Recent Developments

Administation proposals:

Proposed legislation:

  • The Sustainable Water Infrastructure Investment Act, S. 3262, introduced on April 27, 2010 (mirroring a provision in the Small Business and Infrastructure Jobs Tax Act of 2009) would extend the Build America Bond program until April 1, 2013 and exempt all water and sewer exempt facility debt from the private activity bond volume cap.
  • Rep. Jim McDermott, D-Wash., drafting legislation to remove the cap on CREBs now that CREBs may be issued as BABs.  Current option for renewable infrastructure is contracting with private investors who can take advantage of 1603 grants.
  • Sen. Bingaman and Sen. Mike Crapo plan to introduce a bill extending the $30 million small-issuer limit for bank-qualified bonds and peg that limit to inflation in the future.  The bill is not expected to extend the accompanying 2% de minimis provision allowing banks to receive beneficial tax treatment for holding and carrying municipal debt. See May 10, 2010 Bond Buyer.
  • Community Development Financing Act of 2010 (H.R. 5311, 11th), Rep. Pascrell, would make permanent the exception from the general “no federal guarantees for tax-exempt bonds” rule in Section 149(b) of the Code for FHLB loans by striking “and ending on December 31, 2010.”
  • Municipal Bond Market Support Act of 2010 (S. 3350), proposes to make the $30 million bank qualification threshold permanent and index such threshold for inflation. An extension of the 2% de minimis provision is not included in this bill.
  • H.R. 1011 would authorize tax-exempt bond financing for fixed-wing emergency medical aircraft.  March 22, 2011 Tax Notes.
Market News:
  • Proposed disclosure for official statements in connection with the American Jobs Act of 2011 proposals:  From time to time, there are legislative proposals in Congress which, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Bonds. For example, on September 12, 2011, President Obama proposed to Congress the enactment of legislation entitled the “American Jobs Act of 2011” (the “Jobs Act”). If enacted as currently proposed, the Jobs Act would result in federal income tax being imposed on a portion of the interest received by certain individual owners of state or local bonds, including the Bonds, for taxable years beginning on or after January 1, 2013. No prediction is made whether this provision will be enacted as proposed or concerning other future legislation which if passed might have the effect on the tax treatment of interest on the Bonds. Prospective purchasers should consult with their own tax advisors regarding the Jobs Act and any other pending or proposed federal income tax legislation.

Internal Revenue Service News:

  • Letter Ruling 201149017, August 30, 2011.  Issuer’s Build America Bonds bear interest at rates set daily, weekly, by the term, or flexibly, and are subject to mandatory tender by holders.  “(W)e conclude that the conversion of the Bonds to a new term rate period (or to one of the other interest rate periods provided for under the terms of the Bonds), will not result in a modification of the Bonds for purposes of section 1.1001-3.”
  • Letter Ruling 201149, September 12, 2011.  Charitable corporation formed to help public charter school obtain New Markets Tax Credits financing does not qualify for sec. 501(c)(3) status.
  • Letter Ruling 201148005, August 24, 2011 (released December 2, 2011).  Refinancing of debt (line of credit) of a taxable subsidiary with the proceeds of 501(c)(3) bonds.  Involves anti-abuse rules of Treas. Reg. § 1.141-14(a).
  • Letter Ruling 201150026, September 7, 2011 (released December 16, 2011). City may have more time in which to waive the right to invest the proceeds of its refunding bonds in higher yielding investments during the ninety day temporary period pursuant to sec. 1.148-9(d).
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