SECTION 7. DRAFTING

INFORMATION

The principal author of this notice is Lynlee Baker of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, contact Ms. Baker at (202) 317-6937 (not a toll-free number).

Bulletin No. 2016–52 913 December 27, 2016

Satisfying the Required Qualified Allocation Plan Preference in Section 42(m)(1)(B)(ii)(III) (Concerning Concerted Community Revitalization Plans)

Notice 2016–77

PURPOSE

This notice reminds taxpayers that a project is not described in § 42(m)(1) (B)(ii)(III) of the Internal Revenue Code unless its development contributes to a concerted community revitalization plan.

BACKGROUND

Section 42 sets forth rules for determining a building’s amount of the lowincome housing credit (LIHTC), which § 38 allows as a credit against income tax.

Section 42(h)(1)(A) provides that the amount of the credit determined under § 42 for any taxable year for any building may not exceed the housing credit dollar amount allocated to the building.

Section 42(m) requires every allocation of housing credit dollar amount to be made pursuant to a qualified allocation plan (QAP). The Code specifies certain preferences and selection criteria that each QAP must contain.

Section 42(m)(1)(B)(ii) requires every QAP to contain three preferences. Under the third of these, the QAP must give “preference in allocating housing credit dollar amounts among selected projects to . . . projects which are located in qualified census tracts . . . and the development of which contributes to a concerted com- munity revitalization plan . . . .” Section 42(m)(1)(B)(ii)(III) (emphasis added). Qualified census tracts are designated by the U.S. Department of Housing and Urban Development and are characterized by either the percentage of households below a certain income threshold or by a poverty rate above a certain threshold.

In some cases, state or local agencies allocating housing credit dollar amounts have given preference to projects that are located in qualified census tracts without regard to whether the projects contribute to a concerted community revitalization

plan. In some other cases, because development of new multifamily housing benefits a neighborhood, the development of a LIHTC project, without more, has been treated as if it were such a plan.

DISCUSSION

Placing LIHTC projects in qualified census tracts risks exacerbating concentrations of poverty. Therefore, § 42(m)(1) (B)(ii)(III) grants a preference to that placement only when there is an added benefit to the neighborhood in the form of the project’s contribution to a concerted community revitalization plan.

Although the Department of the Treasury and the Internal Revenue Service (the Service) have not issued guidance defining the term “concerted community revitalization plan,” the preference fails to apply unless, not later than the allocation, a plan exists that contains more components than the LIHTC project itself.

REQUEST FOR COMMENTS

The Department of the Treasury and the Service are considering providing guidance to clarify the preference in § 42(m)(1)(B)(ii)(III), and they request comments from the public regarding the contents of that guidance. Comments should be submitted by February 10, 2017. Comments may be mailed to:

Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2016– 77) Room 5203 P.O. Box 7604 Ben Franklin Station Washington, D.C. 20044

or hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Courier’s Desk Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2016– 77) 1111 Constitution Avenue, N.W. Washington, D.C. 20224

Alternatively, persons may submit comments electronically via e-mail to the following address:

Notice.Comments@irscounsel.treas.gov . Persons should include “Notice 2016–77”

in the subject line. All comments submitted by the public will be available for public inspection and copying in their entirety.

DRAFTING INFORMATION

The principal author of this notice is James W. Rider, Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice, please contact Mr. Rider at (202) 317-4137 (not a toll-free number).

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Notice 2016–78

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT RATES

Generally, except for certain plans under sections 104 and 105 of the Pension Protection Act of 2006 and CSEC plans under § 414(y), § 430 of the Code specifies the minimum funding requirements that apply to single-employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2) (C)(iv), these segment rates are adjusted by the applicable percentage of the 25year average segment rates for the period ending September 30 of the year preced

December 27, 2016 914 Bulletin No. 2016–52

ing the calendar year in which the plan year begins. ¹ However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from November 2016 data is in Table I at the end of this

Applicable

Month

First Segment

notice. The spot first, second, and third segment rates for the month of November 2016 are, respectively, 1.79, 3.80, and 4.71. The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h) (2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in

2015, 2016, and 2017 were published in Notice 2014–50, 2014–40 I.R.B. 590, Notice 2015–61, 2015–39 I.R.B. 408, and Notice 2016–54, 2016–40 I.R.B. 429, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for December 2016 without adjustment for the 25year average segment rate limits are as follows:

Third Segment

Second Segment

December 2016 1.55 3.76 4.73

Based on § 430(h)(2)(C)(iv), the 24month averages applicable for December

2016 adjusted to be within the applicable minimum and maximum percentages of

the corresponding 25-year average segment rates, are as follows:

For Plan

Years Beginning

Segment Rates

Applicable First Second

Adjusted 24-Month Average

Applicable First Second Third

In Month Segment Segment Segment

2015 December 2016 4.72 6.11 6.81

2016 December 2016 4.43 5.91 6.65

2017 December 2016 4.16 5.72 6.48

Second Segment

In

Month

First Segment

30-YEAR TREASURY SECURITIES INTEREST RATES

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6) (E)(ii)(I) provides that the interest rate used to calculate current liability for this

purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for November 2016 is 2.86 percent. The Service determined this rate as the average of the daily determinations of yield on the 30

year Treasury bond maturing in August 2046 determined each day through November 9, 2016 and the yield on the 30year Treasury bond maturing in November 2046 determined each day for the balance of the month. For plan years beginning in the month shown below, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rate used to calculate current liability are as follows:

1Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)).

Bulletin No. 2016–52 915 December 27, 2016

For Plan Years

Beginning in

30-Year Treasury Weighted

Permissible Range

Month Year Average 90% to 105%

December 2016 2.91 2.61 3.05

MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates

First Segment

computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value seg

Second Segment

ment rates determined for November 2016 are as follows:

Third Segment

1.79 3.80 4.71

DRAFTING INFORMATION

The principal author of this notice is Tom Morgan of the Office of the Associ

ate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS participated in the development of this guidance. For further

information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 202-317-8698 (not toll-free numbers).

December 27, 2016 916 Bulletin No. 2016–52

Table I Monthly Yield Curve for November 2016

Derived from November 2016 Data.

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

Bulletin No. 2016–52 917 December 27, 2016

2017 Standard Mileage Rates

Notice 2016–79