The COVID-19 Pandemic Continues On and So Do Telephonic TEFRA Hearings

Remember earlier this year when the novelty of working from home hadn’t worn off, when every day wasn’t Groundhog Day, when we hadn’t run out of Netflix to watch, and when we were all concerned about how to satisfy the in-person TEFRA hearing requirement for tax-exempt private activity bonds in the midst of a pandemic and all sorts of Stay-at-Home orders?  I know, that seems like decades ago!

As a refresher, on Star Wars Day,[1] the IRS responded to NABL’s request for relief from the in-person TEFRA hearing requirement in the form of Rev. Proc. 2020-21.  Rev. Proc. 2020-21 permits telephonic TEFRA hearings during the period between May 4, 2020 and December 31, 2020.  Specifically, during this period, a governmental unit can meet the TEFRA requirement that the public hearing be held in a convenient location by affording the general public access to the hearing by toll-free telephone call.[2]  It’s clear that the IRS was also hoping that the COVID-19 pandemic would be all but a distant memory by the end of 2020.

Unfortunately, it looks like the COVID-19 pandemic is probably going to be with us beyond December 31, 2020.  So, yesterday, the IRS issued Rev. Proc. 2020-49, which extends until September 30, 2021 the period during which telephonic TEFRA hearings can be held in lieu of in-person TEFRA hearings.  Hopefully, we won’t be in quarantine until then.

Now back to your regularly scheduled stalking of election coverage.


[1] Or May 4, 2020 – you can choose how you want to recognize days in 2020.

[2] Never have the authors of this blog explained to so many people what a toll-free number is.

We Heard You Missed Us – We’re Back! To Talk about Business Days.

It’s fall, and that means two things.  Pumpkin spice everything, and a calendar that’s replete with holidays – Sukkot, Halloween, Thanksgiving, and Sweetest Day[1] to

name but a few.  Diligent readers of The Public Finance Tax Blog will remember that we previously posted an exhaustive analysis of the “hold-the-offering-price-method” of establishing the issue price of tax-exempt bonds (the “HTOP Method”).  These same readers no doubt remember Treasury regulation § 1.148-1(f)(2)(ii)(B), which requires that the underwriter agree in writing neither to offer nor sell a bond to which the HTOP Method will apply at a price that is higher than the bond’s initial offering price to the public for a period that begins on the sale date of the issue and that ends on the close of the fifth business day after the sale date.[2]

These readers are now perhaps wondering whether, given the surfeit of autumnal holidays, they have correctly counted the number of business days to achieve a successful invocation of the HTOP Method.  Don’t worry; we’re here to help.

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Morning Zoo Radio and Cash Flow Relief for Issuers: Part 2

In Part 1, we introduced the cash flow relief technique/staple of your morning commute known as “Scoop and Chuck.” In particular, we discussed an issuer that will issue new bonds and use the proceeds to pay interest (but no principal) on a prior issue of bonds.  The new bonds will have a debt service schedule that is pushed out later in time compared to the debt service schedule on the prior bonds. This enables the issuer to keep some of the revenues that it otherwise would have used to pay debt service on the prior bonds. In Part 2, below, we’ll add more facts and try to provide some answers.

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Morning Zoo Radio and Cash Flow Relief for Issuers: Part 1

The pandemic is forcing even the most frugal issuers to seek to reduce or postpone their debt repayment requirements. There are many ways to do this. Each approach has pros and cons from a business perspective. Not surprisingly, each approach also has tax consequences that are often not intuitive and sometimes downright devilish. We will tackle them one at a time in a series of bite-size (relatively speaking) posts. First up: It’s America’s #1 Morning Zoo Tag-Team Radio Show: SCOOP AND CHUCK! 

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SPB Webinar: The Municipal Liquidity Facility and Other Current Developments for States and Municipalities

Please join Squire Patton Boggs on Friday, May 8, at 12 pm Eastern time for a one-hour webinar covering the Federal Reserve’s Municipal Liquidity Facility,  the CARES Act, and Chapter 9. Click here to register.

