The Proposed Reissuance Regulations: The Thirty Years’ War Continues

Johnny Hutchinson could tell you, from memory, that the Defenestration of Prague occurred on May 23, 1618, and it precipitated the Thirty Years’ War, which ended on May 15, 1648 upon the ratification of the first of a series of peace treaties that comprised the Peace of Westphalia.

In 1988, 370 years after the Defenestration of Prague, the IRS began its campaign of guidance regarding the reissuance for federal tax purposes of tax-exempt bonds (specifically, qualified tender bonds) with the issuance of Notice 88-13020 years later, in 2008, the financial crisis and collapse of the auction rate securities market compelled the Service to update this guidance, which it did by releasing Notice 2008-41.  On the very last day of 2018, more than 30 years after commencing this line of guidance (a period longer than the Thirty Years’ War), the IRS and Treasury released proposed regulations that, if finalized, would unify and complete the rules for determining whether tax-exempt bonds have been reissued for federal tax purposes (the “Proposed Reissuance Regulations“).

The Proposed Reissuance Regulations will take effect 90 days after they are published as final regulations in the Federal Register, but issuers of tax-exempt obligations can elect to apply the Proposed Reissuance Regulations now.  Alternatively, issuers can apply either Notice 88-130 or Notice 2008-41.  Dealer’s choice.  Comments and requests for a public hearing on the Proposed Reissuance Regulations must be received by the Treasury on or before March 1, 2019.  A brief summary of the Proposed Reissuance Regulations follows the jump.

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The Shutdown Can’t Stop the Release of the Final TEFRA Regulations

The most recent partial shutdown of the federal government has halted many operations of the U.S. Department of the Treasury, including those of the Internal Revenue Service.  The shutdown has, however, evidently left untrammeled the Treasury Department’s ability to promulgate regulations.  On Friday, December 28, the Treasury released final regulations under Internal Revenue Code Section 147(f) regarding the public notice, hearing, and approval requirements that apply to qualified private activity bonds (the “Final TEFRA Regulations“).  The Final TEFRA Regulations put into final, effective form the proposed TEFRA regulations that were issued on September 28, 2017 (the proposed TEFRA regulations are available, and are analyzed, here).  The promulgation of the Final TEFRA Regulations allows the IRS and Treasury to check-off a perennial item on their annual priority guidance plan, and during a shutdown of the federal government, no less.  That’s dedication.  For a brief summary of the Final TEFRA Regulations, hit the jump.

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Save the Crew? Will Do!

The Grateful Dead were noted in their live performances for, among other things, beginning a song and then segueing to one or more other songs before concluding the first song in the thread.  Sometimes, the Dead would wait several concerts to complete the original song.

Today we emulate the Grateful Dead by completing a string of posts that began in May about the potential relocation of Major League Soccer’s Columbus Crew to Austin, Texas.  In our first post, we described the lawsuit brought by then-Ohio Attorney General, and now Governor-Elect, Mike Dewine to apply Ohio’s “Art Modell Law” to halt the Crew’s departure.  We observed in this post that if successful, Ohio’s Art Modell Law could serve as a model to other states to prevent the relocation of professional sports franchises that have benefited from publicly financed arenas, stadiums, and other facilities.  Our second post reported Major League Soccer’s award of an expansion franchise to Cincinnati, which demonstrates that a state’s enactment of an Art Modell Law evidently will not dissuade a professional sports league from expanding to that state.

We can now conclude the trilogy and report that the lawsuit brought by Mr. Dewine has had the desired effect.  After the motion to dismiss the lawsuit was rejected, Major League Soccer negotiated the sale of the Columbus Crew franchise to a new ownership group that includes Dee and Jimmy Haslam, who also own the Cleveland Browns.  (The Browns can partially blame their early season kicking woes if their slim playoff chances are dashed, but purchasing a soccer team to groom and procure kicking talent seems like an unconventional, and expensive, reaction).  The new ownership group has until December 31, 2018 to obtain a location and plan for a new stadium; incentive packages passed by the State of Ohio and the City of Columbus have gone a long way toward meeting this requirement (and will also subject the new ownership group to the Art Modell Law).  Although a court did not decide the merits of the Art Modell Law, the invocation of that law succeeded to compel Major League Soccer to negotiate Columbus’ retention of the Crew franchise, and at the same time it did not thwart the expansion of Major League Soccer in Ohio.  Perhaps these events will spur other states to adopt their own versions of the Art Modell Law.


