As 2015 winds down and we prepare to welcome 2016, many smaller municipalities, municipal authorities, and other public entities may be putting the final touches on last-minute financings, or preparing for new financings in early 2016. In many of these issuances, the term “bank-qualified” will be used.
For such issuers, bank qualification is a means to enhance the attractiveness of the entity’s tax-exempt debt when placed with a bank or other financial institution, regardless of whether the debt is to be publicly offered or placed privately.
Tax-exempt debt is bank-qualified if it meets the requirements for such debt under Section 265 of the Internal Revenue Code. Because certain of the requirements under Section 265 reset each calendar year, there is often a rush to close transactions by Dec. 31, or as soon as possible after the first of the year.
Interested to know more about bank-qualified tax-exempt obligations? I recently wrote an overview of the topic, which was published in the December 15, 2015 edition of The Legal Intelligencer. Read more here.