WASHINGTON — The Treasury Department Wednesday highlighted guidance on tax-credit stripping, Build America Bonds, and other programs stemming from the American Recovery and Reinvestment Act as high priorities in its 2009-2010 priority guidance plan.
Of the 315 projects listed, the document highlighted 10 separate regulatory projects involving municipal bonds that Treasury and Internal Revenue Service officials would like to tackle between now and the end of June.
At the top of the list for munis is additional guidance on tax-credit bonds. Although the document does not specify which topics that guidance would address, market participants expect the Treasury to address how issuers or investors can strip the tax credit from the bond and sell the two separately.
“This does mean credit stripping, [but] it was written broadly enough to address other issues,” said Jeremy Spector, a partner at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC.
While many bond attorneys and other market participants for months have sought stripping guidance, believing it could expand the market for tax-credit bonds, Treasury and IRS officials have said they are still working through a number of complicated issues, and also have warned that stripping should not be viewed as a cure-all for the tax-credit bond market.
ARRA authorized the sale of $11 billion of taxable tax-credit qualified school construction bonds this year and so far at least $1.5 billion if the debt, in 119 issues, has been sold, according to Thomson Reuters.
In addition to stripping, several programs created or expanded by ARRA are guidance priorities. Most of the ARRA-related bond programs are set to expire after Dec. 31, 2010. The Treasury hopes to get out additional guidance on BABs, addressing a number of questions that have emerged over the last few months. Additional guidance on qualified school construction bonds is also on the agenda.
Federal officials also hope to finalize in the coming months a number of recently proposed regulations. Finalizing regulations proposed last year that modernize and ease requirements for municipal issuers to obtain public approval for private-activity bond-financed projects are included on the list. Also listed for finalization are regulations proposed in 2006 outlining allocation and accounting rules used to apportion private payments and private use in tax-exempt bond transactions.
The Treasury also hopes it can put finishing touches on new proposed regulations on solid-waste disposal facilities, which were rolled out in September. Those regulations mark the Treasury’s second attempt at updating the existing 1972 rules for waste facilities, after a 2004 attempt at proposed regulations came under heavy criticism from market participants. A public hearing on those proposed rules is scheduled for Jan. 5, but IRS officials have said they want to finalize them as soon as possible so issuers can utilize them.
The plan also includes finalizing regulations on qualified zone academy bonds, and proposing new regulations on arbitrage investment restrictions.
The Treasury also plans to issue guidance this year on tax-exempt bonds targeted to areas affected by Midwestern flooding and Hurricane Ike.
Up to $17 billion of special tax-exempt private-activity bonds were authorized last year to support disaster recovery efforts. The bonds do not count against a state’s PAB volume cap, but must be issued by the end of 2012.
The IRS issued a notice last December outlining how much each county could issue under each program, but no official Treasury guidance outlining the program’s requirements has been released.