Td 8023

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/ V ol. 50, No. 89 / W ed nesd ay, M ay 8, 1985 / R ules and R egulations

accounts. Those temporary regulations
also served as the text of a notice of
proposed rulemaking that appeared in
the same issue of the Federal Register at
50 FR 3351.

Need for Correction
As published, T.D. 8008 included
language that was not intended and
omitted language that was intended to
be included.

Correction of Publication
Accordingly, the publication of
Treasury Decision 8008, which was the
subject of FR Doc. 85-1817, is corrected
as follows:
§ 1.1092(b)-3T

[Corrected]

1. On page 3325, in the third column,
in Example (6) of paragraph (b)(2) of
§ 1.1092(b)-3T, in the first sentence, the
language “non-section 1256 loss” is
removed and the language “non-section
1256 gain” is added in its place.
2. On page 3325, in the third column,
in Example (6) of paragraph (b)(2) of
§ 1.1092(b)-3T, in the fourth sentence,
the language “60 percent long-term
capital gain and 40 percent short-term
capital gain because it is attributable to
the section 1256 position” is removed
and the language “60 percent long-term
capital loss and 40 percent short-term
capital loss because it is attributable to
the section 1256 contract” is added in its
place.
3. On page 3326, in the third column,
in Example (4) of paragraph (b)(4) of
§ 1.1092(b)-3T, in the first sentence, the
language “section 1256 contract and
non-section 1256 position were entered
into on December 1,1985, and the” is
added immediately after the language
“except that the” and immediately
before the language “section 1256
contract”.
4. On page 3327, in the second column,
in Example (3) (i) of paragraph (b)(5) of
§ 1.1092(b)-3T, the last sentence is
revised to read, “Therefore, the rules of
both paragraphs (b)(3) and (b)(4) of this
§ 1.1092{b)-3T apply.”
5. On page 3327, in the second column,
in Example (3) (ii) of paragraph (b)(5) of
§ 1.1092(b)-3T, in the second sentence,
the word “contract” is added
immediately after the language “The
section 1256” and immediately before
the language “net gain”.
6. On page 3327, in the third column,
in Example (3) (iii) of paragraph (b)(5) of
§ 1.1092(b)-3T, in the first sentence, the
word “position” is added immediately
after the language “non-section 1256”
and immedia tely before the language
“net gain of $700”.
7. On page 3327, in the third column,
in Example (2) of paragraph (b)(6) of

§ 1.1092(b)-3T, in the second sentence
(one occurrence) and in the fourth
sentence (three occurrences), the word
“loss” is removed and the word “giain”
is added in its place.
8. On page 3328, in the first column, in
Example (4) of paragraph (b)(6) of
§ 1.1092(b)-3T, in the fifth sentence, the
word “capital” is added immediately
after the language “short-term” and
immediately before the language “gain
attributable".
9. On page 3328, in the first column, in
the Example in paragraph (7) of
§ 1.1092(b)-3T, at the end of the first
sentence, the language “an identified
section 1092(b)(2) mixed straddle” is
revised to read “a section 1092(b)(2)
identified mixed straddle”.
Peter K. Scott,
D irector, Legislation and Regulations
Division.
[FR Doc. 85-11183 Filed 5-7-85; 8:45 am]
BILLING CO D E 4830-01-41

26 CFR Parts 1 ,6a, and 602
[T.D . 8023]

Mortgage Credit Certificates
AGENCY: Internal Revenue Service,

Treasury.

ACTION: Temporary regulations.
SUMMARY: This document contains

temporary income tax regulations
relating to the issuance of mortgage
credit certificates. This action is
necessary because of changes to the
applicable tax law made by the Tax
Reform Act of 1984. These regulations
affect all holders and issuers of
mortgage credit certificates. In addition,
the text contained in the termporary
regulations set forth in this document
serves as the text of the proposed
regulations cross-referenced in the
notice of proposed rulemaking in the
Proposed Rules section of this issue of
the Federal Register.
DATES: Effective May 8,1985. These

temporary regulations apply to interest
paid or accrued after December 31,1984,
on indebtedness incurred after
December 31,1984, and to elections not
to issue qualified mortgage bonds after
1983.
FOR FURTHER INFORMATION CONTACT:

Mitchell H. Rapaport of the Legislation
and Regulations Division, Office of the
Chief Counsel, Internal Revenue
Service, 1111 Constitution Avenue,
N.W., Washington, D.C. 20224
(Attention: CC:LR:T) (202-566-3740).

SUPPLEMENTARY INFORMATION:

Background
This document contains temporary
regulations relating to the issuance of
mortgage credit certificates under
section 25 of the Internal Revenue Code
as amended by section 612 of the Tax
Reform Act of 1984 ("the Act”) (Pub. L.
98-369; 98 Stat. 905). Further, new
§§ 1.25-1T through 1.25-8T are added by
this document to Part 1 of Title 26 of the
Code of Federal Regulations. The
temporary regulations provided by this
document will remain in effect until
superseded by final regulations on this
subject.
Explanation of Provisions
Section 25 authorizes States and
political subdivisions (“issuers”) to issue
mortgage credit certificates (“MCCs”) in
lieu of qualified mortgage bonds. MCCs
entitle qualifying individuals to a credit
against the individuals’ Federal income
tax. The amount of the credit is
determined by multiplying the certificate
credit rate by the amount of mortgage
interest paid or accrued by the taxpayer
during the taxpayer’s taxable year. An
individual claiming the credit under
section 25 (a) must reduce the amount of
the deduction under section 163 for
interest paid or accrued during the
calendar year by the amount of the
credit allowable under section 25 (a) for
such year. An individual claiming the
credit may be entitled to additional
withholding allowances. See section
3402 (m) and the regulations thereunder.
Mortgage credit certificates may only
be issued by those issuers with
authority to issue qualified mortgage
bonds. An issuer with authority to issue
qualified mortgage bonds may convert
such authority into authority to issue
MCCs by filing an election with the
Internal Revenue Service. Section 1.254T (c) provides that the election must
specify the amount of qualified mortgage
bond authority that the issuer elects not
to issue (the “nonissued bond amount”)
in order to issue MCCs. An issuer may
revoke the election during the calendar
year in which the election is made.
In order for an individual to claim the
credit provided by section 25 (a), the
MCC must be a “qualified mortgage
credit certificate” issued pursuant to a
“qualified mortgage credit certificate
program". Section 1.25-4T (j) provides
examples illustrating the manner in
which MCC programs may be operated.
The requirements that must be met in
order for a certificate to be a qualified
MCC issued pursuant to a qualified
MCC program are provided in § § 1-25—
3T and 1.25-4T. Generally, these
requirements are similar to the

F ed eral R eg ister / V o l 50, No. 89 / W ed n esd ay, M ay 8, 1985 / R ules an d R egulations
requirements of section 1Q3A, relating to
qualified mortgage bonds. Thus, in
general, holders must meet the residence
requirement, the 3-year requirement, the
purchase price requirement, and the new
mortgage requirement Sections 1J25-3T
and 1.25-4T provide safe-harbor
procedures for meeting several of these
requirements. In general, these
procedures permit issuers of MCCs to
rely on affidavits, signed under penalty
of perjury, stating that those
requirements are met. With respect to
the purchase price requirement and the
3-year requirement, additional
information must be provided. See
§ 1.25-3T (e) [3} and (f) (2).
In addition to the previously stated
requirements generally applicable to
qualified mortgage bonds, MCCs must
satisfy a number of other requirements.
Section 1.25-3T (h) limits the
transferability o f MCCs. While transfers
are not prohibited, the transferee must
meet certain requirements as if the
certificate were being issued for the first
time; in addition, the transferee must
assume the transferor’s mortgage.
Section 1.25-3T (i) places restrictions
on the use of MCCs in connection with
mortgages provided from the proceeds
of qualified mortgage bonds and
qualified veterans’ mortgage bonds. The
regulations permit issuers to rely on
affidavits of the MCC holders in
determining whether this requirement is
m et
Section 1.25-3T (j) provides that
issuers may not limit the use of MCCs to
indebtedness incurred from particular
lenders. Thus, in general, a holder of an
MCC must be free to take the certificate
to any lender and use it to obtain any
type of mortgage. An exception is
provided in § 1.25-3T (j) (2), which
permits an issuer to impose limitations
on the use of MCCs to indebtedness
incurred from particular lenders after
demonstrating to the satisfaction of the
Commissioner that the proposed
limitations will result in significant
economic benefits to the MCC holders.
The notice of proposed rulemaking
specifically requests comments on this
provision and requests information on
the types of limitations that issuers
believe will result in significant
economic benefits to MCC holders. It is
anticipated that the comments received,
together with the experience gained
from working with issuers in processing
ruling requests in this area, will form a
basis for specific guidance in the final
regulations on the types of limitations
that generally have been found to result
in significant economic benefits to MCC
holders.
Issuers are permitted to allocate
MCCs to particular developments

provided that the developer certifies
that the purchase price of the residence
is not higher than it would be without
the use of an M CC See § 1.25-3T (k).
The regulations permit great flexibility
in the manner in which MCCs may be
issued. Issuers must ensure, however,
that each of the eligibility requirements
has been m et If each of these
requirements is not met, the program
will not be a qualified MCC program,
and each of the holders of a certificate
will not be entitled to claim the credit
under section 25(a). To ease the
harshness of this rule, the regulations
provide good faith compliance
procedures similar to those contained in
the regulations under section 103A. See
11.25-4T(i).
Section 1.25-4T(h) permits issuers to
charge reasonable fees in connection
with the processing and issuance of
MCCs.
Section 1.25-5T places a limit on the
aggregate amount of MCCs that may be
issued by an issuer. The failure of an
issuer to comply with this requirement
will not result in the invalidation of any
MCCs. Noncompliance with this
requirement wifi result in a reduction in
the qualified mortgage bond State
ceiling for the State in which the issuer
is located.
Section 1.25-6T prescribes the form
that MCCs must take and the
information that must be included on the
MCC.
Section 1.25-7T requires that an issuer
provide public notice of its MCC
program at least 90 days prior to the
issuance o f any MCCs under the
program.
Section 1.25-8T imposes reporting
requirements on lenders and issuers.
Lenders must file an annual report on
Form 8329 containing information on
mortgages issued in connection with
MCCs. Issuers must file similar reports
on a quarterly basis. Section 1.25-4T(e),
relating to information reports
containing information on the use of
MCCs, and § 1.25-4T(f), relating to
annual policy statements are reserved.
These statements and reports are
expected to be similar to those that
issuers of qualified mortgage bonds are
required to file. Numerous comments
have been received with respect to the
notice of proposed rulemaking published
on December 12,1984, dealing with
policy statements and information
reporting requirements for mortgage
subsidy bonds, and a public hearing has
been scheduled for April 30,1985, with
respect to those regulations. The written
comments and those comments received
at the public hearing will be given full
consideration, and it is anticipated that
the information reporting requirements

