The Internal Revenue Service celebrated New Year’s Eve this year by issuing two rule-making notices of interest to the tax-exempt bond community, on the topics of public approval of private activity bonds and reissuance.

The first notice contains final regulations on the public approval requirement of section 147(f) of the Internal Revenue Code, 26 U.S.C. §147(f). You can access a copy of the final regulations here.

The final regulations on section 147(f) make several significant modifications to the proposed regulations, which were published by the Service on September 28, 2017 (read our prior analysis of the 2017 proposed regulations here). Some of the key highlights of the final regulations are as follows:

  • 7-Day Notice Period: The current regulations, at 26 C.F.R. §5f.103-2, require that the public notice be given at least 14 days before the date of the public hearing. The IRS had previously issued proposed regulations in 2008, shortening this requirement to 7 days, but went back to 14 days in the 2017 proposed regulations. The stated reason for this decision was a reference in the legislative history to a 14-day notice period. However, in response to comments to the 2017 proposed regulations, the IRS has determined to restore the 7-day notice period, as the statutory text makes no mention of a 14-day notice period.
  • Website Notices: The current regulations require that the notice must be published in a newspaper or announced by radio or television broadcast. The 2017 proposed regulations introduced website notices, but required that the issuer offer to residents without access to the Internet an alternative method for obtaining the information contained in the website notice. The final regulations drop this “alternative notice” requirement. Therefore, a notice that is published solely through the governmental unit’s website will satisfy the public notice requirement of section 147(f). The notice must appear in an area of the government’s website that is used to inform residents about events affecting the residents.
  • Deviations and Ability to Cure: The 2017 proposed regulations introduced the concept of insubstantial deviations, that is, deviations from the notice and public approval that are so minor as to not cause the notice and public approval to fail to meet the requirements of section 147(f). Additionally, for deviations that were substantial, the 2017 proposed regulations afforded issuers the opportunity to cure the resulting violation through a supplemental notice and hearing that met the requirements of the regulations. The final regulations largely implement these concepts as originally proposed.
  • Effective Date and Retroactive Use: The final regulations are generally effective April 1, 2019. However, the IRS in response to comments it received agreed to afford issuers the option of retroactively applying the “deviation” provisions (including the ability to cure) to any bond issued pursuant to a public approval that occurred prior to April 1, 2019. This presents an excellent opportunity for issuers of bonds with faulty public approvals to reduce their audit risk.

The second New Year’s Eve notice from the IRS contains proposed regulations on the reissuance of tax-exempt bonds, particularly qualified tender bonds. You can access a copy of the proposed regulations here. The proposed regulations follow the guidance previously provided by the IRS in Notices 88-130 and 2008-41, related to qualified tender bonds. Each of those Notices will be rendered obsolete once the regulations are finalized.

The proposed regulations are not intended as a departure from previous guidance. Thus, the proposed regulations, like the Notices before them, provide that the existence or exercise of a qualified tender right of a qualified tender bond will not, in and of itself, result in a reissuance for tax purposes. And, the terms “qualified tender bond” and “qualified tender right” carry meanings substantially similar to the definitions that were ascribed to these terms in the Notices.

The IRS is requesting that any comments to the proposed regulations or requests for a public hearing in connection with them be delivered by March 1, 2019.

 

After months of deliberation, on August 20, 2018, the U.S. Securities and Exchange Commission (the “SEC”) announced its final approval of new amendments (the “2018 Amendments”) to Rule 15c2-12, 17 C.F.R. §240.15c2-12 (herein, “Rule 15c2-12” or the “Rule”). Rule 15c2-12 requires dealers, when underwriting certain types of municipal securities, to ensure that “obligated persons” enter into a written commitment (called a continuing disclosure agreement, or “CDA”) to make periodic disclosure filings to the Municipal Securities Rulemaking Board (the “MSRB”). An “obligated person” means any person, including the issuer, that supports the payment of all or part of the obligations on municipal securities to be publicly offered for sale. Continue Reading What is Material? The SEC Says You Decide

On October 26, 2018, the IRS released a memorandum from its Office of Chief Counsel, confirming that issuers may issue tax-exempt bonds to advance refund taxable bonds without running afoul of the prohibition on tax-exempt advance refundings contained in the Tax Cuts and Jobs Act. The release of the memorandum follows the request in March by the National Association of Bond Lawyers for guidance on this issue, following public statements earlier in the year by IRS and Treasury officials in favor of the approach. Continue Reading IRS Releases Guidance on Use of Advance Refunding Bonds Post-TCJA

The Internal Revenue Service, Tax Exempt & Government Entities Division, has released its Fiscal Year 2019 Program Letter, a copy of which is available here. Among other things, the Program Letter identifies the compliance areas for the tax-exempt bond community that will be a priority for the IRS in the new fiscal year which began on October 1. Continue Reading IRS Announces Tax-Exempt Bonds’ Program Priorities for 2019 Fiscal Year

On August 20, 2018 the SEC approved amendments to Rule 15c2-12 of the Securities Exchange Act to add two additional disclosure events to written continuing disclosure undertakings required to be obtained by underwriters in primary securities offerings. A copy of the final rule approving the amendments can be accessed here. Continue Reading SEC Approves Amendments to Rule 15c2-12 to Address Bank Loan Disclosure Concerns

We’ve previously discussed on this blog the importance of continuing disclosure in the municipal bond industry, and the steps municipal issuers should take to ensure they remain in compliance with their obligations in this area. I recently recorded a video podcast on this topic. You can watch it below – or at the following link: https://www.mcneeslaw.com/continuing-disclosure-video/.

Have questions about continuing disclosure? Feel free to contact me or the Firm’s continuing disclosure specialist, Penny Pollick.

On May 23, the Pennsylvania House of Representatives approved Senate Bill 234, which creates the Property Assessed Clean Energy (PACE) Program. SB 234, which was approved by the Senate in January of this year, would help owners of agricultural, commercial and industrial properties obtain low-cost, long-term financing for energy efficiency, water conservation and renewable energy projects. The program would not include multifamily housing or other residential property. Continue Reading Pennsylvania Legislature Approves New Municipal Alternative Energy Program

On Monday, May 14, the United States Supreme Court announced its eagerly awaited decision in Murphy v. National Collegiate Athletic Association and, as many expected, struck down the Professional and Amateur Sports Protection Act (“PASPA”), a federal law that prohibits states from authorizing and regulating sports wagering. Continue Reading Supreme Court Opens Door to Sports Betting in all Fifty States

On December 12, 2017, the Board of Governors of the Federal Reserve System (FRB) issued Notice 2017-26761 (82 FR 58397, Docket Number OP-1573) expressing its intent to begin publication during the second quarter of 2018 of three overnight repurchase transaction reference rates.  The FRB began publication of these rates through the Federal Reserve Bank of New York on April 3, 2018. Continue Reading Federal Reserve Board Now Publishing SOFR And Other Alternative Repo Rates