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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

Undivided Portion and Qualified Equity

Over the past few weeks, we have written multiple posts (see here, here, and here) on the recently promulgated Final Treasury Regulations governing, among other things, allocating proceeds of tax-exempt bonds and other sources to projects that  involve both qualified and private uses. As we’ve described before, the new Regulations allow issuers and 501(c)(3) borrowers … Continue Reading

With a Little Help From My Friends (on how to treat Partnerships)

To follow up on our recent coverage of the “Allocation and Accounting Regulations”,  (here, here, and here) we wanted to point out a helpful rule that that our friends at the IRS have provided the tax-exempt bond community. Treas. Reg. § 1.141-3(g)(2)(v) (shown below) allows an issuer or conduit borrower to “look through” a partnership … Continue Reading

Eliminating the Vice of Premature Virtue – Anticipatory Remedial Action

Last week Mike Cullers summarized Treasury’s latest addition to the final private activity bond regulations – the “Allocation and Accounting Regulations” — which were published earlier that week (LINK).   This week we begin to focus on the details of those Regulations, beginning with the much appreciated “anticipatory remedial action” rule (the “ARA Rule”). [1] Prior … 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

Breaking: Treasury Department Releases Final Regulations for “Allocation and Accounting” of Private Business Use

The Treasury Department has finalized regulations that it proposed in 2006 to address how to allocate tax-exempt bond proceeds and other sources of funds to a project and other related topics. Click here for a copy of the regulations – we’ll have more on these soon.  … Continue Reading

The Curious Case of Hospital Financings

There are few stereotypes more accurate than the stereotype that tax lawyers appreciate order, continuity, familiarity, and certainty.  We are constantly trying to fit a particular fact pattern nicely and neatly into guidance prescribed by the IRS. This is especially true in determining whether a management contract under which a service provider operates a business … Continue Reading

Measure for Measure: A Problem Play in Applying the Private Business Use Measurement Period

While sitting through several sessions at the Bond Attorneys Workshop last week, I heard references to “measurement period” in different contexts. Although trying to stay focused on the always scintillating discussion, my mind wandered to the good and the bad of that concept.  This post explores certain consequences of measurement period, including some surprising results.… Continue Reading

The Invisible Hand

An unnecessary (but hopefully interesting) introduction: Earlier this year, the great economist and mathematician, John Nash, passed away in a car accident outside his home in New Jersey.  In 1994, John Nash won the Nobel Prize (formally referred to as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) for economics for … Continue Reading

IRS Rules Bus Fares for Privately Used Roads Not Private Payments: Little connection…..little problem

The IRS recently issued PLR 201519015 which concluded that payments made by private persons that have “little connection” to the bond-financed property are not “private payments” that count against the private payment limit.  The IRS concluded that there was little connection between fares paid by bus riders and a bond-financed highway where the fares were … Continue Reading

Mostly Good News for Qualified 501(c)(3) Bonds Under ACA Regulations

The Patient Protection and Affordable Care Act (“ACA”) imposes several new requirements on charitable hospitals.  Charitable hospitals that benefit from tax-exempt qualified 501(c)(3) bonds were concerned that violations of these ACA requirements would either result in a loss of the charitable hospital’s 501(c)(3) status, or result in excessive private business use, either of which would … Continue Reading

Our Holiday Gift to You – Rev. Proc. 97-13, as Modified and Amplified, In a Single Document

It has now been almost two months since the IRS issued Notice 2014-67 and the initial euphoria of tax lawyers across the country has begun to wane.  (To relive that excitement, please visit our posts of October 24, October 28 and November 5, reporting the new opportunities created by this Notice.)  Today we return to … Continue Reading

IRS Scrutiny Puts Prison Financings on Lockdown

Few prospects are more terrifying than either an audit by the Internal Revenue Service or anything involving prison.  Put the two together, and you not only have a nightmare worthy of Stephen King, you begin to appreciate how some issuers of tax-exempt bonds have been feeling recently. As reported in the press ($), several issuers … Continue Reading

Notice 2014-67 – The Accountable Care Organization Provisions

In our last post, we discussed the unsung hero of IRS Notice 2014-67 – the new, 5-year safe harbor from private business use that everyone – governmental users and 501(c)(3)s, and not just Accountable Care Organizations (ACOs) – can use immediately for management contracts covering a bond-financed facility. The much more publicized, limelight-hogging aspect of Notice 2014-67 relates … Continue Reading

Notice 2014-67 Gives EVERYONE a New Private Business Use Safe Harbor

Moby Dick is not a book about the whaling industry, The Godfather is not a movie about cannoli, and IRS Notice 2014-67 is not just about accountable care organizations (ACOs). You’re going to be inundated with coverage about this new Notice, and it’s all going to focus first on the new safe harbor from private business use … Continue Reading