19345

for mortgage subsidy bonds and
mortgage credit certificates will be
revised. At that time, proposed and
temporary regulations relating to annual
policy statements and information
reports for MCCs will be issued. In
addition to the information required
with respect to MCCs, it is anticipated
that issuers of MCCs will be required to
report the exact amount of the fees
charged under § 1.25-4T(h)(2)(iii). This
information will be studied by the
Service to determine whether more
specific limitations on fees are
desirable.
Non-Applicability of Executive Order
12291
The Treasury Department has
determined that these temporary
regulations are not subject to review
under Executive Order 12291 or the
Treasury and OMB implementation of
the Order dated April 29,1983.
Regulatory Flexibility Act
A general notice o f proposed
rulemaking is not requird by 5 U.S.C. 553
for temporary regulations. Accordingly,
the temporary regulations do not
constitute regulations subject to the
Regulatory Flexibility Act (5 U.S.C.
chapter 6).
Paperwork Reduction Act
Hie collection of information
requirements contained in these
regulations have been submitted to the
Office of Management and Budget in
accordance with the requirements of the
Paperwork Reduction Act of 1980. These
requirements have been approved by
OMB under control number 1545-0922.
Drafting Information
The principal author of these
temporary regulations is Mitchell H.
Rapaport of the Legislation and
Regulations Division of the Office of
Chief Counsel, Internal Revenue
Service. However, personnel from other
offices of the Internal Revenue Service
and Treasury Department participated
in developing these regulations, on
matters of both sustances and style.
lis t of Subjects

26 CFR §§ 1.0-1-1.58-8
Income taxes, Tax liability, Tax rates,
Credits.

26 CFR §§ 1-61-1-1.281-4
Income taxes, Taxable income,
Deductions, Exemptions.

26 CFR § 1.6709-1T
Penalties, Mortgage credit certificates.

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space and a minimum width in excess of
constituted authorities empowered to
102 inches and which is of a kind
issue such certificates are the
customarily used at a fixed location. The
certificates of such governmental unit.
preceding sentence shall not apply for
(3) Qualified home improvement loan.
purposes of determining the average
The term "qualified home improvement
26 CFR Part 602
area purchase price for single-family
loan” has the meaning given that term
residences, nor shall it apply for
under section 103A (1) (6) and the
OMB Control Numbers, Paperwork
purposes of determining the State ceiling
regulations thereunder.
Reduction Act.
amount. The term “residence” does not,
(4) Qualified rehabilitation loan. The
Amendments to the regulations
however, include recreational vehicles,
term “qualified rehabilitation loan” has
campers, and other similar vehicles.
the meaning given that term under
The amendments to 26 CFR Part 1,
section 103A (1) (7) (A) and the
(12) Related person. The term “related
Part 6a, and Part 602 are as follows:
regulations thereunder.
person” has the meaning given that term
(5) Single-family and owner-occupied
under section 103(b)(6)(C)(i) and § 1.103PART 1— [AM ENDED]
residences. The terms "single-family”
10(e)(1).
and “owner-occupied” have the meaning
(13) Date o f issue. A mortgage credit
Paragraph 1. Regulations § § 1.25-lT
given those terms under section 103A (1)
certificate is considered issued on the
through 1.25-8T are issued under the
(9) and the regulations thereunder.
date on which a closing agreement is
authority contained in 26 U.S.C. 7805
(6) Constitutional home rule city. The
signed with respect to the certified
and 26 U.S.C. 25. Regulations § 1.163-6T
term “constitutional home rule city”
indebtedness amount.
and § 1.6709-lT are issued under the
means, with respect to any calendar
Affidavits. For purposes of § § 1.25(c)
authority contained in 26 U.S.C. 7805.
year, any political subdivision of a State
1T through 1.25-8T, an affidavit filed in
The authority citation for Part 1 is
which, under a State constitution which
connection with the requirements of
amended by adding, “§§ 1.25-lT through was adopted in 1970 and effective on
§§ 1.25-lT through 1.25-8T shall be
1.25-8T also issued under 26 U.S.C. 25”.
July 1,1971, had home rule powers on
made under penalties of perjury.
the 1st day of the calendar year.
Applicants for mortgage credit
Par. 2. New § § 1.25-lT through 1.25(7) Targeted area residence. The term
certificates who are required by a lender
8T are added following § 1.21-1 to read
“targeted area residence” has the
or the issuer to sign affidavits must be
as follows:
meaning given that term under section
informed that any fraudulent statement
103A (k) and the regulations thereunder.
will result in (1) the revocation of the
§ 1.25-1T Credit for interest paid on
(8) Acquisition cost. The term
individual’s mortgage credit certificate,
certain home mortgages (Temporary).
“acquisition cost” has the meaning given and (2) a $10,000 penalty under section
that term under section 103A (1) (5) and
6709. Other persons required by a lender
(a) In general. Section 25 permits
the regulations thereunder.
or an issuer to provide affidavits m usf
States and political subdivisions to elect
(9) Average area purchase price. The
receive similar notice. A person may not
to issue mortgage credit certificates in
term “average area purchase price” has
rely on an affidavit where that person
lieu of qualified mortgage bonds. An
the meaning given that term under
knows or has reason to know that the
individual who holds a qualified
subparagraphs (2), (3), and (4) of section
information contained in the affidavit is
mortgage credit certificate (as defined in
103A (f) and the regulations thereunder.
false.
§ 1.25-3T) is entitled to a credit against
his Federal income taxes. The amount of For purposes of this paragraph (b) (9), all § 1.25-2T Amount of credit (Temporary).
determinations of average area purchase
the credit depends upon (1) the amount
price shall be made with respect to
(a) In general. Except as otherwise
of mortgage interest paid or accrued
residences
as
that
term
is
defined
in
provided,
the amount of the credit
during the year and (2) the applicable
allowable for any taxable year to an
section 103A and the regulations
certificate credit rate. See §1.25-2T. The
thereunder.
individual who holds a qualified
amount of the deduction under section
mortgage credit certificate is equal to
(10) Total proceeds. The "total
163 for interest paid or accrued during
the product of the certificate credit rate
proceeds” of an issue is the sum of the
any taxable year is reduced by the
products
determined
by
multiplying—
(as defined in paragraph (b)) and the
amount of the credit allowable under
(i)
The certified indebtedness amount amount of the interest paid or accrued
section 25 for such year. See § 1.163-6T.
by the taxpayer during the taxable year
of each mortgage credit certificate
The holder of a qualified mortgage
on the certified indebtedness amount (as
issued pursuant to such issue, by
credit certificate may be entitled to
(11) The certificate credit rate specified defined in paragraph (c)).
additional withholding allowances. See
in such certificate.
(b) Certificate credit rate — (1) In
section 3402 (m) and the regulations
general. For purposes of § § 1.25-lT
Each qualified mortgage credit
thereunder.
through 1.25-8T, the term “certificate
certificate program shall be treated as a
(b) Definitions. For purposes of
credit rate" means the rate specified by
separate issue of mortgage credit
§§ 1.25-2T through 1.25-8T and this
the issuer on the mortgage credit
certificates.
section, the following definitions apply:
certificate. The certificate credit rate
(11) Residence. The term
(1) Mortgage. The term “mortgage”
shall not be less than 10 percent nor
“residence” includes stock held by a
includes deeds of trust, conditional sales
more than 50 percent.
tenant-stockholder in a cooperative
contracts, pledges, agreements to hold
Limitation in certain States, (i) In
(2)
housing corporation (as those terms are
title in escrow, and any other form of
the case of a State which—
defined in section 216(b) (1) and (2)). It
owner financing.
(A)
Has a State ceiling for the
does not include property such as an
(2) State, (i) The term “State” includes
calendar year in which an election is
appliance, a piece of furniture, a radio,
a possession of the United States and
made that exceeds 20 percent of the
etc., which, under applicable local law,
the District of Columbia.
(ii)
Mortgage credit certificates issued is not a fixture. The term also includes
average annual aggregate principal
by or on behalf of any State or political
amount of mortgages executed during
any manufactured home which has a
subdivision (“governmental unit”) by
the immediately preceding 3 calendar
minimum of 400 square feet of living

26 CFR Part 6a

Bonds, Income taxes, Mortgages,
Veterans, Foreign investments in United
States real property interests.

