United States Court of Appeals
                        For the First Circuit


No. 21-1043

    AMTAX HOLDINGS 227, LLC and TAX CREDIT HOLDINGS III, LLC,

                       Plaintiffs, Appellants,

                                  v.

  TENANTS' DEVELOPMENT II CORP. and TENANTS' DEVELOPMENT CORP.,

                        Defendants, Appellees.


          APPEAL FROM THE UNITED STATES DISTRICT COURT
               FOR THE DISTRICT OF MASSACHUSETTS

              [Hon. Leo T. Sorokin, U.S. District Judge]


                                Before

                     Kayatta, Selya, and Barron,
                           Circuit Judges.


     Louis E. Dolan, Jr., with whom Stephen M. LaRose and Nixon
Peabody LLP were on brief, for appellants.
     David A. Davenport, with whom BC Davenport, LLC was on brief,
for appellees.


                           October 13, 2021
           SELYA, Circuit Judge.          Federal courts are courts of

limited jurisdiction, and this appeal requires us to decide whether

the case at hand sufficiently implicates federal interests so as

to   "aris[e]   under   federal   law,"    28   U.S.C.   § 1331,   and   thus

galvanize a federal district court's subject-matter jurisdiction.

The court below     answered this question in the negative,               see

Tenants' Dev. Corp. v. AMTAX Holdings 227, LLC, No. 20-10902, 

, at *3-4 (D. Mass. Dec. 23, 2020), and — although our

reasoning differs somewhat — our answer is the same. Consequently,

we affirm the district court's dismissal of the action for want of

subject-matter jurisdiction.

I. BACKGROUND

           We draw upon the well-pleaded facts adumbrated in the

complaint filed by AMTAX Holdings 227, LLC (AMTAX) and Tax Credit

Holdings III, LLC (TCH), plaintiffs below and appellants here.             In

the process, we "read the allegations . . . liberally . . . and

tak[e] all inferences in favor of the plaintiff[s]."               P.R. Tel.

Co. v. Telecomms. Regul. Bd. of P.R., 

, 7 (1st Cir.

1999).

           The controversy giving rise to this litigation stems

from a tug of war over the fate of a scattered-site affordable

housing development located in Boston's south end (the Project).

Defendant-appellee Tenants' Development Corporation (TDC) is a

not-for-profit corporation        that promotes access to affordable


                                   - 2 -
housing.      TDC    owns   seventy-nine    percent   of   the   stock    in   an

affiliated corporation, defendant-appellee Tenants' Development II

Corporation (TD II).        As shortly will appear, both TDC and TD II

have ties to the Project.

           The chronology of relevant events began on April 11,

2002, when TD II organized a limited partnership (the Partnership)

under Massachusetts law.        TDC agreed to ground-lease the Project

to the Partnership for fifty years to allow the Partnership to

"redevelop,    rehabilitate,     renovate,    develop,     repair,   improve,

maintain, operate, lease, dispose of, and otherwise deal with" the

Project in accordance with stated terms.              TDC became a limited

partner in the Partnership and TD II became the managing general

partner — a role in which it had exclusive authority to "manage

the business and affairs of the Partnership."

           The      original   partnership    agreement    proved    to   be    a

temporary chrysalis for the joint endeavor.           Some fourteen months

into the life of the Partnership, TDC and TD II executed an amended

limited partnership agreement (the Agreement), which was designed

to qualify the Project for federal low-income housing tax credits

(LIHTC).   See 26 U.S.C. § 42.

           At this point, some background is useful.                 Congress

created the LIHTC program in the Tax Reform Act of 1986.             See Pub.

L. No. 99–514, § 252, 100 Stat 2085, 2189–208 (1986) (codified at

26 U.S.C. § 42).        The program incentivizes private investors to


                                    - 3 -
finance affordable housing development in exchange for credit

against their federal income tax liability. See Mark P. Keightley,

Cong. Rsch. Serv., RS22389, An Introduction to the Low-Income

Housing Tax Credit 1, 6 (2021). Under it, the government allocates

tax credits annually to each state, and the state in turn allocates

credits to selected housing developers for use in connection with

qualified projects.   See 8 Scott D. Schimick, Mertens Law of Fed.