Absent any late-breaking public finance tax news, this will be our last post for 2018.  As always, we are grateful to, and appreciative of, our readers.  We wish you all the best for a wonderful holiday season and a healthy and prosperous 2019.

The Public Finance Tax Blog

First New Concourse Opens at LaGuardia Airport

On June 1, 2016, the New York Transportation Development Corporation issued over $2.25 billion in tax-exempt bonds as part of a public-private partnership to redevelop the Central Terminal building (known as Terminal B to passengers) at LaGuardia Airport in New York City.  As The Bond Buyer reported, the deal broke all kinds of records – it was the largest P3 ever, the largest airport transaction ever, and the largest AMT bond issue ever.

In a ceremony on Thursday at the airport, New York Governor Andrew Cuomo and others gathered to celebrate the opening of the first new concourse. From the pictures in the press, the new concourse looks suspiciously like a modern airport facility; most importantly, news reports say that the new concourse will contain a Shake Shack. We are proud to have served as co-bond counsel with D. Seaton and Associates for the bond issue (had we known there’d be a Shake Shack, we might have gotten more creative with our fee arrangement), and we offer our congratulations to all the participants, including the team at LaGuardia Gateway Partners, the consortium of equity sponsors that was formed to construct and operate the new terminal. The other concourses at the replacement for the Central Terminal are up next, and Delta is working on redeveloping Terminals C and D.


Additional Coverage:

Dallas Business Journal

AM New York

From 2016: Bond Buyer spotlight

Nuggets of Midterm Gold from our Public Policy Practice

The midterm elections are (mostly!) over. What’s coming next? No one is in a better position to tell you the answer than our Public Policy colleagues. Here for your reading and savoring are two pieces – a breakdown that spans all areas of law, and an analysis of what the election means specifically for tax policy.

Click here for the big breakdown, and be sure to click “Download” to download the full .pdf.

Click here for the tax-focused piece.



IRS Releases New Guidance to Facilitate Opportunity Zone Program

The Opportunity Zone program was created by the 2017 Tax Cuts and Jobs Act and is intended to increase investment in areas designated as Opportunity Zones (i.e., economically distressed communities).  The general idea behind the program (which we have previously written about here) is that investors are able to defer paying tax on gains from selling property by investing the proceeds from the sale into an Opportunity Zone Fund.

The IRS recently issued much needed guidance on how the Opportunity Zone program will work.  Specifically, the IRS released anxiously-awaited proposed regulations, along with Rev. Rul. 2018-29, and a draft Form 8996 (that entities will need to file with the IRS to certify that they qualify as a Qualified Opportunity Fund).

Our colleague, Steve Mount, has been at the forefront of the Opportunity Zone program from its inception.  He has written yet another insightful article in Bloomberg’s Tax Management Real Estate Journal describing the new guidance in more detail.     Click here to read the article.   You can read Steve’s earlier articles on Opportunity Zones here and here.

IRS: You Can Still Issue Tax-Exempt Bonds to Advance Refund Most Taxable Bonds, Including BABs

For those who still had doubts, the IRS has now made it crystal clear: You can still issue tax-exempt bonds to advance refund most taxable bonds.  In other words, the much-lamented “repeal of tax-exempt advance refunding bonds” in the Tax Cuts and Jobs Act from December 2017 isn’t ironclad. The repeal prevents the issuance of tax-exempt bonds to advance refund only (1) other tax-exempt bonds and (2) a very limited subset of taxable bonds. The IRS expressed this conclusion in Chief Counsel Advice Memorandum 201843009, dated August 31 and released on October 26.