Federal Register

/ V ol. 50, No. 69 / W ed n esd ay , M ay 8, 1985 / R ules

and

R egulations

19347

years for single-family owner-occupied
(c) C ertified indebtedness amount—
section 25 (a) and § 1 .2 5 -lT for the
residences located within the
(1) In general. The term “certified
current taxable year, and (B) the sum of
jurisdiction of such State, or
indebtedness amount” means the
the unused credits which, by reason of
(B)
Issued qualified mortgage bonds inamount of indebtedness which is—
this paragraph (d) (2), are carried to that
an aggregate amount less than $150
(1) Incurred by the taxpayer—
subsequent taxable year and are
million for calendar year 1983.
(A)
To acquire his principal residence, attributable to taxable years before the
§ 1.25-ZT(c)(l)(i)
unused credit year. Thus, if by reason of
the certificate credit rate for any
{B) As a qualified home improvement
this paragraph (d) (2), unused credits
mortgage credit certificate issued under
loan, or
from 2 prior taxable years are carried
such program shall not exceed 20
(C)
As a qualified rehabilitation loan, forward to a subsequent taxable year,
percent unless the issuing authority
and
the unused credit from the earlier of
submits a plan to the Commissioner to
(ii)
Specified in the mortgage credit
those 2 prior years must be taken into
ensure that the weighted average o f the
certificate.
account before the unused credit from
certificate credit rates in such mortgage
(2) Example. The following example
the later of those 2 years is taken into
credit certificate program does not
illustrates die application of this
account. § 1.25-2T (d) (2) (ii)
exceed 20 percent and the
paragraph:
Commissioner approves such plan. For
(in) For purposes o f this paragraph (d)
purposes of determining the average
(2) the term “applicable tax limit” means
Exam ple. On March 1.1986, State X,
pursuant to its qualified mortgage credit
annual aggregate principal amount of
the limitation imposed by section 26 (a)
certificate program, provides a mortgage
mortgages executed during the
for the taxable year reduced by the sum
credit certificate to B. State X specifies that
immediately preceding 3 calendar years
of the credits allowable for that year
the maximum amount of the mortgage loan
for single-family owner-occupied
under section 21, relating to expenses
for which B may claim a credit is $65,000. On
residences located within the
for household and dependent care
March 15, B purchases for $67,000 a singlejurisdiction of such State, an issuer may
services necessary for gainful
family dwelling for use as his principal
rely upon the amount published by the
employment, section 22, relating to the
residence. B obtains from Bank M a mortgage
Treasury Department for such calendar
credit for the elderly and the
loan for $60,000. State X, or Bank M acting on
years. An issuer may rely on a different
permanently disabled, section 23,
behalf of State X, indicates on B’s mortgage
credit certificate that the certified
amount from that safe-harbor limitation
relating to die residential energy credit,
indebtedness amount of B’s loan is $60,000. B
where the issuer has made a more
and section 24, relating to contributions
may claim a credit under section 25 (e) based
accurate and comprehensive
to candidates for public office. The
on this amount
determination of that amount. The
limitation imposed by section 26 (a) for
weighted average of the certificate
(d) Limitation on credit—(1)
any taxable year is equal to the
credit rates in a mortgage credit
taxpayer’s tax liability (as defined in
Limitation where certificate credit rate
certificate program is determined by
section 26 (b)) for that year.
exceeds 20 percent, (i) If the certificate
dividing the sum of the products
credit rate of any mortgage credit
(iv) The following examples illustrate
obtained by multiplying the certificate
certificate exceeds 20 percent, the
the application of this paragraph (d) (2):
credit rate of each certificate by the
amount of the credit allowed to the
E xam ple (1). (i) B, a calendar year
certified indebtedness amount with
taxpayer by section 25(a)(1) for any year taxpayer, holds a qualified mortgage credit
respect to that certificate by the sum of
shall not exceed $2,000. Any amount
certificate. For 1986 B’s applicable tax limit
the certified indebtedness amounts of
(/.©., tax liability) is $1,100. The amount of the
denied under this paragraph (d)(1) may
credit under section 25 (a) and § 1.25-2T for
the certificates issued. See section
not be carried forward under section
1986 is $1,700. For 1986 B is not entitled to
103A(g) and the regulations thereunder
25(e)(1) and paragraph (d)(2) of this
any of the credits described in sections 21
for the definition of the term “State
section.
through 24. Under § 1.25-2T (d) (2), B’s
ceiling”.
(ii)
If two or more persons hold
unused credit for 1986 is $600, and B is
(ii)
The following example illustrates interests in any residence, the limitation
entitled to carry forward that amount to the 3
the application of this paragraph (b) (2):
of paragraph (d)(l)(i) shall be allocated
succeeding years.
among such persons in proporation to
Exam ple. City Z issues four qualified
(ii) For 1987 B’s applicable tax limit is
their respective interests in the
mortgage credit certificates pursuant to its
$1,500, the amount of the credit under section
residence.
qualified mortgage credit certificate program.
25 (a) and § 1.25-2T is $1,700, and the unused
H receives a certificate with a certificate
credit is $200. For 1988 B's applicable tax
(2) Carryforward o f unused credit, (i)
credit rate of 30 percent and a certified
limit is $2,000, the amount of the credit under
If the credit allowable under section 25
indebtedness amount of $50,000.1 receives a
section 25 (a) and § 1.25-2T is $1,300, and
(a) and § 1.25-2T for any taxable year
certificate with a certificate credit rate of 25
there is no unused credit. For 1987 and 1968 B
exceeds the applicable tax limit for that
percent and a certified indebtedness amount
is not entitled to any of the credits described
year, the excess (the “unused credit”)
of $100,000. J and K each receive certificates
in sections 21 through 24. No portion of the
will
be
a
carryover
to
each
of
the
3
with certificate credit rates of 10 percent;
unused credit for 1986 my be used in 1987. For
succeeding taxable years and, subject to
their certified indebtedness amounts are
1988 B is entitled to claim a credit of $2,000
the limitations of paragraph (d)(2) (ii),
$50,000 and $100,000, respectively. The
under section 25 (a) and § 1.25-2T, consisting
will be added to the credit allowable by
weighted average of the certificate credit
of a $1,300 credit for 1988, the $600 unused
rates is determined by dividing the sum of the
section 25 (a) and § 1.25-2T for that
credit for 1986, and $100 of the $200 unused
products obtained by multiplying the
succeeding year.
credit for 1987. In addition, B may carry
certificate credit rate of each certificate by
(ii)
The amount of the unused credit forward the remaining unused credit for 1987
the certified indebtedness amount with
($100) to 1989 and 1990.
for any taxable year (the “unused credit
respect to that certificate ((.3 x $50,000) 4Exam ple (2). The facts are the same as in
year”) which may be taken into account
{•25 X$100,000) + {.IX $50,000) +
Example (1) except that for 1988 B is entitled
under
this
paragraph
(d)
(2)
for
any
(•1X $100,000)) by the sum of the certified
to a credit of $400 under section 23. B's
subsequent taxable year may not
indebtedness amounts of the certificates
applicable tax limit for 1988 is $1,600 ($2,000
exceed the amount by which the
issued {$50,000+$100,000+$50,000+$
less $400). For 1988 B is entitled to claim a
applicable tax limit for that subsequent
100,000). Thus, the weighted average of the
credit of $1,600 under section 25 (a) and
certificate credit rates is 18.33 percent
taxable year exceeds the sum of (A) the
§ 1.25-2T, consisting of a $1,300 credit for
($55,OO0/$3OO,OO0).
amount of the credit allowable under
1988 and $300 of the unused credit for 1986. In

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meet the requirements of this paragraph.
the jurisdiction of the issuer that issued
Such plan must described a procedure
the mortgage credit certificate.
(e)
3-year requirement—(1) In general, for ensuring that no more than 10
percent of the proceeds of a such issue
A certificate meets the requirements of
§ 1.25-3T Qualified mortgage credit
will be used to provide certificates to
this paragraph only if the holder of the
certificate (T emporary).
certificate had no present ownership
such individuals. If the Commissioner
(a) Definition o f qualified mortgage
interest in a principal residence at any
approves the issuer’s plan, certificates
credit certificate. For purposes of
time during the 3-year period prior to the issued in accordance with the terms of
§ § 1.25-lT through 1.25-8T, the term
date on which the mortgage on the
the plan to holders who do not meet the
"qualified mortgage credit certificate”
residence in connection with which the
3-year requirement do not fail to satisfy
means a certificate that meets all of the
certificate is provided is executed. For
the requirements of this paragraph.
requirements of this section.
purposes of the preceding sentence, the
(f) Purchase price requirement—(1) In
(b) Qualified mortgage credit
holder’s interest in the residence with
general A certificate meets the
certificate program. A certificate meets
respect to which the certificate is being
requirements of this paragraph only if
the requirements of this paragraph if it is provided shall not be taken into
the acquisition cost (as defined in
issued under a qualified mortgage credit
account. Seé section 103A (e) and the
§ 1.25-lT (b) (8)) of the residence, other
certificate program (as defined in § 1.25- regulations thereunder for further
than a targeted area residence, in
4T).
definitions and requirements.
connection with which the certificate is
(c) Required form and information. A
(2) Exceptions. Paragraph (e) (1) shall
provided does not exceed 110 percent of
certificate meets the requirements of
not apply with respect to—
the average area purchase price (as
(i) Any certificate provided with
this paragraph if it is in the form
defined in § 1.25-lT (b) (9)) applicable
specified in § 1.25-6T and if all the
respect to a targeted area residence (as
to that residence. In the case of a
information required by the form is
defined in § 1.25-1T (b)(7)),
targeted area residence (as defined in
(ii) Any qualified home improvement
specified on the form.
11.251T (b) (7)) the acquisition cost may
loan, (as defined in § 1.25-lT (b) (3)), and not exceqd 120 percent of the average
(d) Residence requirement—(1) In
(iii) Any qualified rehabilitation loan
general. A certificate meets the
area purchase price applicable to such
(as defined in § 1.25-lT (b) (4)).
requirements of this paragraph only if it
residence. See section 1093A (f) and the
(3) Certification procedure. The
is provided in connection with the
regulations thereunder for further
requirements of paragraph (e) (1) will be
acquisition, qualified rehabilitation, or
definitions and requirements. § 1.25-3T
met if the issuer or its agent obtains
qualified home improvement of a
(f)(1 )
from the holder of the certificate an
residence, that is—
(2)
Certification procedure. The
affidavit stating that he had no present
(1) A single-family residence (as
requirements of paragraph (f)(1) will be
ownership interest in a principal
defined in § 1.25-1T (b)(5)) which, at the
met if the issuer or its agent obtains
residence at any time during the 3-year
time the financing on the residence is
affidavits executed by the seller and the
period prior to the date of which the
executed or assumed, can reasonably be
buyer that state these requirements have
certificate is issued and the issuer or its
expected by the issuer to become (or, in
been met. Such affidavits must include
agent obtains from the applicant copies
the case of a qualified home
an itemized list of—
of the applicant’s Federal tax returns for
improvement loan, to continue to be) the
(i) Any payments made by the buyer
the
preceding
3
years
and
examines
principal residence (as defined in
(or a related person) or for the benefit of
each statement to determine whether
section 1034 and the regulations
the buyer,
the applicant has claimed a deduction
thereunder) of the holder of the
(ii) If the residence is incomplete, an
certificate within a reasonable time after for taxes on property which was the
estimate of the reasonable cost of
applicant’s principal residence pursuant
the financing is executed or assumed,
completing the residence, and
to section 164 (a) (1) or a deduction
and
(iii) If the residence is purchased
pursuant to section 163 for interest paid
(ii)
Located within the jurisdiction of
subject to a ground rent, the capitalized
on a mortgage secured by property
the governmental unit issuing the
value of the ground rent.
which was the applicant’s principal
certificate.
The issuer or his agent must examine
residence. Where the mortgage is
such affidavits and determine whether,
See section 103a(d) and the regulations
executed during the period between
on the basis of information contained
thereunder fpr further definitions and
January 1 and February 15 and the
therein, the purchase price requirement
requirements.
applicant has not yet filed has Federal
is met.
(2) Certification procedure. The
income tax return with the Internal
(g) N ew mortgage requirement—(1) In
requirements of this paragraph will be
Revenue Service, the issuer may, with
general, (i) A certificate meets the
met if the issuer or its agent obtains
respect to such year, rely on a affidavit
requirements of this paragraph only if
from the holder of the certificate an
of the applicant that the applicant is not.
the certificate is not issued in
affidavit stating his intent to use (or, in
entitled to claim deductions for taxes or
connection with the acquisition or
the case of a qualified home
. interest on indebtedness with respect to
replacement of an existing mortgage.
improvement loan, that he is currently
property constituting his principal
Except in the case of a qualified home
residence for the preceding calendar
using and intends to continue to use) the
improvement loan, the certificate must
residence as his principal residence
year. In the alternative, when
be issued to an individual who did not
within a reasonable time (e.g., 60 days)
applicable, the holder may provide an
have a mortgage (whether or not paid
after the mortgage credit certificate is
affidavit stating that one of the
off) on the residence with respect to
issued and stating that the holder will
exceptions provided in paragraph (e) (2)
which the certificate is issued at any
notify the issuer of the mortgage credit
applies.
time prior to the execution of the
(4) Special rule. An issuer may submit
certificate if the residence ceases to be
mortgage.
a plan to the Commissioner for
his principal residence. The affidavit
(ii)
Exceptions. For purposes of this
distributing certificates, in an amount
must also state facts that are sufficient
paragraph, a certificate used in
not to exceed 10 percent of the proceeds
for the issuer or his agent to determine
connection with the replacement of—
of the issue, to individuals who do not
whether the residence is located within

addition, B may carry forward the remaining
unused credits of $300 for 1986 to 1989 and of
$200 for 1987 to 1989 and 1990.

