Archives: Private Business Use

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PLR 201726007 – Insights into the Facts & Circumstances Test for Private Business Use after Rev. Proc. 2017-13

The IRS recently released PLR 201726007, the first private letter ruling to interpret the revised management contract safe harbor in Rev. Proc. 2017-13. On one level, the PLR is quite straightforward – it concludes that a teaching agreement between a hospital and a school to provide clinical practice for pharmacy students does not result in … Continue Reading

Report from TSLI – What Can We Expect in the Near Term from the IRS?

Last week I attended the NABL Tax and Securities Law Institute, which always provides valuable insights from representatives of Treasury and the IRS.  Vicky Tsilas, Chief, Branch 5, Financial Institutions and Products, was a panelist for Tax Hot Topics and gave a very interesting status report on the 2016-2017 Guidance Plan (first reported on here … Continue Reading

How Poker Reminded Me that the Rev. Proc. 97-13 Safe Harbors for Management Contracts Live On

Poker has a well-established hierarchy of winning hands.  If you’re holding a full house, you’ve got a right fine hand, but if you reach for the pot when the last bets are called and another player has four deuces, you will at best be the object of ridicule and at worst the subject of grievous … Continue Reading

New Proposed Legislation: PABs for Social Infrastructure and a Ban on Stadium Bonds

The new Congressional session is heating up, and we’ll cover two new pieces of proposed legislation below. For the first time in several years, we can avoid giving the usual disclaimer that any new piece of legislation is “likely going nowhere.” Tax reform appears to be a real possibility for the first time in many … Continue Reading

Revenue Procedure 2017-13: Management Contracts – Still Trying To Get It Right

For the third time in less than three years, the IRS has issued major guidance – Revenue Procedure 2017-13 — on the safe harbor rules for management or service contracts to avoid private business use.  The new revenue procedure follows closely behind the total rewrite of the safe harbor rules that the IRS issued as … Continue Reading

2016 Year-End Review

Despite an increase in the federal funds rate by the Federal Open Market Committee in December, municipal bond interest rates throughout 2016 were (and still are) extremely low when compared to historic rates.  As a result, the volume of municipal bond issues reached an all-time high in 2016. As discussed below, the Treasury Department released … Continue Reading

An Open Letter to the IRS on Revenue Procedure 2016-44

Dear Internal Revenue Service: At the Bond Attorneys’ Workshop this past October, certain of your officials indicated that you will be considering the issuance of clarifications and amendments of Revenue Procedure 2016-44 to address concerns that have been raised about particular provisions of this Revenue Procedure (which, by and large, is an excellent piece of … Continue Reading

More on Rev. Proc. 2016-44: What Light Is Shed on Net Profits Compensation?

As reported several times in this blog (here, here, and here), Rev. Proc. 2016-44 significantly expands the opportunities for management/service contracts that don’t result in private business use.  One such post was Joel Swearingen’s very thoughtful piece on the future of the facts and circumstances test as applied to these contracts (here).  Of course, Rev. … Continue Reading

Just in Case You Didn’t Notice – Rev. Proc. 2016-44 Treats as Compensation under a Management Contract the Reimbursement of Amounts Paid by the Manager to its Employees

Revenue Procedure 2016-44 is laudable because it significantly expands the scope of management contracts that can satisfy the safe harbor from private business use of facilities financed with proceeds of tax-advantaged bonds.  It also makes much more feasible the use of tax-advantaged bonds in public-private partnership arrangements.  Revenue Procedure 2016-44 does, however, effect one curious … Continue Reading

Following Revenue Procedure 2016-44, is there still a ‘facts and circumstances’ test for private business use?

As we have discussed in previous posts (here), most practitioners treat a management contract for services at bond-financed property that does not fit within a safe harbor from private business use as giving rise to private business use of the bonds for tax purposes.  However, the Treasury Regulations provide that whether or not a management … Continue Reading

Rev. Proc. 2016-44 Greatly Expands Rev. Proc. 97-13 Safe Harbor for Management Contracts, Opening the Door for Long-Term Management Contracts

UPDATE: The IRS has updated Section 7 (“Date of Applicability”) of Revenue Procedure 2016-44.  Following the update, the prior safe harbors can be applied to any management contract entered into before (and not materially modified after) August 18, 2017 (as opposed to February 18, 2017). The original post is below. The IRS has released new … Continue Reading

