Archives: Arbitrage

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The New Issue Price Regulations – “Bought Deals,” Bored Bidders, and Other Problems

As you have heard, and as we noted last week, Treasury and the IRS recently released final regulations that tell issuers how to calculate the “issue price” of tax-advantaged bonds that are issued for money. The regulations don’t take effect until June 7, 2017, so we can spend some time luxuriating in their nuances and … Continue Reading

Final Arbitrage Regulations – The Good and the Not-So-Good Changes to the Working Capital Rules

The 2013 proposed arbitrage regulations included significant changes to the working capital financing rules, including the first rules for long-term working capital financings.  The proposed rules have been finalized in the recently issued final arbitrage regulations (discussed here) (“Final Regulations”), with some changes but without one very significant suggested change.  This post summarizes the important changes that … Continue Reading

Final Arbitrage Regulations Require “Look Through” to a Grantee’s Use of Bond Proceeds: A Big “So What?”

From time to time, issuers will use bond proceeds to make grants to accomplish a governmental purpose. For example, a State bond issuer may make grants to various counties and cities to help with the cost of local transportation improvements. Under the arbitrage regulations (Reg. 1.148-6(d)(4)), the bond proceeds are treated as spent once an issuer … Continue Reading

A Chart Summarizing the Changes in the New Non-Issue Price Arbitrage Regulations

In case you missed it, we prepared a chart comparing the differences between the old arbitrage regulations and the new arbitrage regulations that were released recently. We published it as part of Joel’s comprehensive summary of the new regulations, but here is the chart by itself. The chart shows you the old language and the new … Continue Reading

A Summary of the Final Regulations on Non-Issue Price Arbitrage Restrictions

On July 18, 2016, the Treasury Department published final regulations on non-issue price arbitrage restrictions (the “Final Regulations”) in the Federal Register. The Final Regulations finalize regulations proposed in 2007 and 2013 (collectively, the “Proposed Regulations”).  Click here for a copy of the Final Regulations, and read below for a high-level summary of them.  We … Continue Reading

New Reporting Rules Subject OID on Tax-Exempt Bonds to Information Reporting

Generally, a person that pays interest on a debt to another person must report the amount of interest, usually on IRS Form 1099-INT. In the past, payments of tax-exempt interest did not have to be reported in this way; however, beginning in 2006, the statutory exclusion from information reporting for interest on tax-exempt obligations was … 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

President’s Budget Proposal – More Bond Stuff

A few weeks ago, Joel began our coverage of the President’s FY 2017 budget proposals [Link] by describing several of the bond proposals.  [Link]  After a short break to talk football among other things (we’ll do whatever it takes to keep you readers coming back!) [Link], we’re back to the budget proposals, this time with … Continue Reading

A New Hampshire Tale (Part 1)

The IRS Appeals office has dropped the examination of nine student loan bond issues of the New Hampshire Health and Education Facilities Authority. The examination had begun after the Authority entered but then withdrew from the IRS specialized “voluntary closing agreement program” for student loan bonds. The IRS created this targeted VCAP in 2012 as a standalone … 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

What happened to Edward Jones and does it impact issue price?

[UPDATE (9/11/2015): At the 2015 NABL Bond Attorneys’ Workshop in Chicago, representatives from the Securities and Exchange Commission (including individuals previously employed at the Internal Revenue Service) discussed whether the Edward Jones case (the topic of the blog post following the jump) should impact bond pricing.  The Bond Buyer was at the Bond Attorneys’ Workshop and … Continue Reading

When Two Financial Instruments Become One

Subtitle: Should You Let Your Swap Marry Your Bond Issue Without A Pre-Nup? Subsubtitle:  If You Are Going To Let Your Swap Marry Your Bond Issue Without A Pre-Nup, Please Tell Bond Counsel Early in the Process                 As discussed in prior posts on this Blog (here and here), since the beginning of the last … Continue Reading

Treasury Department Releases New Proposed Regulations on Issue Price

On June 24, 2015, the United States Department of the Treasury withdrew controversial proposed regulations from 2013 (the “Withdrawn Regulations”) that, if finalized, would have made a fundamental change to the definition of the “issue price” of tax-exempt bonds (the balance of the 2013 proposed regulations, which have been well received by the tax-exempt bond community, have … Continue Reading

50% Rebate Penalty – Will It Ever Be Waived on Audit?

At least from this practitioner’s perspective, in the earlier days of IRS bond audits, there were substantial inconsistencies in IRS practices.  Different documents were requested by the examining agents, different tax-exemption requirements were reviewed, and different positions were taken with respect to those requirements.  And this was the case taking into consideration the various audit … Continue Reading

Clarifying the Pros and Cons of Borrowing for Operating Deficits

The Bond Buyer recently reported on a warning by Federal Reserve Bank of New York president and chief executive officer William Dudley ($) against borrowing to cover operational deficits.  Mr. Dudley distinguished capital borrowings from operational, or working capital, borrowings to illustrate the objective of “matching” the cost and benefits of financed facilities through long-term capital … Continue Reading

Random Musings on Reasonable Expectations and on the Big Ten Conference

We’ve previously reported that the Internal Revenue Service (IRS) has issued eight private letter rulings under Internal Revenue Code (Code) Section 54A(d)(2)(B)(iii) that grant an extension of the three-year expenditure period that applies to an issue of qualified tax credit bonds (QTCBs).  An issuer of QTCBs must reasonably expect on the issuance date of the … Continue Reading

New Regulations Provide Flexibility in Setting Issue Price

The IRS announced on April 1 that it has released new proposed issue price regulations that would provide issuers greater flexibility in determining the issue price of a bond issue. You may recall that on Sept. 16, 2013, the IRS announced earlier proposed regulations that would overturn the familiar “reasonable expectations” test for establishing the issue price … Continue Reading