Federal Register

/ V ol. 50, No. 89 / W ed n esd ay, M ay 8, 1985 / R ules and R egulations

(A) Construction period loans,
(B) Bridge loans or similar temporary
initial financing, and
(C) In the case of a qualified
rehabilitation loan, an existing mortage,
shall not be treated as being used to
acquire or replace an existing mortgage.
Generally, temporary initial financing is
any financing which Has a term of 24
months or less. See section 103A(j)(l)
and the regulations thereunder for
examples illustrating the application of
these requirements.
Certification procedure. The
(2)
requirements of paragraph (g)(1) will be
met if the issuer or its agent obtains
from the holder of the certificate an
affidavit stating that the mortage being
acquired in connection with the
certificate will not be used to acquire or
replace an existing mortgage (other than
one that falls within the exceptions
described in paragraph (g)(l)(ii)).
(h) Transfer o f mortgage credit
certificates—(1) In general. A certificate
meets the requirements of this
paragraph only if it is (i) not transferable
or (ii) transferable only with the
approval of the issuer.
(2) Transfer procedure. A certificate
that is transferred with the approval of
the issuer is a qualified mortgage credit
certificate in the hands of the transferee
only if each of the following
requirements is met:
(i) The transferee assumed liability for
the remaining balance of the certified
indebtedness amount in connection with
the acquisition of the residence from the
transferor,
(ii) The issuer issues a new certificate
to the transferee, and
(iii) The new certificate meets each of
the requirements of paragraphs (d), (e),
(f), and (i) of this section based on the
facts as they exist at the time of the
transfer as if the mortgage credit
certificate were being issued for the first
time. For example, the purchase price
requirement is to be determined by
reference to the average area purchase
price at the time of the assumption and
not when the mortgage credit certificate
was originally issued.
(3) Statem ent on certificate. The
requirements of paragraph (h)(1) will be
met if the mortgage credit certificate
states that the certificate may not be
transferred or states that the certificate
may not be transferred unless the issuer
issues a new certificate in place of the
original certificate.
(i)
Prohibited mortgages—(1) In
general. A certificate meets the
requirements of this paragraph only if it
is issued in connection with the
acquisition of a residence none of the
financing of which is provided from the
proceeds of—

(1) A qualified mortgage bond (as
defined under section 103A(c)(l) and the
regulations thereunder), or
(ii)
A qualified veterans’ mortgage
bond (as defined under section
103A(c)(3) and the regulations
thereunder).
Thus, for example, if a mortgagor has a
mortgage on his principal residence that
was obtained from the proceeds of a
qualified mortgage bond, a mortgage
credit certificate issued to such
mortgagor in connection with a qualified
home improvement loan with respect to
such residence is not a qualified
mortgage credit certificate. If, however,
the financing provided from the
proceeds of the qualified mortgage bond
had been paid off in full, the certificate
would be a qualified mortgage credit
certificate (assuming all the
requirements of this paragraph are met).
(2) Certification procedure. The
requirements of paragraph (i)(l) will be
met if the issuer or its agent obtains
from the holder of the certificate an
affidavit stating that no portion of the
financing of the residence in connection
with which the certificate is issued is
provided from the proceeds of a
qualified mortgage bond or a qualified
veterans’ mortgage bond.
(j)
Particular lenders— (1) In general.
Except as otherwise provided in
paragraph (j) (2), a certificate meets the
requirements of this paragraph only if
the certificate is not limited to
indebtedness incurred from particular
lenders. A certificate is limited to
indebtedness from particular lenders if
the issuer, directly orKindirectly,
prohibits the holder of a certificate from
obtaining financing from one or more
lenders or requires the holder of a
certificate to obtain financing from one
or more lenders. For purposes of this
paragraph, a lender is any person,
including an issuer of mortgage credit
certificates, that provides financing for
the acquisition, qualified rehabilitation,
or qualified home improvement of a
residence.
(2) Exception. A mortgage credit
certificate that is limited to
indebtedness incurred from particular
lenders will not cease to meet the
requirements of this paragraph if the
Commissioner approves the basis for
such limitation. The Commissioner may
approve the basis for such limitation if
the issuer establishes to the satisfaction
of the Commissioner that it will result in
a significant economic benefit to the
holders of mortgage credit certificates
[e.g., substantially lower financing costs)
compared to the result without such
limitation.
(3) Taxable bonds. The requirements
of this paragraph do not prevent an

19349

issuer of mortgage credit certificates
from issuing mortgage subsidy bonds
(other than obligations described in
section 103 (a)) the proceeds of which
are to be used to provide mortgages to
holders of mortgage credit certificates
provided that the holders of such
certificates are not required to obtain
financing from the proceeds of the bond
issue. See § 1.25-4T (h) with respect to
permissible fees.
(4) Lists o f participating lenders. The
requirements of this paragraph do not
prohibit an issuer from maintaining a list
of lenders that have stated that they will
make loans to qualified holders of
mortgage credit certificates, provided
that (i) the issuer solicits such
statements in a public notice similar to
the notice described in § 1.25-7T, (ii)
lenders are provided a reasonable
period of time in which to express their
interest in being included in such a list,
and (iii) holders of mortgage credit
certificates are not required to obtain
financing from the lenders on the list. If
an issuer maintains such a list, it must
update the list at least annually.
(5) Certification procedure. The
requirements of this paragraph will be
met if (i) the issuer or its agent obtains
from the holder of the certificate an
affidavit stating that the certificate was
not limited ta indebtedness incurred
from particular lenders or (ii) the issuer
obtains a ruling from the Commissioner
under paragraph (j) (2).
(6) Examples. The following examples
illustrate the application of this
paragraph:
Exam ple (1). Under its mortgage credit
certificate program, County Z distributes all
the certificates to be issued to a group of 60
participating lenders. Residents of County Z
may obtain mortgage credit certificates only
from the participating lenders and only in
connection with the acquisition of mortgage
financing from that lender or one of the other
participating lenders. Certificates issued
under this program do not meet the
requirements of this paragraph since the
certificates are limited to indebtedness
incurred from particular lenders. The
certificates, therefore, are not qualified
mortgage credit certificates.
Exam ple (2). In connection with its
mortgage credit certificate program, County Y
arranges with Bank P for a line of credit to be
used to provide mortgage financing to holders
of mortgage credit certificates. County Y,
pursuant to paragraph (j) (4), maintains a list
of lenders participating in the mortgage credit
certificate program. County Y distributes the
certificates directly to applicants. Holders of
the certificates are not required to obtain
mortgage financing through the line of credit
or through a lender on the list of participating
lenders. Certificates issued pursuant to
County Y’s program satisfy the requirements
of this paragraph.

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Fed eral R egister / Vol. 50, No. 89 / W ed nesd ay, M ay 8, 1985 / R ules and R egulations

(k)
Developer certification — (1) In
general. A mortgage credit certificate

that is allocated by the issuer to any
particular development meets the
requirements of this paragraph only if
the developer provides a certification to
the purchaser of the residence and the
issuer stating that the purchase price of
that residence is not higher than the
price would be if the issuer had not
allocated mortgage credit certificates to
the development. The certification must
be made by the developer if a natural
person or, if not, by a duly authorized
official of the developer.
(2)
Certification procedure. The
requirements of this paragraph will be
met if the issuer or its agent obtains
from the holder of the certificate and
affidavit stating that the has received
from the developer the certification
described in this paragraph.
(Ì) Expiration — (1) In general. A
certificate meets the requirements of
this paragraph if the certified
indebtedness amount is incurred prior to
the close of the second calender year
following the calendar year for which
the issuer elected not to issue qualified
mortgage bonds under § 1.25-4T with
respect to that issue of mortgage credit
certificates. Thus, for example, if on
October 1,1984, and issuing authority
elects under § 1.25-4T not to issue
qualified mortgage bonds, a mortgage
credit certificate provided under that
program does not meet the requirements
of this paragraph unless the
indebtedness is incurred on or before
December 31,1980.
(2) Issure-imposed expiration dates.
An issuer of mortgage credit certificates
may provide that a certificate shall
expire if the holder of the certificate
does not incure certified indebtedness
by a date that is prior to the expiration
date provided in paragraph (1) (1). A
certificate that expires prior to the date
provided in paragraph (1) (1) may be
reissued provided that the requirements
of this paragraph are met.
(m)
Revocation. A certificate meets
the requirements of this paragraph only
if it has not been revoked. Thus, the
credit provided by section 25 and § 1.251T does not apply to interest paid or
accrued following the revocation of a
certificate. A certificate is treated as
revoked when the residence to which
the certificate relates ceases to be the
holder’s principal residence. An issuer
may revoke a mortgage credit certificate
if the certificate does not meet all the
requirements of § 1.25-3T (d), (e), (f), (g),
(h), (i), (j), (k), and (n). The certificate is
revoked by the issure’s notifying the
holder of the certificate and the Internal
Revenue Service that the certificate is
revoked. The notice to the Internal