Income Tax'n § 32B:10 (2021).

          A rental property must remain affordable for thirty

years in order to qualify for a tax-credit allocation, see 26

U.S.C. §§ 42(g)(1), (h)(6)(A)-(D), although federal compliance

reporting is only mandated during the first fifteen years of the

commitment, see id. §§ 42(i)(1), (l)(1)-(2).      For the duration of

the   compliance   period,   property   owners   must   submit   annual

compliance reports to both the Internal Revenue Service (IRS) and

a state monitoring agency.    The federal reporting requirement ends

after fifteen tax years, but state regulators may choose to

continue their monitoring regimes for longer periods.       See Office

of Pol'y Dev. & Rsch., U.S. Dep't of Housing & Urban Dev., What

Happens to Low-Income Housing Tax Credit Properties at Year 15 and

Beyond? 37 (2012) [hereinafter Year 15 and Beyond].

          Once an LIHTC project comes into service, the developer

may claim the allocated tax credits over a ten-year period.        See

26 U.S.C. § 42(f)(1).    By this time, though, the developer often


                                - 4 -
will have sold the unrealized tax-credit allocation to an outside

investor.     See Keightley, supra, at 1.   Developers and investors

normally carry out such transactions through limited partnership

agreements.      As   the general partner, the developer holds "a

relatively small ownership percentage but maintains the authority

to build and run the [housing] project on a day-to-day basis."

Id. at 6.     As a limited partner, the investor retains "a large

ownership percentage with an otherwise passive role."    Id.   At the

end of the compliance period, the investor's previously actualized

tax benefits are no longer subject to recapture, see 26 U.S.C.

§ 42(j)(1), and the time may be ripe for the investor to bid

farewell to the limited partnership.

            Here, the Agreement reflects a somewhat typical LIHTC

transaction.     When the tax credits were sold, TDC withdrew as a

limited partner, and the Partnership admitted AMTAX as an "investor

limited partner."      AMTAX made a significant capital contribution

to the Partnership and received close to 100 percent of the tax-

credit allocation.1     TD II continued to oversee the Partnership's

day-to-day operations in its capacity as managing general partner,

but with added contractual obligations under the Agreement not to

"take any action . . . which would cause the recapture of any


     1 At the same time, the Agreement was amended to admit Protech
2003-B as a "special limited partner." Protech 2003-B withdrew in
2011 and was replaced by TCH. For present purposes, we deem TCH's
interests congruent with those of AMTAX.


                                 - 5 -
Federal Housing Tax Credit" and "to avoid recapture of such credit

for failure to comply with the requirements of Section 42."

             On the day that AMTAX was admitted as a limited partner,

the   Partnership    executed     a    separate    contract   with    TDC.     In

consideration of "subsidies and development assistance" provided

by TDC, through which the Partnership was "able to acquire and

rehabilitate"    the    Project       "at   a   favorable   total    cost,"   the

Partnership granted TDC a right of first refusal in the event that

the Partnership later proposed to sell "all or substantially all

[of its] interest" in the Project to a bona fide third party.                 The

agreement that embodied the right of first refusal (the ROFR

Agreement) provided that the right, if exercised, would entitle

TDC to purchase the Project at the lesser of the third-party offer

price   or    "the   sum   of   the     principal    amount   of     outstanding

indebtedness secured by the [Project] . . . and all federal, state

and local taxes attributable to such [a] sale" (the debt-plus-

taxes price).        The ROFR Agreement was duly recorded in local

property records.

             The debt-plus-taxes price corresponds to a statutory

provision enacted in 1989 to allow tenants to purchase buildings

at reduced cost at the end of the compliance period, see Pub. L.

No. 101-239, § 7108, 103 Stat. 2106, 2321 (1989) (codified at 26

U.S.C. § 42(i)(7)(A)) — a right that was subsequently expanded to

inure to the benefit of qualifying nonprofits, see Pub. L. No.


