Yes, The Thing touches everything.

COVID-19 affects the muni bond world in some fairly obvious ways. The general mandate is “everybody do less.” Decreasing activity in general translates to decreased business revenues and decreased tax revenues, which means less money available to repay bonds. This has set the disclosure world ablaze, as securities lawyers ponder what to say to the market about the pandemic. That very practical question is far beyond the bounds of this blog and will be dealt with ad nauseum elsewhere, such as this piece in The Bond Buyer.

There are a few less obvious ways that the disease will affect the tax requirements for tax-advantaged bonds. We’ll look at them in a series of posts. Click through for a teaser. (I guess that makes the previous sentence a meta-teaser?)

Some specific tax requirements that are potentially affected by COVID-19:

  • What are some ways that issuers and borrowers who are going to be strapped for cash can reconfigure their finances and tax-advantaged bond deals to ease the pain?
  • What solutions are available to fund working capital where issuers or borrowers are completely strapped for cash to pay daily expenses?
  • The current situation will delay projects and delay the expenditure of proceeds for those projects – what tax requirements are implicated?
  • The 2018 final TEFRA regulations explicitly rejected a request to allow for telephone or web-based TEFRA hearings.
    • The Preamble states: “One commenter [Chuck Samuels and NAHEFFA, take a bow!] suggested allowing a public hearing by teleconference or webinar. The Treasury Department and the IRS have determined that, although these technologies may be effective for other purposes, they cannot replace a conventional public hearing conducted in-person because they are not sufficiently reliable, publicly available, susceptible to public response, or uniform in their features and operation.”
    • This could be a problem if the jurisdiction where the hearing was going to be held has banned gatherings or if all of the people who work for the issuer or the host have to work from home – what are some options?
  • How might the various time deadlines that apply to tax-advantaged bonds be affected?
  • There are rumors that some kind of tax/fiscal stimulus legislation is coming – what tax-advantaged bond provisions will be implicated?

Wishing you all good health. Stay safe out there.