Header graphic for print
Public Finance Matters Updates on recent public finance and municipal bond developments

Category Archives: Tax/arbitrage

Subscribe to Tax/arbitrage RSS Feed

Tax Guidance to Slow Under Trump. Even More Emphasis on Letter Rulings in Bond Transactions?

Posted in Tax/arbitrage

By MAXWELL D. SOLET and CHRISTIE MARTIN As the Trump administration attempts to substantially reduce the amount of federal regulations, both the Deputy Tax Legislative Counsel of the Treasury Department and an Associate Chief Counsel at the Internal Revenue Service indicated this week that we are likely to see a virtual halt to formal tax… Continue Reading

IRS Clarifies New Management Contract Safe Harbors

Posted in Tax/arbitrage

By MAXWELL D. SOLET and CHRISTIE MARTIN In August, 2016, the IRS issued Revenue Procedure 2016-44, the first comprehensive revision of its management contract safe harbors since Revenue Procedure 97-13.  Rev. Proc. 2016-44 (see our description here) built upon and amplified principles laid out in private letter rulings issued over many years and in Notice… Continue Reading

Treasury/IRS Provide Early Holiday Present: Final “Issue Price” Regulations Released

Posted in Tax/arbitrage

By CHRISTIE MARTIN and MAXWELL D. SOLET After two sets of proposed regulations, Treasury and IRS have now released final regulations on the definition of “issue price” for purposes of arbitrage investment restrictions that apply to tax-advantaged bonds (the “Final Regulations”) and it appears that the third time’s the charm. Practitioners are particularly praising the… Continue Reading

IRS Relaxes Restrictions on Management Contracts for Bond-Financed Facilities

Posted in Tax/arbitrage

By CHRISTIE  L. MARTIN and MAXWELL D. SOLET The IRS on August 22, 2016 released long-anticipated Revenue Procedure 2016-44 (Rev. Proc. 2016-44), which substantially increases flexibility in, and provides a less formulaic approach to, the ability of a tax-exempt bond issuer or 501(c)(3) conduit borrower to contract with private parties without jeopardizing the tax-exemption of… Continue Reading

Helpful News from IRS on Student Loan Bonds

Posted in Tax/arbitrage

By MAXWELL D. SOLET On November 13, the IRS issued Notice 2015-78, providing favorable guidance on topics of interest to providers of “supplemental” or “alternative” student loans financed with tax-exempt bonds and to underwriters of such student loan bonds. Such guidance confirms that loans financeable under such programs include (i) parent loans as well as… Continue Reading

IRS Revamps Proposed Issue Price Definition for Municipal Bonds

Posted in Tax/arbitrage

By MAXWELL SOLET and CHRISTIE MARTIN Treasury and IRS today announced a decision to withdraw the much-criticized portion of the notice of proposed rulemaking published in the Federal Register on September 16, 2013 (the “2013 Proposed Regulations”) related to the definition of issue price for tax-advantaged obligations and to propose a revised definition of issue… Continue Reading

IRS Green Lights Section 529A ABLE Disability Programs

Posted in Tax/arbitrage

By LEN WEISER-VARON Pi Day comes but once a century, on 3/14/15. The Internal Revenue Service receives praise approximately as frequently. But the IRS deserves applause for its Notice 2015-18, released March 10, 2015, giving the green light to states to proceed with the establishment of tax-free investment programs for the disabled under new Section… Continue Reading

Municipal Bond Interest Paid By a Bond Insurer After an Issuer’s Bankruptcy Discharge Can Remain Tax-Exempt

Posted in Bankruptcy, Bond Insurance, Tax/arbitrage

By LEN WEISER-VARON and MAXWELL D. SOLET In the aftermath of recent municipal bankruptcies in which issuers proposed and/or implemented bankruptcy plans involving partial discharges of the issuer’s payment obligation on insured bonds, there has been increased focus on whether municipal bond interest paid by a bond insurer after the bankruptcy plan’s effective date continues… Continue Reading

IRS Provides Increased Flexibility on Management Contracts for Tax-Exempt Bond-Financed Property

Posted in Tax/arbitrage

By Maxwell D. Solet On October 24, 2014, the Internal Revenue Service issued Notice 2014-67 (the “Notice”), which provides important guidance and increased flexibility for issuers and conduit borrowers of tax-exempt bonds regarding contracting with private parties in a manner that avoids “private use” by such parties of bond-financed facilities. The Internal Revenue Code restricts private… Continue Reading

“28% Cap” Unlikely to Trigger Wave of Municipal Bond Tax Calls

Posted in Tax/arbitrage

By LEN WEISER-VARON Market commenters have suggested that billions of dollars in municipal bonds may be subject to par redemptions if the much-discussed “28% cap” on the value of certain federal income tax deductions or exclusions is enacted and if the capped items include municipal bond interest.  While such commenters flag an issue worthy of… Continue Reading

IRS Warns That Financial Restructurings Can Jeopardize Tax-Exemption of Bonds

Posted in Tax/arbitrage

By JEREMY A. SPECTOR The IRS is planning on sending out letters (“Letters”) over the next few months to several hundred issuers who have experienced covenant or payment defaults from 2007 to the present. The Letters remind issuers of their tax compliance responsibilities in the context of a restructuring and encourage them to self-police compliance… Continue Reading

IRS Announces Closing Agreement Process for At-Risk Student Loan Bonds

Posted in Tax/arbitrage

The IRS has announced the procedures, and settlement cost methodology, for issuers seeking to preserve the tax-exemption of those student loan bonds that are at risk of being declared taxable due to the issuer’s attempted compliance with arbitrage restrictions using a loan-swapping technique that the IRS has determined is ineffective.  The closing agreement arrangements, which are… Continue Reading

Recent Developments Regarding Issuer Responsibility for Reviewing Initial Offering Prices of Bonds

Posted in Tax/arbitrage

BY JEREMY SPECTOR Following the advent of Build America Bonds (BABs) in 2009 and securities law rulemaking that has resulted in the posting of virtually instantaneous trading data on the EMMA website (msrb.emma.org) hosted by the Municipal Securities Rulemaking Board (MSRB), the IRS has repeatedly expressed concerns about how initial offering prices (a/k/a “issue prices”)… Continue Reading

Tax Alert: Schedule K and Post Issuance Compliance

Posted in Tax/arbitrage

BY JEREMY SPECTOR Several recent developments have underscored the importance for Section 501(c)(3) organizations with outstanding tax exempt bonds of adopting and implementing procedures for monitoring their post issuance compliance with federal tax requirements. At the recent Bond Attorneys Workshop of the National Association of Bond Lawyers, Steven Chamberlin, Manager of the IRS’s office of Compliance… Continue Reading

Amended IRS Regulation Facilitates Tax-Exempt Bond Restructurings

Posted in Tax/arbitrage, Workouts

BY LEN WEISER-VARON Restructurings of tax-exempt bonds payable by an entity experiencing financial difficulties typically feature the yin of an obligor seeking debt relief that will permit it to operate without the stigma of potential insolvency and the yang of creditors who may wish to accommodate but do not want to leave money on the table.  This… Continue Reading

IRS Audit of CCRC Bonds’ Tax-Exemption Resolved

Posted in Tax/arbitrage

  BY MIKE SOLET The much-publicized IRS audit of the Mission Ridge project in Montana has been resolved favorably, with the IRS concluding that the bonds are not “arbitrage bonds” and remain tax-exempt.  The IRS audit had focused on CCRC entrance fees and the technical issue of whether the CCRC erred in not treating its accumulated… Continue Reading