                                       - 6 -
101-508, § 11407(b), 104 Stat. 1388, 1388-474 (1990) (codified at

26 U.S.C. § 42(i)(7)(A)).   That provision creates a safe harbor

within which qualifying organizations may negotiate "a right of

first refusal to purchase a LIHTC property at the end of the

compliance period."   See Year 15 and Beyond, supra, at 31 n.20.

This safe harbor is attractive from an investor's coign of vantage

because the IRS ordinarily treats a below-market purchase option

as a conditional transfer of ownership to the option-holder, see

Rev. Rul. 55-540, 1955-

, § 4.01(e), thus precluding an

owner whose interest is subject to such a right from claiming any

tax benefits associated with the asset.     Section 42(i)(7) makes

this general rule inapplicable when a qualifying organization

holds the right of first refusal to purchase an LIHTC development.

The safe harbor creates an incentive for private investment at the

beginning of a project, allowing the investor to capture the tax

credits while making it easier for tenant groups and nonprofits

committed to "fostering low-income housing" to obtain ownership of

the property for the long term. See 26 U.S.C. §§ 42(i)(7), (h)(5).

The statute neither defines the term "right of 1st refusal" nor

dictates how the contractual mechanism must operate (other than

specifying who may hold and exercise such a right, when it may be

exercised, and the minimum price).    See id. § 42(i)(7).

          At some time during the next fourteen years, AMTAX came

under the control of Alden Torch Financial, LLC (Alden Torch).


                              - 7 -
Alden Torch took over the management of AMTAX's interest in the

Partnership.     The Project's compliance period was due to expire on

December 31, 2018.     As that date approached, AMTAX (through Alden

Torch) entered into negotiations with TD II over the terms of its

potential exit from the Partnership.        When there was no meeting of

the minds, Alden Torch notified TD II that AMTAX was exercising

its right under the Agreement to force the Project's sale at fair

market value.     TD II promptly initiated a marketing process.

           Ten    months   later,   Alden    Torch    did    an   about-face,

claiming that AMTAX had just learned of the ROFR Agreement.            Alden

Torch   unilaterally    declared    that    AMTAX    now    "rescind[ed]   and

revoke[d]" its previous exercise of the forced-sale option.             AMTAX

also denied that any rights under the ROFR Agreement had been

triggered.   TD II rejected this attempted rescission, questioning

how AMTAX could be unaware of the ROFR Agreement (which was a

matter of public record).      And it took the position that, under

the Agreement, AMTAX could not turn back the clock after having

set the forced-sale process in motion.

           On February 10, 2020, TD II              notified TDC that the

Partnership had received a bona fide third-party offer for the

Project.   That offer was in the approximate amount of $51,000,000.

TDC responded by notifying TD II that it intended to purchase the




                                    - 8 -
Project    for    the     debt-plus-taxes      price     (approximately

$17,000,000).2

           In response, AMTAX sought leverage to strengthen its

bargaining position.    It recorded (in the Suffolk County Registry

of Deeds) a notice reciting that "[AMTAX] ha[d] certain consent

rights relating to the sale of the [Project]" and that it had not

approved any sale.      The recorded document caused the Project's

mortgagee to conclude that it could not transfer the mortgage until

the dispute between AMTAX and TD II was resolved.

           With the parties at loggerheads, AMTAX (joined by TCH)

sued TDC and TD II in the United States District Court for the

District of Massachusetts.3    Their complaint sought a declaratory

judgment   concerning    the   validity   of   the     ROFR   Agreement.

Specifically, the appellants sought a declaration that the ROFR

Agreement did not comply with section 42(i)(7); that the right of

first refusal "could not have been . . . validly exercised;" and


     2 Some perspective on these numbers may be gained by arraying
them against the backdrop of AMTAX's initial investment and
subsequent tax benefits. For capital contributions of a little
more than $12,000,000, AMTAX received tax credits totaling over
$15,000,000, together with a string of year-by-year tax losses
over the life of the Project.
     3 In actuality, TDC and TD II were the first to file in the
federal district court. Their suit, which named AMTAX and Alden
Torch (among others) as defendants, was premised on the alleged
existence of diversity jurisdiction.     See 28 U.S.C. § 1332(a).
When the assertion of diversity jurisdiction proved insupportable,
the district court dismissed the suit for want of jurisdiction.
No appeal has been taken from that ruling, and we make no further
reference to this first-filed suit.


