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The Inclusive Communities Project, Inc. v. Department of Treasury

United States Court of Appeals, Fifth Circuit

December 30, 2019

THE INCLUSIVE COMMUNITIES PROJECT, INCORPORATED, Plaintiff-Appellant,
v.
DEPARTMENT OF TREASURY; OFFICE OF THE COMPTROLLER OF THE CURRENCY, Defendants-Appellees.

          Appeal from the United States District Court for the Northern District of Texas

          Before JOLLY, SMITH, and COSTA, Circuit Judges.

          JERRY E. SMITH, CIRCUIT JUDGE.

         The Inclusive Communities Project, Inc. ("ICP"), sued the Department of the Treasury ("Treasury") and the Office of the Comptroller of the Currency ("OCC"), asserting, inter alia, claims under Section 3608 of the Fair Housing Act ("FHA") and the Fifth Amendment. ICP averred that Treasury and OCC had failed to regulate the federal Low-Income Housing Tax Credit ("LIHTC") program so as to promote fair housing. The district court granted summary judgment to OCC and Treasury on three grounds: (1) ICP lacked Article III standing to sue OCC; (2) the court couldn't review ICP's FHA claim because ICP hadn't challenged any "final agency action" under the Administrative Procedure Act ("APA"); and (3) ICP's Fifth Amendment claim failed on the merits. Because ICP lacks standing to sue either OCC or Treasury, we affirm in part, vacate in part, and render a judgment of dismissal.

         I.

         The Tax Reform Act of 1986 established the LIHTC program to encourage the development of affordable rental housing. Pub. L. No. 99-514, § 252, 100 Stat 2085, 2189-208 (codified at 26 U.S.C. § 42). The statute provides tax subsidies for "qualified low-income housing project[s]." 26 U.S.C. § 42(g)(1). The credits are first apportioned by Congress, based on population, to state and local Housing Credit Agencies ("HCAs"), id. § 42(h)(3), which then allocate the credits to sponsors of and investors in affordable housing projects, see id. § 42(m).

         Each HCA is required to enact a Qualified Allocation Plan ("QAP") establishing the body's priorities for allocating the credits. Id. § 42(m)(1)(B). Each QAP must set forth selection criteria, give preference to projects benefiting people most in need of affordable housing, and provide a procedure for the HCA to monitor noncompliance by project sponsors. Id. HCAs also may add criteria that "are appropriate to local conditions." Id. § 42(m)(1)(B)(i). And HCAs can deviate from those criteria if they offer a publicly available written explanation. Id. § 42(m)(1)(A)(iv).

         The Texas Department of Housing and Community Affairs ("TDHCA") has adopted a comprehensive scoring rubric to determine which affordable housing projects will receive LIHTCs. See generally 10 Tex. Admin. Code § 11.9. The scoring criteria reduce to four basic categories: (1) "[c]riteria promoting development of high quality housing," (2) "[c]riteria to serve and support Texans most in need," (3) "[c]riteria promoting community support and engagement," and (4) "[c]riteria promoting the efficient use of limited resources and applicant accountability." Id. § 11.9(b)-(e). Significant points are available in all four categories, though the most are potentially available in categories (2) and (3).[1] Generally, applications with the highest combined score are given the highest priority for LIHTC assignment. See id. § 11.6(3).

         At the federal level, the LIHTC program is administered by Treasury, which has the authority to "prescribe such regulations as may be necessary or appropriate." 26 U.S.C. § 42(n). Treasury also has the power to deny or recapture a LIHTC claimed by a noncompliant investor. Id. § 42(j). It is likewise empowered to issue revenue rulings, publish guidance, and issue notices regarding all provisions of the Tax Code, including those governing LIHTCs. See id. § 7805(a); 26 C.F.R. § 601.601(d). Only HCAs, however, have the power to choose what projects will receive LIHTCs. See 26 U.S.C. § 42(m).

         OCC, an independent bureau within Treasury, is the primary regulator of "national banks" and "federal savings associations." See 12 U.S.C. § 1 et seq. National banks generally are forbidden from owning or investing in real property, but they can make public welfare investments ("PWI") in real estate, including LIHTC projects, that don't expose them to unlimited liability.[2] As part of its role, OCC regulates and approves national banks' PWIs. See 12 C.F.R. pt. 24. But OCC doesn't regulate all individuals or entities that may invest in LIHTC projects, and it isn't involved in selecting which projects receive LIHTCs.