Following the logic of this guidance, the only taxable bonds that can’t be advance refunded with tax-exempt bonds are taxable bonds that:

One way to force a tax-advantaged taxable bond to lose its tax advantage is to “legally defease” it, which happens in almost all advance refundings once the issuer deposits Treasury securities acquired with proceeds of the advance refunding bonds into the refunding escrow on the issue date. Perhaps the only exception – certain governmental bonds cannot be legally defeased under state law.[1]

That’s the bottom line. Read on for a little more about this guidance and the history behind it.

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In Need of More Research – The Congressional Research Service’s Error-Filled Report on Private Activity Bonds (and, Specifically, Qualified 501(c)(3) Bonds)

As readers of this blog know, the version of the Tax Cuts and Jobs Act that was passed by the House of Representatives would not have allowed any private activity bond (including any qualified 501(c)(3) bond) to be issued as a tax-exempt bond after December 31, 2017.  The version of the Tax Cuts and Jobs Act passed by the Senate, and the version ultimately enacted into law, did not include this repeal of tax-exempt private activity bonds.   

We’ve previously explored (here) why the House wanted to eliminate tax-exempt private activity bonds and debunked the purported policy bases that were articulated by members of the House in support of the repeal of tax-exempt private activity bonds.  The need for exploration and debunking remains, in light of both the Republicans’ insatiable desire to enact tax cuts and the release by the Congressional Research Service of its report titled “Private Activity Bonds: An Introduction,” which appears to have been drafted to afford a policy rationale to eliminate the income tax exemption for interest paid on certain private activity bonds (which elimination would, of course, be used to cover the cost of income tax rate reductions).[1]  To discover the errors in CRS’s report, hit the jump.

Annie Belle still wants to know why.

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A Reshuffling of the 8038 Deck

The IRS recently released a new Form 8038-G, which is the information return for issues of tax-exempt governmental bonds, and a new Form 8038, which is the information return for tax-exempt private activity bonds.  In addition, the IRS has released draft instructions for each form.  The revised forms are in part a response to changes made to the Internal Revenue Code by the Tax Cuts and Jobs Act (P.L. 115-97), which was signed into law on December 22, 2017 (“TCJA”).  Keep reading for more information on the new forms, the fate of some old forms, and some gratuitous commentary.

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“Tax Reform 2.0” Released, Bonds are Untouched (So Far)

Hope you all had a nice summer – the blog is officially back from summer break. The Hutchinsons had a good one; we took Charlie to visit his grandparents at the beach in Pensacola, FL, where he went to Waffle House for the first time, and to visit his great-grandparents in Clinton, MS, where he went to Waffle House for the second time.

Back to business. The House Ways and Means Committee released three bills yesterday, which comprise something along the lines of “Tax Reform 2.0.” So far, the bills don’t mention tax-advantaged bonds in any way. However, as Congress hunts for revenue to pay for the permanent extension of various tax benefits in Tax Reform 1.0 (the Artist Formerly Known as the Tax Cuts and Jobs Act), we must all continue to monitor the legislative process. The rationale that Congress offered for eliminating tax-exempt private activity bonds last year is so thin that a cynic could infer that the real rationale was to raise revenue to pay for other provisions.

The bills are numbered H.R. 6760, H.R. 6757, and H.R. 6756.

Happy Birthday to Us!

Today is our fourth birthday.

Thanks to all of you who have listened to us rant and ramble over the years. We hope that you continue to visit us and that you find value here (or at least are occasionally bemused by our strained cultural references and bad jokes). If you like it here, consider telling a friend or colleague about us, and encourage them to subscribe. If you find us annoying (but are masochistic enough to continue to read – why do you hate yourself?), please click here to send Mike Cullers your hate-mail. (Don’t hold back! Mike is tough, and he can take it.) If you don’t mind paying overseas shipping, we have some gift ideas for us (or, heck, for your loved ones, too).