Archives: Private Activity

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Why did the House want to repeal tax-exempt private activity bonds?

Happy New Year to all. When we last spoke, we were all breathing a sigh of relief that tax-exempt private activity bonds were spared the sword in the final tax reform legislation, and we poured out a little eggnog for our old friend, the tax-exempt advance refunding bond, gone too soon. But based on comments from … Continue Reading

In Theaters This Christmas – The Parliamentarian: Slightly Slowing, but Ultimately not Stopping, Passage of the Tax Cuts and Jobs Act

Update:  The President signed the Tax Cuts and Jobs Act into law on December 22, 2017.  On that same date, he also executed the Continuing Resolution passed by Congress that permits the federal government to make expenditures through January 19, 2018.  This Continuing Resolution also suspends the application of the PAYGO law in respect of the … Continue Reading

Final Tax Reform Legislation Saves PABs and Stadium Bonds, Kills Advance Refundings and Tax Credit Bonds

Signaling the end of our six-week ride in a runaway cement mixer, the Conference Committee for the Tax Cuts and Jobs Act has released its Conference Report, which represents a compromise version of the House and Senate-passed versions of the Act. Each chamber has the votes to enact the compromise bill; they’ll do it, and … Continue Reading

Someone Left the Crayons Out, and Now the Tax Lawyers Are Drawing Pictures (updated)

Timing, as they say, is everything. The tax-exempt bond rules are full of deadlines and sunsets, both before and after the issue date and before and after the project is finished. Click above for a diagram of how some of these rules work together. It’s by no means exhaustive, but certainly exhausting. Maybe you’ll find it … Continue Reading

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

The Latest Attack on Stadium Financing – Keeping the Debate Honest

On June 13, 2017, U.S. Senators Cory Booker (D-NJ) and James Lankford (R-OK) introduced the latest bill (S. 1342) (“Senate Bill”) intended to end tax-exempt financing of professional sports stadiums.  The Senate Bill mirrors the bill (H.R. 811) introduced by Rep. Steve Russell (R-OK) on February 1, 2017, reported in this blog by Johnny Hutchinson … 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

Tax-Exempt Stadium Financing? – There They Go Again

Rep. Steve Russell, R-Okla., recently introduced a bill (H.R. 4838) in the House to prohibit tax-exempt financing of professional sports stadiums and for-profit entertainment facilities.  This is only the most recent in a string of similar proposals, including by President Obama and former Senator Tom Coburn.  In this case, tax-exempt financing would be prohibited for … 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

Treasury Corrects Proposed Regulations on Political Subdivisions

This post has been edited to correct an error. The proposed regulations, if finalized, would apply to bonds issued no more than 90 days, not 30 days, after the publication of the final regulations in the Federal Register.  Recently, Treasury proposed a new test for an entity to qualify as a “political subdivision” that is entitled to issue … 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
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