Revenue Service shall be made as part
of the report requred by § 1.25-8T (b) (2).
(n) Interest paid to related person— [1}
In general. A certificate does not meet
the requirements of this paragraph if
interest on the certified indebtedness
amount is paid to a person who is a
related person to the holder of the
certificate.
(2) Certification procedure. The
requirements of this paragraph will be
met if the issuer or its agent obtains
from the holder of the certificate an
affidavit stating that a related person
does not have, and is not expected to
have, an interest as a creditor in the
certified indebtedness amount.
(o) Fraud. Notwithstanding any other
provision of this section, a mortgage
credit certificate does not meet the
requirements of this section and,
therefore, the certificate is not a
qualified mortgage credit certificate for
any calendar year, if the holder of the
certificate provides a certification or
any other information to the lender
providing the mortgage or to the issuer
of the certificate containing a material
misstatement and such misstatement is
due to fraud. In determining whether
any misstatement is due to fraud, the
rules generally applicable to
underpayments of tax due to fraud
(including rules relating to the statute of
limitations] shall apply. See § 1.6709-1T
with respect to the penalty for filing
negligent or fraudulent statements.
§ 1.25-4T Qualified mortgage credit
certificate program (Temporary).
(a)
In general—(1) Definition o f

qualified mortgage credit certificate
program. For purposes of § § 1.25-1T

through 1.25-8T, the term “qualified
mortgage credit certificate program”
means a program to issue qualified
mortgage credit certificates which meets
all of the requirements of paragraphs (b)
through (i) of this section.
(2) Requirements are a minimum.
Except as otherwise provided in this
section, the requirements of this section
are minimum requirements. Issuers may
establish more stringent criteria for
participation in a qualified mortgage
credit certificate program. Thus, for
example, an issuer may target 30 percent
of the proceeds of an issue of mortgage
credit certificates to targeted areas.
Further, issuers may establish additional
eligibility criteria for participation in a
qualified mortgage credit certificate
program. Thus, for example, issuers may
impose an income limitation designed to
ensure that only those individuals who
could not otherwise purchase a
residence will benefit from the credit.
(3) Except as otherwise provided in
this section and § 1.25-3T, issuers may

use mortgage credit certificates in
connection with other Federal, State,
and local programs provided that such
use complies with the requirements of
§ 1.25—3T(j). Thus, for example, a
mortgage credit certificate may be
issued in connection with the qualified
rehabilitation of a residence part of the
cost of wrhich will be paid from the
proceeds of a State grant.
(b) Establishm ent o f program, A
program meets the requirements of this
paragraph only if it is established by a
State or political subdivision thereof for
any calendar year for which it has the
authority to issue qualified mortgage
bonds.
(c) Election not to issue qualified
mortgage bonds— (1) In general. A
program meets the requirements of this
paragraph only if the issuer elects, in the
time and manner specified in this
paragraph, not to issue an amount of
qualified mortgage bonds that it may
otherwise issue during the calendar year
under section 103A and the regulations
thereunder.
(2) Manner o f making election. On or
before the earlier of the date of
distribution of mortgage credit
certificates under a program or
December 31,1987, the issuer must file
an election not to issue an amount of
qualified mortgage bonds. The election
(and the certification (or affidavit)
described in paragraph (d)} shall be filed
with the Internal Revenue Service
Center, Philadelphia, Pennsylvania
19255. The election should be titled
“Mortgage Credit Certificate Election”
and must include—
(i) The name, address, and TIN of the
issuer,
(ii) The issuer’s applicable limit, as
defined in section 103A (g) and the
regulations thereunder,
(iii) The aggregate amount of qualified
mortgage bonds issued by the issuing
authority during the calendar year,
(iv) The amount of the issuer’s
applicable limit that it has surrendered
to other issuers during the calendar
year,
(v) The date and amount of any
previous elections under this paragraph
for the calendar year, and
(vi) The amount of qualfied mortgage
bonds that the issuer elects not to issue.
(3) Revocation o f election. Any
election made under this paragraph may
be revoked, in whole or in part, at any
time during the calendar year in which
the election was made. The revocation,
however, may not be made with respect
to any part of the nonissued bond
amount that has been used to issue
mortgage credit certificates pursuant to
the election. The revocation shall be

Federal Register / Vol. 50, No. 89 / Wednesday, May 8, 1985 / Rules and Regulations
filed with the Internal Revenue Service
described in this paragraph (d) need not
Center, Philadelphia, Pennsylvania
perform an independent investigation to
19255. The revocation should be titled
determine whether the issuer has met
“Revocation of Mortgage Credit
the requirements of section 103A(g). In
Certificate Election” and must include—
determining the aggregate amount of
(1) The name, address, and TIN of the
qualified mortgage bonds previously
issuer,
issued by that issuer during the calendar
(ii) The nonissued bond amount as
year the official may rely on copies of
originally elected, and
prior elections under paragraph (c) of
(iii) The portion o f the nonissued bond
this section made by the issuer for that
amount with respect to which the
year, together with an affidavit executed
election is being revoked.
by an official of the issuer who is
(4) Special rule. If at the time that an
responsible for issuing bonds stating
issuer makes an election under this
that the issuer has not, to date, issued
paragraph it does not know its
any other issues of qualified mortgage
applicable limit, the issuer may elect not
bonds during the calendar year and
to use all of its remaining authority to
stating the amount, if any, of the issuer’s
issue qualified mortgage bonds; this
applicable limit that it has surrendered
form of election will be treated as
to other issuers diming the calendar
meeting the requirements of paragraph
year; for any calendar year prior to 1985,
(c)(2) if, prior to the later of the end of
the official may rely on an affidavit
the calendar year and December 31,
executed by a duly authorized official of
1985, the issuer amends its election so as
the issuer who states the aggregate
to indicate the exact amount of qualified
amount of qualified mortgage bonds
mortgage bond authority that it elected
issued by the issuer during the year. In
not to issue.
determining the aggregate amount of
(5) Limitation on nonissued bond
qualified mortgage bonds that the issuer
amount. The amount of qualified
has previously elected not to issue
mortgage bonds which an issuer elects
during that calendar year, the official
not to issue may not exceed the issuer’s
may
rely on copies of any elections not
applicable limit (as determined under
to issue qualified mortgage bonds filed
section 103A (g) and the regulations
by the issuer for that calendar year,
thereunder). For example, a
together with an affidavit executed by
governmental unit that, pursuant to
an official of the issuer responsible for
section 103A (g)(3), may issue $10
issuing mortgage credit certificates
million of qualified mortgage bonds that
stating that the issuer has not, to date,
elects to trade in $11 million in qualified
made any other elections not to issue
mortgage bond authority has not.met the
qualified mortgage bonds. If, based on
requirements of this paragraph, and
such information, the certifying official
mortgage credit certificates issued
determines that the issuer has not, as of
pursuant to such election are not
the date on which the certification is
qualified mortgage credit certificates.
provided, exceeded its applicable limit
(d) State certification requirement—
for the yeaV, the official may certify that
(1) In general. A program meets the
the issue meets the requirements of
requirements of this paragraph only if
section 103A(g). The fact that the
the State official designated by law (or,
certification described in this paragraph
where there is no State official, the
(d) is provided does not ensure that the
Governor) certifies, based on facts and
issuer has met the requirements of
circumstances as of the date on which
the certification is requested, following a section 103A(g) and the regulations
thereunder, nor does it preclude the
request for such certification, that the
application of the penalty for overissue meets the requirements of section
issuance of mortgage credit certificates
103A(g) (relating to volume limitation)
if such over-issuance actually occurs.
and the regulations thereunder. A copy
•See § 1.25-5T.
of the State certification must be
attached to the issuer’s election not to
(3) Special rule. If within 30 days after
issue qualified mortgage bonds, except
the issuer files a proper request for the
that, in the case of elections made
certification described in this paragraph
during calendar year 1984, the
(d) the issuer has not received from the
certification may be filed with the
State official designated by law (or, if
Service prior to July 8,1985 provided
thereJs no State official, the Governor)
that mortgage credit certificates may not
certification that the issue meets the
he distributed until the certification is
requirements of section 103A(g) or, in
filed. In the case of any constitutional
the alternative, a statement that the
home rule city, the certification shall be
issue does not meet such requirements,
made by the chief executive officer of
the issuer may submit, in lieu of the
the city.
certification required by this paragraph
(2) Certification procedure. The
(d), an affidavit executed by an officer
official making the certification
of the issuer responsible for issuing

19351

mortgage credit certificates stating
that—
(i) The issue meets the requirements
of section 103A(g) and the regulations
thereunder,
(ii) At least 30 days before the
execution of the affidavit the issuer filed
a proper request for the certification
described in this paragraph (d), and
(iii) The State official designated by
law (or, if there is no State official, the
Governor) has not provided the
certification described in this paragraph
(d) or a statement that the issue does not
meet such requirements.
For purposes of this paragraph, a
request for certification is proper if the
request includes the reports and
affidavits described in paragraph (d)(2).
(e) Information reporting
requirement—(1) Annual report.
[Reserved]
(f) Policy statem ent requirement.
[Reserved]
(g) Targeted areas requirement—(1) In
general. A program meets the .
requirements of this paragraph only if—
(1) The portion of the total proceeds of
the issue specified in paragraph (g)(2) is
made available to provide mortgage
credit certificates in connection with
owner financing of targeted area
residents for at least 1 year after the
date on which mortgage credit
certificates are first made available with
respect to targeted area residences, and
(ii) The issuer attempts with
reasonable diligence to place such
proceeds with qualified persons.
Mortgage credit certificates are
considered first made available with
respect to targeted area residences on
the date on which the issuer first begins
to accept applications for mortgage
credit certificates provided under that
issue.
(2) Specified portion, (i) The specified
portion of the total proceeds of an issue
is the lesser of—
(A) 20 percent of the total proceeds, or
(B) 8 percent of the average annual
aggregate principal amount of mortgages
executed during the immediately
prceding 3 calendar years for singlefamily, owner-occupied residences in
targeted areas within the jurisdication of
the issuing authority.
For purposes of computing the
required portion of the total proceeds
specified in paragraph (g)(2)(i)(B) where
such provision is applicable, an issuer
may rely upon the safe-harbor formula
provided in the regulations under
section 103A(h).
(ii) See § 1.25—lT (b)(10)(ii) for the
definition of “total proceeds”.