The webinar will be led by our colleagues Karol Denniston, Alethia Nancoo, and David Stewart (former Majority Staff Director for the House Committee on Ways and Means).

The Federal Reserve has agreed to purchase up to US$500 billion of short-term municipal notes from eligible municipal issuers. Please join us for an update on the Municipal Liquidity Facility’s general terms, who can access and what is provided.

We will continue to review the challenges and benefits of accessing the facility and what changes may be needed.

Here’s the registration link again. We hope you can join us.

The IRS Comes Through: New Guidance Allows Phone TEFRA Hearings and Helps Issuers Repurchase their VRDOs Without Extinguishing Them

As described in our previous post, NABL hasn’t been binge watching Tiger King and binge eating like the rest of us during this time at home during the COVID-19 pandemic.  Instead, on March 25, 2020, NABL asked the IRS to adopt a proposed notice  that would address two municipal bond concerns caused by the pandemic: (1) the requirement of in-person TEFRA hearings for tax-exempt private activity bonds; and (2) the extinguishment of qualified tender bonds and commercial paper if the issuer of such debt repurchases it without meeting certain requirements.

The IRS responded on Star Wars Day[1] with Rev. Proc. 2020-21 and Notice 2020-25, which should help alleviate these two concerns through the end of 2020.

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Bring Back Tax-Exempt Advance Refundings

Over at our Restructuring GlobalView blog, our public finance colleagues Pedro Miranda and Pedro Hernandez make the case for bringing back tax-exempt advance refundings.

The general shutdown of the economy in response to COVID-19 threatens businesses in most sectors of the economy, and the revenues that those businesses will lose cannot be taxed by state and local governments, threatening their budgets as well.  Lawmakers at all levels are searching for grand gestures and bold new ideas to relieve the extraordinary burdens that COVID-19 is imposing. However, the old and tried – the low-hanging fruit – may be even more useful than the new and untried.  Tax-exempt advance refunding bonds were a well-established tool that state and local governments formerly used to save money. They allowed state and local governments to reap the benefits of comparatively low prevailing interest rates even when their outstanding debt could not be redeemed until more than 90 days in the future. Citing concerns (even if only as fig leaf for the real objective of raising revenue) about having two sets of bonds (the original new money bonds and the advance refunding bonds) outstanding concurrently for more than 90 days with but a single project to support them, Congress eliminated most tax-exempt advance refunding bonds in the Tax Cuts and Jobs Act of 2017. What better time than a once-in-a-hundred-years pandemic to restore tax-exempt advance refunding bonds to their rightful place?

If Congress restores them, before the ink on President Trump’s signature is dry, tax-exempt advance refunding transactions will begin to take shape. The municipal bond market is completely familiar with the regulatory rules and business considerations involved. There are no new rules to learn or unintended consequences to consider. Working groups will convene, tax lawyers will be roused from their parents’ basement, and state and local governments can obtain significant cash flow relief using a well-established financing technique.

Helping Public Entities Navigate the COVID-19 Financial Crisis

As we’ve said, The Thing touches everything. Indeed, to quote No Country For Old Men: It’s the dismal tide.  It’s not the one thing.” State and local governments are no exception. Our public policy and public finance groups have a four-point action plan for state and local governments to start to pick up the pieces. We’re ready to help.

NABL Asks IRS to Help with TEFRA, Debt Repurchase Problems

NABL has asked the IRS to issue a Notice that would allow issuers to hold TEFRA public hearings for private activity bonds by phone and that would allow issuers to purchase and sit on their own debt through the end of the COVID-19 crisis without extinguishing the debt, even if the issuer doesn’t use its best efforts to remarket it.

The text of the proposed Notice is available here. It remains to be seen whether the IRS will make significant changes to the Notice before adopting it or some other form of relief, but some highlights of the request are as follows.

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