Commercial Paper Provisions

Provisions Relevant to Commercial Paper Financings:

Treas. Reg. 1.150-1(c)(4)(ii):  Special rule to determine an “issue” of commercial paper

Treas. Reg. 1.149(e)-1(e)(2)(ii):  Special rule for determining what the issue of commercial paper is for purposes of information reporting

Notice 2011-63:  Discusses issue date determination for draw down loans and commercial paper (among others)

Notice 2011-63:

Under Notice 2010-81, the IRS determined that bonds are considered issued on the “issue date” of the particular bond, not the “issue date” of the issue of bonds.  The IRS subsequently received comments stating that this definition of issue date for purposes of, e.g., volume cap administration, is not workable and is inconsistent with prior interpretation of the issue date rules.  For instance, it is impractical for draw-down loans and commercial paper, which might be issued in various years – each time a draw is made or each time the commercial paper is issued.  In Notice 2011-63, the IRS corrects its determinations in Notice 2010-81 and provides that an issuer may now treat a bond as issued in either of the following cases:

  1. on the issue date of the bond under the general (problematic) interpretation of Notice 2010-81; or
  2. on the issue date of the issue so long as the issuer meets the following additional requirements:
    • all of the bonds of the issue must be issued no later than the earlier of:
      • the statutory deadline for issuing the bonds; or
      • the end of the maximum carryforward period for unused volume cap under the applicable statute, treating all of the unused volume cap for the issue as volume cap arising in the year in which the issue date of the issue occurs.

If the second alternative is used, the issuer must make a special marking on the IRS Form 8038/-G information return to identify the use of the alternative for, e.g., draw-down bonds or commercial paper.

Note that, for example, “if the bonds were small issue bonds under § 144(a), the alternative option would not be available because under § 146 there is no carryforward period for unused volume cap for small issue bonds.”

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