rp-10-23.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.601: Rules and Regulations.
(Also Part I, §§ 25, 103, 143; 1.25-4T, 1.103-1, 6a.103A-2.)

Rev. Proc. 2010-23

SECTION 1. PURPOSE
This revenue procedure provides guidance with respect to the
United States and area median gross income figures that are to be
used by 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), in computing the
housing cost/income ratio described in § 143(f)(5).
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

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term "qualified bond" includes any private activity bond that (1)
is a qualified mortgage bond, (2) meets the applicable 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 of one or more
bonds by a state or political subdivision thereof, but only if
(i) all proceeds of the issue (exclusive of issuance costs and a
reasonably required reserve) are to be used to 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 Section 143(f) imposes eligibility requirements
concerning the maximum income of mortgagors for whom financing

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may be provided by qualified mortgage bonds. Section
25(c)(2)(A)(iii)(IV) provides that recipients of mortgage credit
certificates must meet the income requirements of § 143(f).
Generally, under §§ 143(f)(1) and 25(c)(2)(A)(iii)(IV), these
income requirements are met only if all owner-financing under a
qualified mortgage bond and all certified indebtedness amounts
under a mortgage credit certificate program are provided to
mortgagors whose family income is 115 percent or less of the
applicable median family income. Under § 143(f)(6), the income
limitation is reduced to 100 percent of the applicable median
family income if there are fewer than three individuals in the
family of the mortgagor.
.04 Section 143(f)(4) provides that the term "applicable
median family income" means the greater of (A) the area median
gross income for the area in which the residence is located, or
(B) the statewide median gross income for the state in which the
residence is located.
.05 Section 143(f)(5) provides for an upward adjustment of
the income limitations in certain high housing cost areas. Under
§ 143(f)(5)(C), a high housing cost area is a statistical area
for which the housing cost/income ratio is greater than 1.2. The
housing cost/income ratio is determined under § 143(f)(5)(D) by
dividing (a) the applicable housing price ratio by (b) the ratio

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that the area median gross income bears to the median gross
income for the United States. The applicable housing price ratio
is the new housing price ratio (new housing average purchase
price for the area divided by the new housing average purchase
price for the United States) or the existing housing price ratio
(existing housing average area purchase price divided by the
existing housing average purchase price for the United States),
whichever results in the housing cost/income ratio being closer
to 1. This income adjustment applies only to bonds issued, and
nonissued bond amounts elected, after December 31, 1988. See
§ 4005(h) of the Technical and Miscellaneous Revenue Act of 1988,
1988-3 C.B. 1, 311 (1988).
.06 The Department of Housing and Urban Development (HUD)
has computed the median gross income for the United States, the
states, and statistical areas within the states. The income
information was released to the HUD regional offices on May 14,
2010, and may be obtained by calling the HUD reference service at
1-800-245-2691. The income information is also available at HUD's
World Wide Web site, http:huduser.org/datasets/il.html, which
provides a menu from which you may select the year and type of
data of interest. The Internal Revenue Service annually publishes
the median gross income for the United States.
.07 The most recent nationwide average purchase prices and

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average area purchase price safe harbor limitations were
published on March 16, 2009, in Rev. Proc. 2009-18, 2009-11
I.R.B. 686.
SECTION 3. APPLICATION
.01 When computing the income requirements of § 143(f),
issuers of qualified mortgage bonds and mortgage credit
certificates must use either (1) the median gross income for the
United States, the states, and statistical areas within the
states, as released to the HUD regional offices on March 19,
2009, or (2) the median gross income for the United States, the
states, and statistical areas within the states, as released to
the HUD regional offices on May 14, 2010.
.02 If an issuer uses the median gross income for the United
States, the states, and statistical areas within the states, as
released to the HUD regional offices on March 19, 2009, to
compute the housing cost/income ratio under § 143(f)(5), the
issuer must use the median gross income for the United States,
the states, and statistical areas within the states, as released
to the HUD regional offices on March 19, 2009, for all purposes
under § 143(f). Likewise, if an issuer uses the median gross
income for the United States, the states, and statistical areas
within the states, as released to the HUD regional offices on May
14, 2010, to compute the housing cost/income ratio under

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§ 143(f)(5), the issuer must use the median gross income for the
United States, the states, and statistical areas within the
states, as released to the HUD regional offices on May 14, 2010,
for all purposes under § 143(f).
SECTION 4. EFFECT ON OTHER REVENUE PROCEDURES
.01 Rev. Proc. 2009-27, 2009-19 I.R.B. 938, is obsolete
except as provided in §§ 3.01, 3.02, or 5.01 of this revenue
procedure.
.02 This revenue procedure does not affect the effective
date provisions of Rev. Rul. 86-124, 1986-2 C.B. 27. Those
effective date provisions will remain operative at least until
the Service publishes a new revenue ruling that conforms the
approach to effective dates set forth in Rev. Rul. 86-124 to the
general approach taken in this revenue procedure.
SECTION 5. EFFECTIVE DATES
.01 Issuers must use the United States and area median gross
income figures specified in § 3.01 of this revenue procedure for
commitments to provide financing that are made, or (if the
purchase precedes the financing commitment) for residences that
are purchased, in the period that begins on May 14, 2010, and
ends on the date when these United States and area median gross
income figures are rendered obsolete by a new revenue procedure.
DRAFTING INFORMATION

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The principal authors of this revenue procedure are David
White and Timothy Jones of the Office of Associate Chief Counsel
(Financial Institutions & Products). For further information
regarding this revenue procedure contact Mr. White or Mr. Jones
at (202) 622-3980 (not a toll-free call).