rp-03-81.pdf

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26 CFR 601.201: Ruling and determination letters
(Also: Part I, sections 25, 103, 143, 1.25-3T, 1.103-1, 6a.103-2)

Rev. Proc. 2003-81
SECTION 1. PURPOSE
This revenue procedure supplements Rev. Proc. 2003-49, 2003-29 I.R.B. 89,
and provides issuers of qualified mortgage bonds, as defined in § 143(a) of the Internal
Revenue Code, and issuers of mortgage credit certificates, as defined in § 25(c) with a
list of qualified census tracts for the Northern Mariana Islands, American Samoa, and
Guam.
SECTION 2. BACKGROUND
.01 Section 103(a) provides that, except as provided in § 103(b), gross income
does not include interest on any State or local bond. Section 103(b)(1) provides that
§ 103(a) shall not apply to any private activity bond that is not a “qualified bond” within
the meaning of § 141. Section 141(e) provides that the term “qualified bond” includes
any private activity bond if that bond: (1) is a qualified mortgage bond; (2) meets the
volume cap requirements under § 146; and (3) meets the applicable requirements under
§ 147.
.02 Section 143(a)(1) provides that the term “qualified mortgage bond” means a
bond that is issued as part of a “qualified mortgage issue”. Section 143(a)(2)(A)
provides that the term “qualified mortgage issue” means an issue by a state or political
subdivision thereof of one or more bonds, but only if (i) all proceeds of the issue
(exclusive of issuance costs and a reasonably required reserve) are to be used to

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finance owner-occupied residences; (ii) the issue meets the requirements of
subsections (c), (d), (e), (f), (g), (h), (i) and (m)(7) of § 143; (iii) the issue does not meet
the private business tests of paragraphs (1) and (2) of § 141(b); and (iv) with respect to
amounts received more than 10 years after the date of issuance, repayments of
$250,000 or more of principal on financing provided by the issue are used not later than
the close of the first semi-annual period beginning after the date the prepayment (or
complete repayment) is received to redeem bonds that are part of the issue.
.03 An issue of bonds meets the requirements of § 143(h)(1) only if at least 20
percent of the proceeds of the issue is made available for owner financing of “targeted
area residences” for at least 1 year after the date on which owner-financing is first made
available with respect to targeted area residences. Section 143(h)(2) provides,
however, that the amount made available need not exceed 40 percent of the average
annual aggregate principal amount of mortgages executed during the immediately
preceding 3 calendar years for single-family, owner-occupied residences located in
targeted areas within the jurisdiction of the issuing authority.
.04 Targeted area residences are defined in § 143(j)(1)(A) to include residences
in a qualified census tract. A “qualified census tract”, according to § 143(j)(2)(A), is a
census tract in which 70 percent or more of the families have income that is 80 percent
or less of the statewide median family income. Section 143(j)(2)(B) provides that the
determination that a census tract is a “qualified census tract” must be based on the
most recent decennial census for which data are available.
.05 Section 6a.103A-2(b)(4)(ii) of the Temporary Income Tax Regulations
provides that, with respect to any particular bond issue, the determination that a census

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tract is a “qualified census tract” may be based upon the decennial census data
available 3 months prior to the date of issuance and shall not be affected by official
changes to the data during or after that 3-month period.
.06 Section 143(k)(2)(A) of the Code provides that the term “statistical area”
means (i) a metropolitan statistical area (“MSA”) and (ii) any county (or the portion
thereof) that is not within an MSA.
.07 An MSA is currently defined as an area containing at least one urbanized
area with a population of at least 50,000, plus adjacent territory having a high degree of
social and economic integration with the core as measured through commuting ties.
See Office of Management and Budget (“OMB”), Standards for Defining Metropolitan
and Micropolitan Statistical Areas; Notice, 65 FR 249 (December 27, 2000); OMB
Bulletin No. 03-04 (June 6, 2003).
.08 A state or local government may elect to exchange all or part of its qualified
mortgage bond authority to issue mortgage credit certificates. Section 25(a)(1) states,
in general, that the recipient of a mortgage credit certificate may claim a federal income
tax credit equal to the product of the certificate credit rate and the interest paid or
accrued during the tax year on the remaining principal of the certified indebtedness
amount. Section 25(c)(2)(A)(iii)(V) of the Code provides that the indebtedness certified
by mortgage credit certificates must meet the requirements of § 143(h) concerning the
portion of loans to be placed in targeted areas.
.09 The list of qualified census tracts is developed by the Department of Housing
and Urban Development (“HUD”) for publication by the Internal Revenue Service.
HUD’s determination is based upon decennial census data received by HUD from the

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Bureau of the Census.
.10 Qualified census tracts for the states, the District of Columbia, and Puerto
Rico, based on the 2000 census, were most recently published in Rev. Proc. 2003-49,
2003-29 I.R.B. 89. Qualified census tracts for the Northern Mariana Islands, American
Samoa, and Guam have not been published in any previous revenue procedure.
SECTION 3. APPLICATION
The qualified census tracts for the Northern Mariana Islands, American Samoa,
and Guam as listed below are based on the 2000 census. In 2000, the Bureau of the
Census provided data for all areas, not only MSAs. Thus, the list of qualified census
tracts includes tracts in Block Numbering Areas in nonmetropolitan counties as well as
tracts in MSAs.

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County or Equivalent Qualified Census Tracts
NORTHERN MARIANA ISLANDS
Northern Islands Municipality 9501
Rota Municipality 9501
Saipan Municipality 9501 9502 9503 9504
9505.01 9505.02 9506.01 9506.02
9507 9508 9509 9510
9511 9512 9513.01 9513.02
9514 9515
Tinian Municipality 9501

AMERICAN SAMOA
Eastern District 9501 9502 9503 9504
9505 9506 9507 9508
9509
Manu’a District 9517 9518
Rose Island 9519
Swains Island 9520
Western District 9510 9511 9512.01 9512.02
9512.03 9513 9515 9516

GUAM
Guam 9501 9502 9503 9504
9505 9506 9507 9508
9509 9510 9511 9512
9513 9514 9515 9516
9517 9518 9519 9520
9521 9522 9523 9524
9525 9526 9527 9528
9529 9530 9531 9532
9533 9534 9535 9536
9537 9538 9539 9540
9541 9542 9543 9544
9545 9546 9547 9548
9549 9550 9551 9552
9553 9554 9555 9556

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SECTION 4. EFFECT ON OTHER REVENUE PROCEDURES
This revenue procedure supplements Rev. Proc. 2003-49 by providing a list of
qualified census tracts for the Northern Mariana Islands, American Samoa, and Guam.
SECTION 5. SCOPE
An issuer may rely on the list of qualified census tracts set forth in this revenue
procedure with respect to a commitment to provide financing, if that commitment was
made during the period specified in this section, or the if purchase of the residence was
made during the period specified in this section. The period begins on November 10,
2003, the date of publication of this revenue procedure in the Internal Revenue Bulletin,
and ends on the date as of which the list of qualified census tracts is rendered obsolete
by a new revenue procedure.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective on November 10, 2003, the date of
publication of this revenue procedure in the Internal Revenue Bulletin, and ends on the
date as of which the list of qualified census tracts is rendered obsolete by a new
revenue procedure.
SECTION 7. DRAFTING INFORMATION
The principal authors of this revenue procedure are Laura W. Lederman and
Timothy L. Jones of the Office of Associate Chief Counsel (Tax Exempt and
Government Entities). For further information regarding this revenue procedure, contact
Ms. Lederman on (202) 622-3980 (not a toll free call).