         ICP "is a fair housing focused nonprofit organization working with families seeking access to housing in predominately nonminority areas of the Dallas metropolitan area." ICP uses its resources to encourage the development of LIHTC projects in non-minority-concentrated areas, and it assists minority families who participate in the Dallas Housing Authority's Section 8 Housing Choice Voucher program. Because LIHTC units can't refuse to rent to tenants using Section 8 vouchers, [3] it's important to ICP where those projects are located within the Dallas metropolitan area. ICP can help its clients obtain LIHTC units more efficiently-i.e., using less time and money-than other housing options.

         II.

         ICP has been involved in litigation related to the LIHTC program for more than a decade. In 2008, ICP brought a FHA claim against TDHCA, alleging that TDHCA perpetuated racial segregation by disproportionately allocating LIHTCs to projects in non-white neighborhoods.[4] That case, which included a bench trial and review in this court and the Supreme Court, was ultimately dismissed in 2016.[5]

         ICP filed this suit in 2014, asserting, inter alia, claims under Section 3608 of the FHA and the Fifth Amendment.[6] Specifically, ICP averred that Treasury and OCC have abdicated their Section 3608 duties to regulate the LIHTC program in a manner that furthers fair housing. That abandonment, ICP suggested, was also intentional discrimination in violation of the Fifth Amendment. ICP sought injunctive relief, attorney's fees, and costs.

         ICP's claim is based primarily on statistical data showing that LIHTC housing in Dallas remains segregated by race. As of 2017, 96% of both LIHTC projects (161 of 168) and LIHTC units (27, 823 of 28, 874) were located in minority-concentrated areas (less than 50% white, non-Hispanic). Between 1995 and 2017, 96 of the 101 approved LIHTC projects in Dallas were built in minority-concentrated areas. Moreover, 57 of them were owned by national banks, and only one of these bank-owned projects was sited in a minority-concentrated area. Black voucher families often suffered the effects most acutely, and ICP alleged that the current racial segregation in Dallas public housing was equivalent to the conditions under city-sanctioned de jure segregation but with more than three times as many units.

         Treasury and OCC moved for summary judgment on three grounds: ICP (1) lacked Article III standing; (2) hadn't challenged any final agency action under the APA, a jurisdictional prerequisite for its Section 3608 claim; and (3) hadn't made a prima facie case of intentional discrimination under the Fifth Amendment. ICP moved for partial summary judgment on standing and its Section 3608 claim.

         The district court granted Treasury and OCC's motion and denied ICP's. The court ruled that ICP didn't have standing to pursue its claims against OCC because it hadn't established that its alleged injury was traceable to OCC's conduct or that the relief it requested would redress that injury. The court found that ICP had standing to sue Treasury, but it still rejected the claims against it. The court held that it lacked jurisdiction to consider the Section 3608 claim because ICP hadn't identified any final agency action under Section 702 of the APA. And as for the Fifth Amendment claim, the court determined that ICP had failed to adduce "any evidence that would support the reasonable finding that Treasury failed to act, or delayed in acting, because it intended to discriminate on the basis of race." ICP appealed. We review summary judgments and questions of standing de novo. See Nat'l Rifle Ass'n of Am., Inc. v. McCraw, 719 F.3d 338, 343 (5th Cir. 2013).

         III.

         A.

         "The law of Article III standing, which is built on separation-of-powers principles, serves to prevent the judicial process from being used to usurp the powers of the political branches." Town of Chester v. Laroe Estates, Inc., 137 S.Ct. 1645, 1650 (2017). To have standing, ICP "must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial deci-sion."[7] "Th[at] triad of injury in fact, causation, and redressability constitutes the core of Article III's case-or-controversy requirement," and ICP, as "the party invoking federal jurisdiction[, ] bears the burden of establishing its existence." Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103-04 (1998) (footnote omitted).

         "[E]ach element of Article III standing must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, with the same evidentiary requirements of that stage of litigation." Legacy Cmty. Health Servs., Inc. v. Smith, 881 F.3d 358, 366 (5th Cir.), as revised (Feb. 1, 2018), cert. denied, 139 S.Ct. 211 (2018) (quotation marks omitted). Thus, at summary judgment, ICP can't rely on "mere allegations"; it "must set forth by affidavit or other evidence ...


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