                                - 9 -
that, therefore, the ROFR Agreement should be declared void.            The

complaint also asserted a laundry list of state-law causes of

action, including claims of breach of contract and breach of

fiduciary duty against TD II; claims of tortious interference and

aiding and abetting a fiduciary-duty breach against TDC; and claims

of fraud and unfair trade practices against both TD II and TDC.

Federal jurisdiction was premised on the existence of an embedded

federal question.    See R.I. Fishermen's All., Inc. v. R.I. Dep't

of Env't Mgmt., 

, 48 (1st Cir. 2009) (describing

embedded federal jurisdiction as jurisdiction attaching to a suit

"in which the plaintiff pleads a state-law cause of action, but

that cause of action 'necessarily raise[s] a stated federal issue'"

(quoting Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg.,

, 314 (2005))).     In particular, the appellants alleged

that the claims stated in their complaint (or, at least, their

declaratory judgment claim) required the district court to resolve

whether the ROFR Agreement violated 26 U.S.C. § 42(i)(7).               The

precise scope of the statutory right would in their view determine

whether that contract should be declared void because it departed

from the federal scheme.     Extending this reasoning, they said that

the   same   determination   would   show   whether   TD   II   "materially

breached" terms of the Agreement (such as the prohibition against

any action that could cause recapture of federal tax credits) when

it formed the contract with TDC.


                                 - 10 -
             TDC and TD II moved to dismiss the appellants' suit for

want    of   federal    subject-matter    jurisdiction.        The   appellants

opposed the motion.        The district court rejected the appellants'

jurisdictional theory and dismissed the suit.                See Tenants' Dev.

Corp., 

, at *3-4.

             In reaching this result, the court recognized the four-

part test for embedded federal jurisdiction articulated by the

Supreme Court, which requires the appellants to demonstrate that

"a   federal    issue    is:   (1)     necessarily       raised,   (2)   actually

disputed, (3) substantial, and (4) capable of resolution in federal

court without disrupting the federal-state balance approved by

Congress."     Gunn v. Minton, 

, 258 (2013).                 Three of

these four elements, the district court said, were missing in this

case:    although the parties disagreed about the meaning of section

42(i)(7), the federal-law controversy was not necessarily raised,

substantial,     or     appropriate    for     federal    intervention.       See

Tenants' Dev. Corp., 

, at *3-4.              This timely appeal

followed.

II. ANALYSIS

             "We review the granting of a motion to dismiss for lack

of subject matter jurisdiction de novo" and may affirm the lower

court's judgment based on "any ground made manifest by the record."

Román-Cancel v. United States, 

, 41 (1st Cir. 2010).

Given the appellants' theory of federal jurisdiction and this


                                      - 11 -
standard of review, we consider afresh whether the complaint falls

into the "'special and small category of cases' where a 'state-

law claim necessarily raise[s] a stated federal issue, actually

disputed and substantial, which a federal forum may entertain

without disturbing any congressionally approved balance of federal

and state judicial responsibilities.'"        One & Ken Valley Hous.

Grp. v. Me. State Hous. Auth., 

, 224 (1st Cir. 2013)

(alteration in original) (quoting Gunn, 

).

          Two familiar principles guide our inquiry.       First, "it

is irrefragable that the burden of establishing jurisdiction must

fall to the party who asserts it."       Woo v. Spackman, 

,

53 (1st Cir. 2021).    It follows that the appellants must shoulder

that burden here.     Second, any putative federal question must be

clearly stated on the face of the appellants' complaint, not

fashioned ex post.      See R.I. Fishermen's All., 

(describing well-pleaded complaint rule).