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Federal Register / Vol. 50, No. 89 / Wednesday, May 8, 1985 / Rules and Regulations

(h) Fees—(1) In general. A program
compliance with those requirements.
meets the requirements of this
Reasonable procedures include
paragraph only if each applicant is
reasonable investigations by the issuer
required to pay, directly or indirectly, no
to determine whether individuals satisfy
fee other than those fees permitted
the requirements of paragraphs (c)
under this paragraph.
through (o) of § 1.25-3T.
Permissible fees. Applicants may
(2)
(B) 95 percent or more of the total
be required to pay the following fees
proceeds of the issue were devoted to
provided that they are reasonable:
individuals with respect to whom, at the
(i) Points, origination fees, servicing
time that the certificate was issued, all
fees, and other fees in amounts that are
the requirements of paragraphs (c)
customarily charged with respect to
through (o) of § 1.25-3T were met. If a
mortgages not provided in connection
holder of a mortgage credit certificate
with mortgage credit certificates,
fails to meet more than one of these
(ii) Application fees, survey fees,
requirements, the amount of the
credit report fees, insurance fees, or
certificate [i.e., the certificate credit rate
similar settlement or financing costs to
multiplied by the certified indebtedness
the extent such amounts do not exceed
amount) issued to that individual will be
the amounts charged in the area in cases
taken into account only once in
where mortgages are not provided in
determining whether the 95-percent
connection with mortgage credit
requirement is met. However, all of the
certificates. For example, amounts
defects in that individual’s certificate
charged for FHA, VA, or similar private
must be corrected pursuant to paragraph
mortgage insurance on an individual’s
(j)(D(i)(C).
mortgage are permissible so long as
(C) Any failure to meet the
such amounts do not exceed the
requirements of paragraphs (c) through
amounts charged in the area with
(o) of § 1.25-3T is corrected within a
respect to a similar mortgage that is not
reasonable period after that failure is
provided in connection with a mortgage
discovered. For example, if an
credit certificate, and
individual fails to meet one or more of
(iii) Other fees that, taking into
such requirements those failures can be
account all the facts and circumstances,
corrected by revoking that individual’s
are reasonably necessary to cover any
certificate.
administrative costs incurred by the
(ii) Examples. The following examples
issuer or its agent in issuing mortgage
illustrate the application of this
credit certificates.
paragraph (j)(l):
(i) Qualified mortgage credit ,
Example (1). County X only distributes
certificate. A program meets the
mortgage credit certificates to individuals
requirements of this paragraph only if
who have contracted to purchase a principal
each mortgage credit certificate issued
residence. County X requires that applicants
under the program meets each of the
for mortgage credit certificates present the
requirements of paragraphs (c) through
following information:
(o) of § 1.25-3T.
(i) An affidavit stating that the applicant
(j) Good faith compliance efforts—(1)
intends to use the residence in connection
with which the mortgage credit certificate is
Eligibility requirements, (i) A program
issued as his principal residence within a
under which each of the mortgage credit
certificates issued does not meet each of reasonable time after the certificate is issued
by County X. that the applicant will notify
the requirements of paragraphs (c)
the County if the residence ceases to be his
through (o) of § 1.25-3T shall be treated
principal residence, and facts that are
as meeting the requirements of
sufficient for County X to determine whether
paragraph (i) of this section if each of
the residence is located within the
the requirements of this paragraph (j)(l)
jurisdiction of County X,
(ii) An affidavit stating that the applicant
is satisfied. A mortgage credit certificate
had no present ownership interest in a
program meets the requirements of this
principal residence at any time during the 3paragraph (j)(l) only if each of the
year period prior to the date on which the
following provisions is met:
(A)
The issuer in good faith attempted certificate is issued,
(iii) Copies of the applicant’s Federal tax
to issue mortgage credit certificates only
returns for the preceding 3 years,
to individuals meeting each of the
(iv) Affidavits from the seller of the
requirements of paragraphs (c) through
residence with respect to which the
(o) of § 1.25-3T. Good faith requires that certificate is issued and the applicant stating
the purchase price of the residence, including
agreements with lenders and agents and
an itemized list of (A) payments made by or
other relevant instruments contain
for the benefit of the applicant, (B) if the
restrictions that permit the approval of
residence is incomplete, an estimate of the
mortgage credit certificates only in
reasonable cost of completing the residence,
accordance with the requirements of
and (C) if the residence is subject to a ground
paragraphs (c) through (o) of § 1.25-3T.
rent, the capitalized value of the ground rent,
In addition, the issuer must establish
(v) An affidavit executed by the applicant
reasonable procedures to ensure
stating that the mortgage being acquired in

connection with the certificate will not be
used to acquire or replace an existing
mortgage,
(vi) An affidavit executed by the applicant
stating that no portion of the financing for the
residence in connection with which the
certificate is issued is provided*from the
proceeds of a qualified mortgage bond or
qualified veterans’ mortgage bond and that
no portion of the mortgage for the residence
is provided by a person related to the
applicant (as defined in § 1.25-3T(n)),
(vii) An affidavit executed by the applicant
stating that the certificate was not limited to
indebtedness incurred from particular
lenders, and
(viii) In the case of a mortgate credit
certificate allocated for use in connection
with a particular development, and affidavit
executed by the applicant stating that the
applicant received from the developer a
certification stating that the price of the
residence with respect to which the
certificate was issued no higher than it
would be without the use of a mortgage credit
certificate.
County X examines the information
submitted by the applicant to determine
whether the requirements of paragraphs (c),
(d), (e), (f), (g), (i), (j), (k), and (n) of § 1.25-3T
are met. County X determines that the
certificate has not expired. The mortgage
credit certificates issued by County X are in
the form prescribed by § 1.25-6T and County
X provides all the required information and
statements. After determining that the
applicant meets all these requirements
County X issues a mortgage credit certificate
to the applicant. This procedure for issuing
mortgage credit certificates is sufficient
evidence of the good faith of County X to
meet the requirements of § 1.25-4T(j)(l)(i)
(A).
Example (2). County W distributes
preliminary mortgage credit certificates to
individuals who have not entered into
contracts to purchase a principal residence.
County W issues preliminary certificates in
the form prescribed by § 1.25-6T to those
applicants that have submitted statements
that they (i) intend to purchase a singlefamily residence located within the
jurisdiction of County W which they will
occupy as a principal residence, (ii) have had
no present ownership interest in a principal
residence within the preceding 3-year period,
and (iii) will not use the certificate in
connection with the acquisition or
replacement of an existing mortgage. The
certificates contain a maximum purchase
price, the certificate credit rate, and a
statement that the certificate will expire if the
applicant does not enter into a closing
agreement with respect to a loan within 6
months from the date of preliminary issuan ce.
Holders of these certificates may apply for a
mortgage loan from any lender. When the
holder of the certificate applies for a loan the
lender requires that he submit the following:
(i)
An affidavit stating that the applicant
intends to use the residence in connection
with which the mortgage credit certificate is
issued as his principal residence within a
reasonable time after the certificate is issued
by County W, that the applicant will notify

F ed eral R eg ister / Vol. 50, No. 89 / Wednesday, May 8, 1985 / Rules and Regulations
the County if the residence ceases to be his
principal residence, and facts that are
sufficient for County W to detrmine whether
the residence is located within the
jurisdication of County W,
(ii) An affidavit stating that the applicant
had no present ownership interest in a
principal residence at any time during the 3year period prior to the date on which the
certifícate is issued,
i (iii) Copies of the applicant’s Federal tax
returns for the preceding 3 years,
(iv) Affidavits from the seller of the
residence with respect to which the
certificate is issued and the applicant stating
the purchase price of the residence, including
an itemized list of (A) payments made by or
for the benefit of the applicant, (B) if the
Iresidence is incomplete, an estimate of the
reasonable cost of completing the residence,
and (C) if the residence is subject to a ground
rent, the capitalized value of the ground rent,
(v) An affidavit executed by the applicant
stating that the mortgage being acquired in
connection with the certificate will not be
used to acquire or replace an existing
mortgage,
(vi) An affidavit executed by the applicant
stating that no portion of the financing for the
residence in connection with which the
certificate is issued in provided from the
proceeds of a qualified mortgage bond or
qualified veterans’ mortgage bond and that
no portion of the mortgage for the residence
is provided by a person related to the
applicant (as defined in § 1.25-3T{n)),
| (vii) An affidavit executed by the applicant
stating that the certificate was not limited to
indebtedness incurred from particular
lenders, and
(viii)in the case of a mortgage credit
certificate allocated for use in connection
with a particular development, an affidavit
executed by the applicant stating that the
applicant received from the developer a
certification stating that the price of the
residence with respect to which the
certificate was issued is no higher than it
Would be without the use of a mortgage credit
certificate.
The lender then submits those affidavits,
together with its statement as to the amount
of the indebtedness incurred, to County W.
After determining that the requirements of
laragraphs (c), (d), (e), (f), (g), (i), (j), (k) and
n) of § 1.25-3T are met and determining that
the certificate has not expired, County W
completes the mortgage credit certificate,
this procedure for issuing mortgage credit
certificates is sufficient evidence of the good
faith of County W to meet the requirements
§ 1.25-4T(j)(l)(i)(A).

paragraphs (b) through (h) of this
section. This good faith requirement will
be met if all reasonable steps are taken
by the issuer to ensure that the program
complies with these requirements.
(B)
Any failure to meet such
requirements is due to inadvertent error,
e.g., mathematical error, after taking
reasonable steps to comply with such
requirements.
(ii) The following example illustrate
the application of this paragraph (j)(2):
Exam ple. City X issues an issue of
mortgage credit certificates. However,
despite taking all reasonable steps to
determine accurately the size of the
applicable limit, as provided in section 103A
(g)(3) and the regulations thereunder, the limit
is exceeded because the amount of the
mortgages, originated in the area during the
past 3 years is incorrectly computed as a
result of mathematical error. Such facts are
sufficient evidence of the good faith of the
* issuer to meet the requirements of paragraph

am

§ 1.25-5T Limitation on aggregate amount
of mortgage credit certificates
(Temporary).

(a) In general If the aggregate amount
of qualified mortgage credit certificates
(as defined in paragraph (b)) issufed by
an issuer under a qualified mortgage
credit certificate program exceeds 20
percent of the nonissued bond amount
(as defined in paragraph (c)), the
provisions of paragraph (d) shall apply.
(b) Aggregate amount o f mortgage
credit certificates .—(1) In general. The
aggregate amount of qualified mortgage
credit certificates issued under a
qualified mortgage credit certificate
program is the sum of the products
determined by multiplying—
(1) The certified indebtedness amount
of each qualified mortgage credit
certificate issued under that program, by
(ii) The certificate credit rate with
respect to such certificate.
(2) Examples. The following examples
illustrate the application of this
paragraph (b):

Exam ple (1). For 1986 City Q has a
nonissued bond amount of $100 million. After
making a proper election, Q issues 2,000
qualified mortgage credit certificates each
with a certificate credit rate of 20 percent and
(2) Program requirements, (i) A
a certified indebtedness amount of $50,000.
mortgage credit certificate program
The aggregate amount of qualified mortgage
which fails to meet one or more of the
credit certificates is $20 million (2,000 x (.2 x
equirements of paragraphs (b) through
$50,000)). Since this amount does not exceed
20 percent of the nonissued bond amount (.2
h) of this section shall be treated as
x $100 million = $20 million), Q has complied
meeting such requirements if the
with the limitation on the aggregate amount
equirements of this paragraph (j}(2) are
of mortgage credit certificates, provided that
mtisfied. A mortgage credit certificate
it does not issue any additional certificates.
’fogram meets the requirements of this
Exam ple (2). The facts are the same as in
mragraph (j)(2) only if each of the
example (1) except that instead of issuing all
following provisions is met:
its certificates at the 20 percent rate, Q issues
(A) The issuer in good faith attempted (i) qualified mortgage credit certificates with
0meet all of the requirements of
a certificate credit rate of 10 percent and an

19353

aggregate principal amount of $25 million, (ii)
qualified mortgage credit certificates with a
certificate credit rate of 40 percent and an
aggregate principal amount of $25 million,
and (iii) qualified mortgage credit certificates
with a certificate credit rate of 30 percent and
an aggregate principal amount of $25 million.
The aggregate amount of qualified mortgage
credit certificates is $20 million ((10 percent
of $25 million) plus (40 percent of $25 million)
plus (30 percent of $25 million)). Q has
complied with the limitation on the aggregate
amount of qualified mortgage credit
certificates, provided that it does not issue
any additional certificates pursuant to the
same program.

