Under Section 148 of the Internal Revenue Code of 1986, as amended (“Code” – it’s been almost a year since we started this blog, and our devotion to defined terms remains unswerving), the gross proceeds of a tax-exempt bond issue cannot be invested at a yield that is materially higher than the yield of bond … Continue Reading
[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
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
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June 24, 2015, the United States Department of the Treasury withdrew controversial proposed regulations from 2013 (the “Withdrawn Regulations”) that, if finalized, would have made a fundamental change to the definition of the “issue price” of tax-exempt bonds (the balance of the 2013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
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
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
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
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
Well, it’s official: https://www.slgs.gov/news/pressroom/pressroom_1503slgsoff.htm It’s a good day to be a bidding agent for open market securities. If you’ve got refunding deals coming up, plan accordingly, and refer to Bob Eidnier’s post from Wednesday for the details of what you need to do.… Continue Reading
The federal debt limit, which has been suspended since February 2014, will be reinstated Sunday, March 15. At that time, the debt limit will be equal to the amount of debt then outstanding – in other words, there will be no room for additional debt. If Congress does nothing to change this (which seems likely), … Continue Reading
Last week we reported on recently released PLR 201502008 (Jan. 9, 2015), which involved a total return swap (TRS) relating to an issue of tax-exempt bonds (Bonds) where the holder of the Bonds was also the TRS counterparty. The TRS originally had a term of about two years and was being extended an additional five … Continue Reading
Although The Bond Buyer has previously reported that the IRS has audited a number of tax-exempt bond issues that involved total return swaps ($) and that the IRS has declared to be taxable an ostensibly tax-exempt bond issue that involved a total return swap ($), the IRS had until a public release on January 9, … Continue Reading
The IRS published final regulations on November 13, 2014, governing claims for refund of arbitrage rebate overpayments. The final regulations do three main things. First, they set a two-year statute of limitations on requesting refunds, running from the final rebate computation date. Second, they provide that if you file a refund request, the IRS can … Continue Reading
New private letter rulings are here! The IRS released two new private letter rulings. Neither of them is earth-shattering. In the first, PLR 201445002, the IRS ruled that an authority created by a tribal government is a political subdivision so that it can issue tax-advantaged bonds. In the second, PLR 201445007, the IRS granted a school district … Continue Reading
Treasury has provided a valuable yet often overlooked tool in the regulations governing the allocation of bond proceeds to expenditures under IRC §§141 and 148. Using this tool, you can allocate bond proceeds in a way that differs from the flow of funds. Treas. Reg. 1.148-6(d)(1)(iii) allows an issuer to allocate bond proceeds to expenditures … Continue Reading
A recent article in The Bond Buyer ($) reported that IRS agents have been raising concerns during audits about bond proceeds that remain unspent or that haven’t been spent in a timely manner. The article reports further that IRS agents are not “buying the argument” that those transactions were originally sized reasonably even though changed … Continue Reading