          Refined to bare essence,        this is a dispute over a

contract, the ROFR Agreement.     As we already have explained, the

ROFR Agreement sets out a right of first refusal at a purchase

price equal to the lesser of a bona fide third-party offer price

or the debt-plus-taxes price.       TDC holds this right of first

refusal and chose to exercise it after AMTAX exercised its forced-

sale option, marketing of the Project began, and TDC asserts that

a bona fide third-party offer had been secured.      Having had second


                                - 12 -
thoughts once they realized that TDC would seek to exercise its

option to purchase the Project at the debt-plus-taxes price, the

appellants now prefer to retain their ownership interest — but

they may do so only if TDC cannot exercise its right of first

refusal.

           To that end, the appellants asked the district court to

declare the ROFR Agreement "void, void ab initio, and[] otherwise

ineffective," contending that it does not comport with the right

of first refusal    contemplated by    26 U.S.C. § 42(i)(7).    The

appellants posit that the statute defines the right as being

triggered only when the property owner receives a bona fide

purchase offer that it is willing to accept.   By contrast, TDC and

TD II assert that "[s]ection 42 does not purport to specify all of

the possible terms and conditions of th[e] 'right of 1st refusal,'"

leaving private parties to "freely negotiate" how the contractual

mechanism will operate in any given instance       subject to   the

statute's explicit restrictions on when the right may be exercised

and to the debt-plus-taxes minimum price.

           This dispute over the proper construction of section

42(i)(7) is the hook upon which the appellants hang their argument

for federal jurisdiction.   The need to test the validity of the

parties' conflicting constructions     is necessarily raised, the

appellants say, by their prayer for declaratory relief seeking to

void the ROFR Agreement because it is out of sync with section


                              - 13 -
42(i)(7).    The potential of noncompliance, they submit, presents

a "threshold" federal question, which — until resolved — precludes

any court from properly interpreting the ROFR Agreement.

            We do not gainsay that the parties disagree about the

meaning and reach of section 42(i)(7). To support embedded federal

jurisdiction, though, it is not enough that a federal issue is

"actually disputed."   See Gunn, 

.     The federal issue

must also be "necessarily raised," "substantial," and "capable of

resolution in federal court without disrupting the federal-state

balance approved by Congress."       

            We are doubtful that this case, as presented by the

appellants, necessarily raises a federal issue.        Section 42(i)(7)

provides only that "no Federal income tax credit shall fail to be

allowable" when a qualifying right of first refusal is in effect.

Nothing in the statute either suggests or implies that it voids

noncompliant right of first refusal agreements.         The notion that

section   42(i)(7)   independently    voids    noncompliant   agreements

rather than simply making a party or a project ineligible for

certain tax benefits borders on the specious and seems too thin a

reed to support federal jurisdiction.         See Abraugh v. Y H Corp.,

, 513 n.10 (2006) ("A claim invoking federal-question

jurisdiction under 28 U.S.C. § 1331 . . . may be dismissed for

want of subject-matter jurisdiction if it is not colorable, i.e.,

if it is 'immaterial and made solely for the purpose of obtaining


                               - 14 -
jurisdiction'    or     is   'wholly   insubstantial   and   frivolous.'"

(quoting Bell v. Hood, 

, 682-83 (1946))).             To the

extent that the appellants' bid for federal jurisdiction rests on

this theory — and the preponderance of their briefing suggests

that it rests exclusively there — the proposed federal issue also

lacks substantiality.

          Substantiality demands that an embedded federal question

be "important to the federal system," not just to the parties.

Mun. of Mayagüez v. Corporación Para el Desarrollo del Oeste, Inc.,

, 14 (1st Cir. 2013).        There are multiple possible ways

in which to satisfy this test, such as when a state-law claim

"directly challenges the propriety of an action taken by 'a federal

department, agency, or service,'" 

 (quoting Empire Healthchoice

Assurance, Inc. v. McVeigh, 

, 700 (2006)), or will

otherwise yield "a new interpretation of [federal law] which will

govern a large number of cases," 

        The common thread that runs

through all such suits is that they entail some appreciable measure

of risk to the federal sovereign.        See 

          The federal question posed by the appellants involves no

such jeopardy.        Their complaint does not challenge — nor even

implicate — concrete federal activity (such as an attempt by the

IRS to recapture the Partnership's tax credits).              And it is

questionable whether the outcome of the litigation will have

ramifications for other cases.