Ignore the rules (if they don’t apply)

We are rather fond (because you are rather fond) of discussing Rev. Proc. 97-13 and related authorities that address private business use from management contracts. Back in 2014, when the IRS amplified Rev. Proc. 97-13 in Notice 2014-67 (collectively, “97-13”), we even made a holiday present of it. Now more than ever, 97-13 is an … Continue Reading

Recent IRS Private Letter Ruling Provides Helpful Guidance on Management Contracts

On May 27, 2016, the National Office of the Internal Revenue Service (“IRS”) released Private Letter Ruling (“PLR”) 201622003.  PLR 201622003 continues the trend of favorable PLRs issued by the IRS on the question of whether, under a facts-and-circumstances analysis, a management contract that fails to satisfy a Rev. Proc. 97-13 safe harbor from private … Continue Reading

The Final Allocation and Accounting Regulations – What Do They Mean For “Phantom Investment Proceeds”?

The flexibility to reallocate proceeds to expenditures using an accounting method other than direct tracing has been a well-recognized and much-appreciated opportunity under the allocation and accounting rules of IRC section 141. The former proposed section 141 regulations (REG-140379-02, Sept. 26, 2006) (“Proposed Regulations”), now replaced by the final section 141 regulations issued October 27, … Continue Reading

Hot Topics from the Tax and Securities Law Institute’s Annual Meeting

                Every year, the National Association of Bond Lawyers (“NABL”) hosts the Tax and Securities Law Institute (“TSLI”), which is an advanced conference with various workshops related to pressing issues confronting tax and securities lawyers in the public finance arena.  Essentially, the annual TSLI is like Chrismukkah for tax and securities lawyers.  This year’s meeting … Continue Reading

In the New World of the Final Allocation and Accounting Regulations, What Is Left of “Final Allocations”?

Since the final allocation and accounting regulations (“Allocation Regs”) were published on October 27, 2015, they have been a recurring topic of this blog (see here, here, here, and here).  One question yet to be addressed is what, if anything, is the continuing importance of a “final allocation” of tax-favored bond proceeds in the wake … Continue Reading

Undivided Portion and Qualified Equity

Over the past few weeks, we have written multiple posts (see here, here, and here) on the recently promulgated Final Treasury Regulations governing, among other things, allocating proceeds of tax-exempt bonds and other sources to projects that  involve both qualified and private uses. As we’ve described before, the new Regulations allow issuers and 501(c)(3) borrowers … Continue Reading

A Summary of the Final Regulations on Allocation of Bond Proceeds to Mixed-Use Projects

On October 27, 2015, the Treasury Department published final regulations on the allocation of tax-exempt bond proceeds to mixed use projects and related topics (the “Allocation Regulations”).  The Allocation Regulations finalize proposed regulations that were issued in 2006 and 2003.  Click here for a copy of the Allocation Regulations, and read below for a high-level summary … Continue Reading

Breaking: Treasury Department Releases Final Regulations for “Allocation and Accounting” of Private Business Use

The Treasury Department has finalized regulations that it proposed in 2006 to address how to allocate tax-exempt bond proceeds and other sources of funds to a project and other related topics. Click here for a copy of the regulations – we’ll have more on these soon.  … Continue Reading

The Curious Case of Hospital Financings

There are few stereotypes more accurate than the stereotype that tax lawyers appreciate order, continuity, familiarity, and certainty.  We are constantly trying to fit a particular fact pattern nicely and neatly into guidance prescribed by the IRS. This is especially true in determining whether a management contract under which a service provider operates a business … Continue Reading

Measure for Measure: A Problem Play in Applying the Private Business Use Measurement Period

While sitting through several sessions at the Bond Attorneys Workshop last week, I heard references to “measurement period” in different contexts. Although trying to stay focused on the always scintillating discussion, my mind wandered to the good and the bad of that concept.  This post explores certain consequences of measurement period, including some surprising results.… Continue Reading

The Invisible Hand

An unnecessary (but hopefully interesting) introduction: Earlier this year, the great economist and mathematician, John Nash, passed away in a car accident outside his home in New Jersey.  In 1994, John Nash won the Nobel Prize (formally referred to as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) for economics for … Continue Reading
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