Amid the world’s turmoil, we can take comfort in the persistent march of long-foretold events. Keeping to their pre-pandemic promises (at least partially), the Federal Reserve and U.K. regulators of LIBOR have reaffirmed their plans to cease publication of the one-week and two-month LIBORs by the end of 2021. Issuers, holders, and counterparties are slowly and grudgingly waking up to this reality. How are they responding? Continue Reading
On the 396th day of March, 2020 (or March 31, 2021 for those who have returned to some semblance of normalcy), President Joe Biden outlined his vision for a new economy. Specifically, President Biden focused on the American Jobs Plan as a $2.25 trillion investment in the United States that “will create millions of good jobs, rebuilding our country’s infrastructure, and position the US to out-compete China.”
Ambitious climate policies are a major focus of the President’s vision for this massive infrastructure bill, which aims at rebuilding and developing both the US physical and technological infrastructure, creating jobs, and bolstering resilience. The impact on the transportation sector will undoubtedly be substantial.
With these concepts setting the stage, Squire Patton Boggs is hosting an hour-long panel discussion THURSDAY, April 8, 2021, at 10:00 am Eastern Time, moderated by former Secretary of Transportation Rodney Slater. This discussion will focus on a number of related developments and challenges, including:
- The economic impact on infrastructure plans and deployment
- How can the proposals bring positive real-world changes to the transportation sector? What should be prioritized?
- Paying for the spending package through the proposed Made in America corporate tax plan just when the economy is recovering from the pandemic-inflicted economy
- The impact of infrastructure on systematic inequality and what it means in the future
- Future proofing infrastructure – challenges and changes ahead
This panel will feature insights from former Republican Congressman and former Chairman of the House Transportation and Infrastructure Committee Bill Shuster, along with the former Chairman of the House Democratic Caucus Joe Crowley, and former Vice-Chairman of the House Republic Conference Jack Kingston. The former Congressmen will also be joined by three key transportation experts sharing their perspectives on plans and related expected developments:
- Jane Garvey, North America Chairman of Meridiam Infrastructure,
- Robert (Bob) Poole, Director of Transportation Policy, Reason Foundation, and
- Robert (Rob) Puentes, President and CEO of the Eno Center for Transportation.
Click here to register to hear this distinguished panel discuss the potential impact of the American Jobs Plan!
On March 31, 2021, President Biden officially unveiled the planned $2.25 trillion infrastructure bill, marking the beginning of what promises to be a lengthy debate over the appropriate size and scope of infrastructure investment and economic recovery in the country. Who better to guide you through it than our partner, Rodney Slater, former Secretary of Transportation in the Clinton Administration. Rodney appeared on Bloomberg TV and on Bloomberg’s SoundOn podcast to offer his insights.
We invite you to listen to our colleagues, Rep. Bill Shuster, former Chairman of the House Transportation and Infrastructure Committee, and Secretary Rodney Slater, former U.S. Secretary of Transportation, in conversation with Paul Burton of The Bond Buyer about the prospects for federal infrastructure legislation.
The conversation will happen next Monday, March 15, at 12:30 pm eastern. You can register for free (even if you are not a subscriber to The Bond Buyer, although you should probably fix that) by clicking the link here.
As the likelihood that Congress will pass infrastructure legislation with tax-advantaged bond provisions appears greater than it has in many years, this conversation is one you won’t want to miss.
We’ll have much more to say about that topic as the legislative text crystallizes over the coming months.
Our own Mike Cullers was quoted in Law360 on Wednesday in an article about renewed hope for a full restoration of tax-exempt advance refundings of tax-advantaged bonds after their repeal by the TCJA. The article describes the renewed optimism in the muni bond community that tax-exempt advance refundings can be restored, precipitated by the confirmation of Mayor Pete as Transportation Secretary.
As you have probably seen by now, Mr. Buttigieg made clear in his Senate confirmation hearing that he, like Brother Cullers, is a man of refined taste who appreciates the great pleasures of life (fine scotch, advance refundings for debt service savings, etc.). (Other similarities: neither man is a cat.)