(c) Nonissued bond amount. The term
"nonissued bond amount” means, with
respect to any qualified mortgage credit
certificate program, the amount of
qualified mortgage bonds (as defined in
section 103A(c)(l) and the regulations
thereunder) which the issuer is
otherwise authorized to issue and elects
not to issue under section 25(c)(2) and
§ 1.25-4T(b). The amount of qualified
mortgage bonds which an issuing
authority is authorized to issue is
determined under section 103A(g) and
the regulations thereunder; such
determination shall take into account
any prior elections by the issuer not to
issue qualified mortgage bonds, the
amount of any reduction in the State
ceiling under paragraph (d) of this
section, and the aggregate amount of
qualified mortgage bonds issued by the
issuer prior to its electiori not to issue
qualified mortgage bonds.
(d) Noncompliance w ith limitation on

aggregate amount o f mortgage credit
certificates— (1) In general. If the

provisions of this paragraph apply, the
State ceiling under section 103A(g)(4)
and the regulations thereunder for the
calendar year following the calendar
year in which the Commissioner
determines the correction amount for the
State in which the issuer which
exceeded the limitation on the aggregate
amount of mortgage credit certificates is
located shall be reduced by 1.25 times
the correction amount with respect to
such failure.
Correction amount, (i) The term
(2)
"correction amount” means an amount
equal to the excess credit amount
divided by .20.
(ii) The term "excess credit amount”
means the excess of—
(A) The credit amount for any
mortgage credit certificate program, over
(B) The amount which would have
been the credit amount for such program
had such program met the requirements
of section 25(d)(2) and paragraph (a) of
this section.

19354

Fed eral R eg ister / V ol. 50, No. 89 / W ed n esd ay, M ay 8, 1985 / R ules and R egulations

(iii)
The term "credit amount” means
the sum of the products determined by
multiplying—
(A) The certified indebtedness amount
of each qualified mortgage credit
certificate issued under the program, by
(B) The certificate credit rate with
respect to such certificate.
(3) Example. The following example
illustrates the application of this
paragraph:
Exam ple. For 1987 City R has a nonissued
bond amount of $100 million. City R issues all
of its mortgage credit certificates with a
certificate credit rate of 20 percent. City R
issues certificates with an aggregate certified
indebtedness amount of $120 million. The
aggregate amount of mortgage credit
certificates issued by City R is $24 million,
which exceeds 20 percent of the nonissued
bond amount. The State ceiling for the
calendar year following the calendar year in
which the Commissioner determines the
correction amount is reduced by $25 million
(the correction amount multiplied by 1.25).
The correction amount is determined as
follows: The credit amount is $24 million
(.2X$120 million); the amount which would
have been the credit amount for the program
had it met the requirements of section
25(d)(2) is $20 million (.2X$100 million); the
excess credit amount is $4 million ($24
million—$20 million); therefore, the
correction amount is $20 million ($4 million/
. 2 ).

(4) Cross references. See section
103A(g)(4) and the regulations
thereunder with respect to the reduction
of the applicable State ceiling.
§ 1.25-6T Form of qualified mortgage
credit certificate (Temporary).

(a) In general. Qualified mortgage
credit certificates are to be issued on the
form prescribed by the Internal Revenue
Service. If no form is prescribed by the
Internal Revenue Service, or if the form
prescribed by the Internal Revenue
Service is not readily available, the
issuer may use its own form provided
that such form contains the information
required by this section. Each mortgage
credit certificate must be issued in a
form such that there are at least three
copies of the form. One copy of the
certificate shall be retained by the
issuer; one copy shall be retained by the
lender; and one copy shall be forwarded
to the State official who issued the
certification required by § 1.25-4T(d),
unless that State official has stated in
writing that he does not want to receive
such copies.
(b) Required information. Each
qualified mortgage credit certificate
must include the following information:
(1) The name, address, and TIN of the
issuer,
(2) The date of the issuer’s election
not to issue qualified mortgage bonds

pursuant to which the certificate is being
issued;
(3) The number assigned to the
certificate,
(4) The name, address, and TIN of the
holder of the certificate,
(5) The certificate credit rate,
(6) The certified indebtness amount,
(7) Tke acquisition cost of the
residence being acquired in connection
with the certificate,
(8) The average area purchase price
applicable to the residence,
(9) Whether the certificate meets the
requirements of § 1.25-3T(d), relating to
residence requirement,
(10) Whether the certificate meets the
requirements of § 1.25-3T(e), relating to
3-year requirement,
(11) Whether the certificate meets the
requirements of § 1.25-3T(g), relating to
new mortgage requirement,
(12) Whether the certificate meets the ~
requirements of § 1.25-3T(i), relating to
prohibited mortgages,
(13) Whether the certificate meets the
requirements of § 1.25—3T(j), relating to
particular lenders,
(14) Whether the certificate meets the
requirements of § 1.25-3T(k), relating to
allocations to particular developments,
(15) Whether the certificate meets the
requirements of § 1.25-3T(n), relating to
interest paid to related persons,
(16) Whether the residence in
connection with which the certificate is
issued is a targeted area residence,
(17) The date on which a closing
agreement is signed with respect to the
certified indebtness amount,
(18) The expiration date of the
certificate,
(19) A statement that the certificate is
not transferable or a statement that the
certificate may be transferred only if the
issuer issues a new certificate, and
(20) A statement, signed under
penalties of perjury by an authorized
official of the issuer or its agent, that
such person has made the
determinations specified in paragraph
(b) (9) through (16).
§ 1.25-7T

Public notice (Temporary).

(a) In general. At least 90 days prior to
the issuance of any mortgage credit
certificate under a qualified mortgage
credit certificate program, the issuer
shall provide reasonable public notice
of—
(1) The eligibility requirements for
such certificate,
(2) The methods by which such
certificates are to be issued, and
(3) The other information required by
this section.
(b) Reasonable public notice —(1) In
general. Reasonable public notice
means published notice which is

reasonably designed to inform
individuals who would be eligible to
receive mortgage credit certificates of
the proposed issuance. Reasonable
public notice may be provided through
newspapers of general circulation.
Contents o f notice. The public
(2)
notice required by paragraph (a) must
include a brief description of the
principal residence requirement, 3-year
requirement, purchase price
requirement, and new mortgage
requirement. The notice must also
provide a brief description of the
methods by which the certificates are to
be issued and the address and telephone
number for obtaining further
information.
§ 1.25-8T Reporting requirements
(T emporary).

(a)
Lender—(1) In general. Each
person who makes a loan that is a
certified indebtedness amount with
respect to any mortgage credit
certificate must file the report described
in paragraph (a)(2) and must retain on
its books and records the information
described in paragraph (a)(3). The report
described in paragraph (a)(2) is an
annual report and must be filed on or
before January 31 of the year following
the calendar year to which the report
relates. See section 6709(c) and the
regulations thereunder for the applicable
penalties with respect to failure to file
reports.
Information required. The report
(2)
shall be submitted on Form 8329 and
shall contain the information required
therein. A separate Form 8329 shall be
filed for each issue of mortgage credit
certificates with respect to which the
lender made mortgage loans during the ;
preceding calendar year. Thus, for
example, if during 1986 Bank M makes
three mortgage loans which are certified]
indebtedness amounts with respect to
State Z’s January 15,1986, issue of
mortgage credit certificates, and two
mortgage loans which are certified
indebtedness amounts with respect to
State Z’s April 15,1986, issue of
mortgage credit certificates, and fifty
mortgage loans which are certified
indebtedness amounts with respect to
County X’s December 31,1985, issue of
mortgage credit certificates, Bank M
must file three separate reports for
calendar year 1986. The lender must
submit the Form 8329 with the
information required therein,
including—
(i) The name, address, and TIN of the
issuer of the mortgage credit certificates,
(ii) The date on which the election not
to issue qualified mortgage bonds with

Federal Register / Vol. 50, No. 89 / Wednesday, May 8, 1985 / Rules and Regulations