                                   - 15 -
            For    aught   that    appears,     right   of    first      refusal

agreements are sui generis.        There is no standardized language for

such agreements, nor is there any indication that developers and

investors customarily use a one-size-fits-all prototype.                 In their

briefing,    the   appellants      have   not   furnished    any    basis    for

concluding that a large number of LIHTC transactions would be

affected by the federal-law issue here. And the federal government

already "delegates" LIHTC-related compliance matters "to state

agencies as a matter of course," Templeton Bd. of Sewer Comm'rs.

v. Am. Tissue Mills of Mass., Inc., 

, 41 (1st Cir.

2003), and it is not clear how a state court could destabilize the

program by ruling on the meaning of section 42(i)(7).                 The short

of it is that the theory advanced by the appellants in their

briefing    does   not   suggest   broad     significance    to    the   federal

government or other parties and, thus, lacks substantiality.

            To be sure, the appellants' complaint also suggests that

interpretation of section 42(i)(7) might be necessitated by claims

for breach of provisions of the Agreement requiring TD II not to

endanger tax benefits and to comply with section 42(i)(7).                   But

the appellants never fleshed out that theory either in the district

court or in their briefs to this court.          In their opening brief in

this court, the appellants adverted to this theory in a single

sentence but made no effort to develop it.          Instead, they hewed to

the more general contention that the ROFR Agreement was "in


                                    - 16 -
violation of Section 42 of the Internal Revenue Code, and thus is

void and unenforceable." (emphasis in original).                        Nor did their

reply brief make any effort to fill this void.                  Indeed, it was not

until oral argument that the appellants explained — and again

without substantial elaboration — that one of the causes of action

underpinning      the    declaratory        judgment    count     was    a   breach     of

contract claim based on the "express provision in the Partnership

Agreement      that   obligates       the   general     partner    to    comply       with

statutory      requirements."          Critical   elements        of    this    line    of

reasoning, such as how the recapture process works and whether the

tax credits the Project received might be imperiled, also remained

unexplored.

            It may or may not be that this breach of contract theory

would necessarily implicate the proper interpretation of section

42(i)(7) and would present a substantial issue of relevance to

other cases.      But that question is not properly before us, and we

need not answer it.        It is the party claiming federal jurisdiction

that   bears    the     burden   of    making    such    arguments       face    up    and

squarely, and it is a "settled appellate rule that issues adverted

to in a perfunctory manner, unaccompanied by some effort at

developed argumentation, are deemed waived."                      United States v.

Zannino, 

, 17 (1st Cir. 1990); see United States v.

Merritt, 

, 585 n.3 (1st Cir. 2019) ("Arguments not

advanced before the district court or in a party's briefs and then


                                        - 17 -
raised for the first time at oral argument are 'doubly waived.'"

(quoting United States v. Leoner-Aguirre, 

, 319 (1st

Cir. 2019))); Teamsters Union, Loc. No. 59 v. Superline Transp.

Co., 

, 21 (1st Cir. 1992) ("If any principle is settled

in   this    circuit,   it   is   that,   absent   the   most   extraordinary

circumstances, legal theories not raised squarely in the lower

court cannot be broached for the first time on appeal.").                The

appellants' undeveloped breach of contract theory is waived and,

as such, cannot rescue their bid for federal jurisdiction.

              To say more would be supererogatory.4        We hold that the

district court did not err in concluding that the complaint in

this       case   failed     to   trigger    embedded     federal    question

jurisdiction.

III. CONCLUSION

              We need go no further. For the reasons elucidated above,

the district court's dismissal of the action for want of federal

subject-matter jurisdiction is



Affirmed.




       Our reasoning makes it unnecessary for us to delve into the
       4

extent (if at all) to which the appellants' complaint implicates
the congressionally approved balance of federal and state judicial
responsibilities.   At first blush, though, any such implication
appears to be minimal.


                                    - 18 -