At the tail-end of the hearing, in a delightfully deliberate gesture, which you can watch here, Senator Roger Wicker (R-MS), outgoing chair of the Senate Transportation Committee and co-sponsor of a bill in the last Congress that would have brought back tax-exempt advance refundings, asked Mayor Pete if he would support doing so. The new Secretary said he would, and noted that few things gave him more “fiscal pleasure” as Mayor of South Bend, Indiana than tax-exempt advance refundings and the savings that come with them.
The Law360 article is worth a read. It does a good job of surveying the chief players involved in the efforts to fully restore tax-exempt advance refundings. As Mike and the other public servants and lawyers (but I repeat myself!) quoted in the article observe, tax-exempt advance refundings save money in the long run for taxpayers at the federal, state, and local levels, even though there will be a brief period where both the advance refunding bonds and the advance refunded bonds are bearing tax-exempt interest. Although there are ways to address this overlap period without eliminating tax-exempt advance refundings, such as those ably described in recent years by Charlie Almond (R.I.P.) and Steven Gortler in The Bond Buyer, we could all use a bit of pleasure these days. Just bring them back already. We’ll give you the name in the headline, free of charge.
Remember back in the day when we would all gather for a transaction closing to get documents signed and enjoy a nice meal out at a restaurant together? Me neither. In fact, in-person closings were starting to fade long before the pandemic.
Now that we have been closing transactions from the comfort [sic] of our homes for almost a year, in-person closings may become extinct altogether. With that comes the complicated logistics of getting documents signed, shipped, and overnighted to the respective parties where electronic signatures cannot, for one reason or another, be used. Electronic signatures have saved transaction closings during the pandemic, but specific IRS forms, such as the family of Form 8038s, still required a wet signature.
Good news; on December 28, 2020, the IRS published a memorandum, which allows taxpayers and representatives to use electronic or digital signatures when signing over roughly 20 forms, including Forms 8038, 8038-G and 8038-GC. Notably, Forms 8038-T and 8038-CP were excluded from the IRS memo. The IRS guidance is effective for Forms 8038, 8038-G and 8038-GC that are postmarked from January 1, 2021 through June 30, 2021.
Even before the pandemic, facsimile signatures of the paid preparer (e.g. counsel to the Issuer) have been expressly acceptable for Form 8038-G, but not so for the others.
You can see the difference for yourself…
Makes perfect sense, right?
NABL has also requested permanent, long-term clarification from the IRS regarding electronic signatures. In September, NABL sent a letter to the IRS requesting a laundry list of items pertaining to the instructions to Forms 8038 and 8038-G. Electronic signatures for Form 8038 was one of the items.
On January 27, 2021, a snowy owl was seen in New York City’s Central Park for the first time in 130 years. Nine days later, on February 5, 2021, something almost as rare occurred – the Internal Revenue Service released a private letter ruling dealing with Section 103 of the Internal Revenue Code. In PLR 202105007, the IRS determined that a nonprofit corporation that amended its articles of incorporation to change its purposes and come under the control of a city became a “constituted authority,” within the meaning of Treas. Reg. 1.103-1(b), of the city that could issue tax-exempt bonds on behalf of the city.
The coincidence of these infrequent events involving ornithology and quasi-governmental entities calls to mind the field guide Johnny Hutchinson prepared on the tax classifications of various species of the latter, which was an homage to Roger Tory Peterson’s Field Guide to Birds, a seminal work in the canon of the former. February is a good time to brush up on both.
 of 1986, as amended.
In a complaint filed directly with the U.S. Supreme Court under its original jurisdiction, New Hampshire has sued Massachusetts for attempting to tax residents of the Granite State who normally work in Massachusetts but are working at home during the pandemic. Read Mike’s comments on the case in The Bond Buyer here ($).
“New Hampshire gains allies in tax fight against Massachusetts,” New Hampshire Union Leader, (Dec. 23, 2020; updated Jan. 25, 2021).
Pennsylvania v. New Jersey, 426 U.S. 660 (1976) (holding that Pennsylvania could not sue New Jersey in the Supreme Court on behalf of Pennsylvania’s citizens with respect to a New Jersey transportation benefits tax imposed on income of Pennsylvania citizens derived from New Jersey because Pennsylvania’s suit represented nothing more than an aggregation of private lawsuits that those Pennsylvania citizens could have brought against New Jersey for taxes withheld from them, and no sovereign or quasi-sovereign interests of Pennsylvania were implicated).
