Medicaid;
• National Housing Trust Fund (HTF), for affordable housing programs only; or
• Home Investment Partnerships Program (HOME), for affordable housing programs only.[7]

Disproportionately impacted households: The Treasury will recognize a household as disproportionately impacted if it otherwise qualifies for, or participates in, any of the following programs:

• Temporary Assistance for Needy Families (TANF);
• Supplemental Nutrition Assistance Program (SNAP);
• Free and Reduced-Price Lunch (NSLP) and/or School Breakfast (SBP) programs;
• Medicare Part D Low-income Subsidies;
• Supplemental Security Income (SSI);
• Head Start and/or Early Head Start;
• Special Supplemental Nutrition Program for Women, Infants, and Children (WIC);
• Section 8 Vouchers;
• Low-Income Home Energy Assistance Program (LIHEAP);
• Title I school attendance; or
• Pell Grants.[8]

Further, the Final Rule identifies a pathway to designate other disproportionately impacted classes. Recipients may identify classes of households, communities, small businesses, nonprofits, or populations that have experienced a disproportionate impact based on academic research or government research publications, through analysis of their own data or through analysis of other existing data sources.[9] To augment their analysis, or when quantitative data is not readily available, recipients may also consider qualitative research and sources like resident interviews or feedback from relevant state and local agencies, such as public health departments or social services departments. In both cases, recipients should consider the quality of the research, data, and applicability of analysis to their determination.[10]

Last Revised: January 26, 2022