(a) In evaluating an application, the department shall determine whether the application satisfies the threshold criteria required by the board in the qualified allocation plan. The department shall reject and return to the applicant any application that fails to satisfy the threshold criteria.
(b) If an application satisfies the threshold criteria, the department shall score and rank the application using a point system that:
(1) prioritizes in descending order criteria regarding:
(A) financial feasibility of the development based on the supporting financial data required in the application that will include a project underwriting pro forma from the permanent or construction lender;
(B) quantifiable community participation with respect to the development, evaluated on the basis of a resolution concerning the development that is voted on and adopted by the following, as applicable:
(i) the governing body of a municipality in which the proposed development site is to be located;
(ii) subject to Subparagraph (iii), the commissioners court of a county in which the proposed development site is to be located, if the proposed site is to be located in an area of a county that is not part of a municipality; or
(iii) the commissioners court of a county in which the proposed development site is to be located and the governing body of the applicable municipality, if the proposed site is to be located in the extraterritorial jurisdiction of a municipality;
(C) the income levels of tenants of the development;
(D) the size and quality of the units;
(E) the rent levels of the units;
(F) the cost of the development by square foot;
(G) the services to be provided to tenants of the development;
(H) whether, at the time the complete application is submitted or at any time within the two-year period preceding the date of submission, the proposed development site is located in an area declared to be a disaster under § 418.014;
(I) quantifiable community participation with respect to the development, evaluated on the basis of written statements from any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site; and
(J) the level of community support for the application, evaluated on the basis of a written statement from the state representative who represents the district containing the proposed development site;
(2) uses criteria imposing penalties on applicants or affiliates who have requested extensions of department deadlines relating to developments supported by housing tax credit allocations made in the application round preceding the current round or a developer or principal of the applicant that has been removed by the lender, equity provider, or limited partners for its failure to perform its obligations under the loan documents or limited partnership agreement;
(3) encourages applicants to provide free notary public service to the residents of the developments for which the allocation of housing tax credits is requested; and
(4) for an application concerning a development that is or will be located in a county with a population of 1.2 million or more but less than 4 million and that is or will be located not more than two miles from a veterans hospital, veterans affairs medical center, or veterans affairs health care center, encourages applicants to provide a preference for leasing units in the development to low income veterans.

(c) The department shall publish in the qualified allocation plan details of the scoring system used by the department to score applications.
(d) The department shall underwrite the applications ranked under Subsection (b) beginning with the applications with the highest scores in each region described by § 2306.111(d) and in each set-aside category described in the qualified allocation plan. Based on application rankings, the department shall continue to underwrite applications until the department has processed enough applications satisfying the department’s underwriting criteria to enable the allocation of all available housing tax credits according to regional allocation goals and set-aside categories. To enable the board to establish an applications waiting list under § 2306.6711, the department shall underwrite as many additional applications as the board considers necessary to ensure that all available housing tax credits are allocated within the period required by law. The department shall underwrite an application to determine the financial feasibility of the development and an appropriate level of housing tax credits. In determining an appropriate level of housing tax credits, the department shall evaluate the cost of the development based on acceptable cost parameters as adjusted for inflation and as established by historical final cost certifications of all previous housing tax credit allocations for:
(1) the county in which the development is to be located;
(2) if certifications are unavailable under Subdivision (1), the metropolitan statistical area in which the development is to be located; or
(3) if certifications are unavailable under Subdivisions (1) and (2), the uniform state service region in which the development is to be located.
(e) In scoring applications for purposes of housing tax credit allocations, the department shall award, consistent with Section 42, Internal Revenue Code of 1986 (26 U.S.C. § 42), preference points to a development that will:
(1) when practicable and feasible based on documented, committed, and available third-party funding sources, serve the lowest income tenants per housing tax credit, if the development is to be located outside a qualified census tract; and
(2) produce for the longest economically feasible period the greatest number of high quality units committed to remaining affordable to any tenants who are income-eligible under the low income housing tax credit program.
(f) In evaluating the level of community support for an application under Subsection (b)(1)(J), the department shall award:
(1) positive points for positive written statements received;
(2) negative points for negative written statements received; and
(3) zero points for neutral statements received.
(g) If no written statement is received for an application under Subsection (b)(1)(J), the department shall use the maximum number of points that could have been awarded under that paragraph to increase the maximum number of points that may be awarded for that application under Subsection (b)(1)(B). If awarding points under Subsection (b)(1)(B)(iii), the department shall reallocate the points from the scoring category provided by Subsection (b)(1)(J) equally between the political subdivisions described by Subsection (b)(1)(B)(iii). In awarding points transferred under this subsection from the scoring category provided by Subsection (b)(1)(J) to the scoring category provided by Subsection (b)(1)(B), the department shall award:
(1) positive points for positive resolutions adopted;
(2) negative points for negative resolutions adopted; and
(3) zero points for neutral resolutions adopted.