Principality of Monaco v. Mississippi, 292 U.S. 313 (1934) (holding, and unjustly depriving us of a monumental spectacle, that Monaco couldn’t sue Mississippi in the Supreme Court without Mississippi’s consent to enforce pre-Civil War bonds issued by various Mississippi entities, which had been in default for around 90 years, and which had been donated to the Monaco consulate in Paris by certain unknown troublemakers who “had been advised that there was no basis upon which they could maintain a suit against Mississippi on the bonds, but that ‘such a suit could only be maintained by a foreign government or one of the United States’”).
 U.S. Constitution, Article III, Section 2.
The IRS has had a busy start to 2021! Guidance continues to pour forth as the change in Administration approaches. On January 4, the IRS released Revenue Procedure 2021-10, which provides issuers with updated procedures for obtaining review from the IRS Office of Appeals of proposed adverse determinations and rebate refund rejections by the IRS Office of Tax-Exempt Bonds. Rev. Proc. 2021-10 supplements and supersedes Rev. Proc. 2006-40, which previously set forth the procedures for getting to Appeals. Rev. Proc. 2006-40 predated the advent of tax credit and direct pay bonds, and therefore applied only to tax-exempt bonds. As many of you may have experienced, the IRS has applied the logic of Rev. Proc. 2006-40 to tax-advantaged bonds that were not tax-exempt bonds (e.g., BABs) in audits of those bonds. Rev. Proc. 2021-10 adopts this practice.
Specifically, Rev. Proc. 2021-10 provides that an issuer is eligible to request an appeal once the issuer receives (1) a proposed adverse determination that interest on the bonds is not tax-exempt; (2) a proposed adverse determination that an issue of bonds fails to qualify for the tax credits to the bondholders or direct payments to the issuer with respect to the bonds under provisions of the Code applicable to tax-advantaged bonds, such as former §§ 54, 54A, 54AA, 1397E, and 6431; or (3) a proposed adverse determination that denies a claim for a rebate refund. These items are, in effect, your “ticket to Appeals.” On items (1) and (2), recall that the “proposed adverse determination” is the final step in the audit process, coming after the “Notice of Proposed Issue” (often referred to as the “30-day letter”). In most bond issues subject to a continuing disclosure undertaking, the receipt of that Notice of Proposed Issue triggers the requirement for the issuer to disclose the audit to the market, although many issuers may choose to disclose before they reach that point.
In addition, Rev. Proc. 2021-10 modifies Rev. Proc. 2006-40 by explicitly giving the issuer 30 days to correct any deficiencies in the appeal that deviate from the requirements in Rev. Proc. 2021-10. (Given the ambiguity in Rev. Proc. 2006-40 on this point, it probably depends on the situation whether this is a positive or negative change.) The new guidance also notes that the TEB Examination Office will furnish to the issuer a copy of the TEB Examination Office’s transmittal letter and response, if any, to the issuer’s positions stated in its appeal request.
The mechanics of the appeal will continue to be handled under Section 8.7.8 of the Internal Revenue Manual.
There remains no user fee for an appeals request, which is comforting after the IRS recently hiked the user fee for a tax-advantaged bond private letter ruling from $30,000 to $38,000, notwithstanding NABL’s recent request to provide for reduced user fees for tax-exempt bonds.
The new procedures apply to proposed adverse determinations for tax-advantaged bonds or denials of rebate refund claims issued by the TEB Examination Office on or after February 4, 2021.
 We would say “inexplicably,” but there’s a pretty clear, if unpalatable, explanation.
 And that’s just the cover charge.
We just wanted to remind everyone that today, December 16, 2020 at 4:00 pm Eastern Squire Patton Boggs’ and the Association of Public Finance Professionals (APFP) of the District of Columbia, Maryland, and Virginia are hosting a virtual event to remember! The event will feature insights from our colleagues, former Congressman Joe Crowley (D-NY), former Congressman and former Chairman of the House Committee on Transportation and Infrastructure Bill Shuster (R-PA), and former Secretary of Transportation Rodney Slater regarding what Joe Biden’s infrastructure “Build Back Better” plan will include.
Click here to register! We hope to see you there!