19355

respect to that mortgage credit
certificate program and the nonissued
the fraudulent misstatement was made.
certificate was made,
bond amount of the program,
The penalty imposed by this paragraph
fin) The name, address, and TIN of the
(C) The sum of the products "■
(a)(2) is in addition to any criminal
lender, and
determined by multiplying—
penalty.
(iv)
The sum of the products
(2)
The certified indebtedness amount (b)
Reports. (1) Any person required
determined by multiplying—
of each qualified mortgage credit
by § 1.25-8T to file a report with respect
(AJ The certified indebtedness amount certificate issued under that program
to any mortgage credit certificate who
of each mortgage credit certificate
during the calendar quarter, by
fails to file the report at the time and in
issued under such program, by
(2)
The certificate credit rate with
the manner required by § 1.25-8T shall
(B)
The certificate credit rate with
respect to such certificate, and
pay a penalty of $200 for each mortgage
respect to such certificate.
(D) A listing of the name, address, and
credit certificate with respect to which
(3)
Recordkeeping requirements. Each TIN of each holder of a qualified
that failure occurred. The preceding
person who makes a loan that is a
mortgage credit certificate which has
sentence shall not apply if it is shown
certified indebtedness amount with
been revoked during the calendar
that such failure is due to reasonable
respect to any mortgage credit
quarter.
cause and not to willful neglect.
certificate must retain the information
(c) Extensions o f time for filing
(2)
In the case of any report required
specified in this paragraph (a)(3) on its
reports. The Commissioner may grant an under § 1.25-8T(b), the aggregate
books and records for 6 years following
extension of time for the filing of a
amount of the penalty imposed by this
the year in which the loan was made.
report required by this section if there is
paragraph shall not exceed $2,000.
With respect to each loan the lender
reasonable cause for the failure to file
must retain the following information:
such report in a timely fashion.
PART 6a— [AM ENDED]
(1) The name, address, and TIN of
(d) Place fo r filing. The reports
Par. 5. The authority citation for Part
each holder of a qualified mortgage
required by this section are to be filed at
6a is revised to read:
credit certificate with respect to which a
the Internal Revenue Service Center,
loan is made,
Philadelphia, Pennsylvania 19225.
Authority: Sec. 7805, Internal Revenue
(ii) The name, address, and TIN of the
Code of 1954, 68A stat. 917 (26 U.S.C. 7805)
(e) Cross reference. See section 6709
issuer of such certificate, and
unless otherwise noted.
and the regulations thereunder with
(iii) The date the loan for the certified
respect to the penalty for failure to file a
Par. 6. Section 6a.l03A -2 is amended
indebtedness amount is fclosed, the«
report required by this section.
by revising paragraph (g)(1), by revising
I certified indebtedness amount, and the
Par. 3. New § 1.163-6T is inserted
the first sentence of paragraph (g)(6)(i),
certificate credit rate of such certificate.
after § 1.163-5T to read as follows:
and adding a new paragraph (g)(6)(v).
(b)
Issuers— (1) In general. Each issuer
These
added and revised provisions
of mortgage credit certificates shall file
§ 1.163-6T Reduction of deduction where
read as follows:
section 25 credit taken (Temporary).
the report described in paragraph (b)(2).
(2) Quarterly reports, (i) Each issuer
which elects to issue mortgage credit
certificates shall file reports on Form
8330. These reports shall be filed on a
quarterly basis, beginning with the
quarter in which the election is made,
and are due on the following dates:
April 30 (for the quarter ending March
31), July 31 (for the quarter ending June
30), October 31 (for the quarter ending
September 30), and January 31 (for the
quarter ending December 31). For
elections made prior to May 8,1985, the
first report need not be filed until July
31,1985. An issuer shall file a separate
report for each issue of mortgage credit
certificates. In the quarter in which the
last qualified mortgage credit certificate
that may be issued under a program is
issued, the issuer must state that fact on
the report to be filed for that quarter; the
issuer is not required to file any
subsequent reports with respect to that
program. See section 6709 (c) for the
penalties with respect to failure to file a
report.
(ii) The report shall be submitted on
Form 8330 and shall contain the
information required therein,
including—
(A) The name, address, and TIN of the
issuer of the mortgage credit certificates,
(B) The date of the issuer’s election
not to issue qualified mortgage bonds
with respect to the mortgage credit

(a) In general. The amount of the
deduction under section 163 for interest
paid or accrued during any taxable year
on a certified indebtedness amount with
respect to a mortgage credit certificate
which has been issued under section 25
shall be reduced by the amount of the
credit allowable with respect to such
interest under section 25 (determined
without regard to section 26).
(b) Cross reference. See § § 1.25-1T
through 1.25-8T with respect to rules
relating to mortgage credit certificates.
Par. 4. New § 1.6709-1T is inserted
after § 1.6696-1 to read as follows:
§ 1.6709-1T Penalties with respect to
mortgage credit certificates (Temporary).

[a]
M aterial m isstatem ent—[1)
Negligence. If any person makes a

§ 6a.103A-2
*
*
*

Qualified mortgage bond.
*
*

(g)
Limitation on aggregate amount o f
qualified mortgage bonds issued during
any calendar year —(1) In gênerai. An

issue meets the requirements of this
section only if the aggregate amount of
bonds issued pursuant thereto, when
added to the sum of (i) the aggregate
amount of qualified mortgage bonds
previously issued by the issuing
authority during the calendar year and
(ii) the amount of qualified mortgage
bonds which the issuing authority
previously elected not to issue under
section 25(c)(2)(A)(ii) and the
regulations thereunder during the
calendar year, does not exceed the
applicable limit (“market limitation”) for
such authority for such calendar year.

material misstatement in any affidavit
*
*
*
*
*
or other statement under a penalty of
(6)
State ceiling, (i) Except as
perjury made with respect to the
provided in paragraph (g)(6)(v), the State
issuance of a mortgage credit certificate
ceiling applicable to any State for any
and such misstatement is due to the
calendar year shall be the greater of—
negligence of that person, that person
(A)
9 percent of the average annual
shall pay a penalty of $1,000 for each
aggregate principal amount of mortgages
mortgage credti certificate with respect
executed during the immediately
to which that misstatement w as made.
(2)
Fraud. If a misstatement described preceding 3 calendar years for singlefamily, owner-occupied residences
in subparagraph (1) is due to fraud on
located within the jurisdiction of such
the part of the person making the
State, or
misstatement, that person shall pay a
■(B) $200,000,000. * * *
penalty of $10,000 for each mortgage
*
*
*
*
*
credit certificate with respect to which

Federal Register / V ol. 50, No. 89 / W ed n esd ay, M ay 8, 1985 / R ules and R egulations

19356

Reduction in State ceiling. If for
(v)
any calendar year an issuer of mortgage
credit certificates, as defined in section
25 and the regulations thereunder, fails
to meet the requirements of section
25(d)(2) and the regulations thereunder,
relating to the limit on the aggregate
amount of mortgage credit certificates
that may be issued, the applicable State
ceiling under paragraph (g)(6)(i) of this
section for the State in which the
program operates will be reducedby
1.25 times the correction amount (as
defined in section 25(f)(2) and the
regulations thereunder) with respect to
that failure for the calendar year
following the calendar year in which the
Commissioner determines the correction
amount with respect to that failure.
*

^

*

.

*

it

*

PART 602— [ AMENDED]

Par. 7. The authority citation for Part
602 continues to read:
Authority: Sec. 7805, Internal Revenue
Code of 1954, 68A Stat. 917 (20 U.S.C. 7805).

Par. 8. Section 602.101(c) is amended

by inserting in the appropriate places in
the table, “§§ 1.25-IT thru 1.258T . . . 1545-0922”.
There is. a need for immediate
guidance with respect to the provisions
contained in this Treasury decision. For
this reason it is found impracticable to
issue it with notice and public procedure
under subsection (b) of section 553 of
title 5 of the United States Code or
subject to the effective date limitation of
subsection (d) of that section.
Roscoe L. Egger, Jr.,
Com m issioner o f Internal Revenue.
Approved: April 22,1985.
Ronald A. Pearlman,
Assistant Secretary o f the Treasury.
[FR Doc. 85-11017 Filed 5-3-85; 2:59 pm]
BILLING CO D E 4830-01-M

DEPARTM ENT OF TH E INTERIOR
Office of Surface Mining Reclamation
and Enforcement
30 CFR Part 931
Notice of Extension of Deadline for
Submission of Program Amendment to
the New Mexico Permanent Program
: Office of Surface Mining
Reclamation and Enforcement (OSM),
Interior.
a c t i o n : Final rule.
a g en c y

OSM is announcing its
decision to further extend the deadline
for New Mexico to (1) promulgate rules
governing the training, examination and
summar y:

certification of blasters, and (2) develop
and adopt a program to examine and
certify all persons who are directly
responsible for the use of explosives in a
surface coal mining operation.
On March 5,1984, New Mexico
requested an extension of time for the
development of a blaster certification
program. On May 14,1984, OSM
announced its decision to extend New
Mexico’s deadline to March 4,1985 (49
FR 20287). On February 6,1985, New
Mexico requested an additional oneyear extension to submit a blaster
training program and examination. All
States with regulatory programs
approved under the Surface Mining
Control and Reclamation Act of 1977
(SMCRA or the Act) are required to
develop and adopt a blaster certification
program by March 4,1984. Section
850.12(b) of OSM’s regulation provides
that the Director, OSM, may approve an
extension of time for a State to develop
and adopt a program upon a
demonstration of good cause. In
accordance with the State’s request, the
Director is granting the State an
additional one-year extension of time to
submit a proposed blaster certification
program.
EFFECTIVE DATE: May 8,1985.
FOR FURTHER INFORMATION CO NTACT:

Mr. Robert Hagen, Field Office Director,
Albuquerque Field Office, Office of
Surface Mining, 219 Central Avenue,
NW., Albuquerque, New Mexico 87102;
Telephone (505) 766-1486.
SUPPLEMENTARY INFORMATION: On
March 4,1983, OSM issued final rules
effective April 14,1983, establishing the
Federal standards for the training and
certification of blasters at 30 CFR
Chapter M (48 FR 9486). Section 850.12
of these regulations stipulates that the
regulatory authority in each State with
an approved program under SMCRA
shall develop and adopt a program to
examine and certify all persons who are
directly responsible for the use of
explosives in a surface coal mining
operation within 12 months after
approval of a State program or within 12
months after publication date of OSM’s
rule at 30 CFR Part 850, whichever is
later. In the case of New Mexico’s
program, the applicable date is 12
months after publication date of OSM’s
rule, or March 4,1984.
On March 5,1984, New Mexico
advised OSM that it would be unable to
meet the March 4,1984 deadline and
requested a one-year extension to
develop and adopt a blaster certification
program. On May 14,1984, OSM granted
New Mexico an extension to March 4,
1985 (49 FR 20287).

On February 6,1985, the Director of
New Mexico Energy and Mineral
Department advised OSM that the State
would require another one-year
extension of time to submit its blaster
training and examination program. He
stated that the New Mexico Blasting
Regulations need to be rewritten and
approved by the Coal Surface Mining
Commission. In addition, the Director
stated that the State must develop a
Blaster’s Examination for certification of
blasters and develop a budget for the
blaster training, examination and
certification program. An additional
one-year extension was requested.
In the March 18,1985 Federal Register
(50 FR 10793), OSM proposed an
additional one-year extension for New
Mexico to submit to OSM a proposed
blaster training program. Public
comment on this proposal was sought
for 30 days ending April 17,1985. No
comments were submitted to OSM
during the comment period.

Director’s Determination
In accordance with the State’s
request, the Director has decided to
extend the deadline for New Mexico to
submit a proposed blaster training
program until March 4,1985. This
extension will allow the Director of the
New Mexico Energy and Minerals
Department to develop and adopt an
adequate blaster certification and
training program consistent with Federal
requirements.

Additional Determinations
1. Compliance with the National
Environmental Policy Act: The

Secretary has determined that, pursuant
to section 702(d) of SMCRA, 30 U.S.C.
1292(d), no environmental impact
statement need be prepared on this
rulemaking.
2. Executive Order No. 12291 and the
Regulatory Flexibility Act: On August
28,1981, the Office of Management and
Budget (OMB) granted OSM an
exemption from sections 3, 4, 7, and 8 of
Executive Order 12291 for actions
directly related to approval or
conditional approval of State regulatory
programs. Therefore, this action is
exempt from preparation of a Regulatory
Impact Analysis and Regulatory review
by OMB.
The Department of the Interior has
determined that this rule will not have a
significant economic effect on a
substantial number of small entities
under the Regulatory Flexibility Act (5
U.S.C. 601 etseq.). This rule will not
impose any new requirements; rather, it
will ensure that existing requirements

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