The Treasury Department should issue guidance on the definition of issue price for Build America Bonds and proceed with 10 other regulatory projects on a priority basis, the National Association of Bond Lawyers told department officials
The group’s recommendations were sent in a June 10 letter in response to the Treasury’s solicitation of public comments on the projects it should include in its 2010-2011 priority guidance plan. The plan identifies the top priorities for the Treasury’s Office of Tax Policy from July 1, 2010, through June 30, 2011.
NABL stressed that it was not prioritizing any of its suggestions or withdrawing any recommendations it made for previous priority-guidance plans.
On BABs, the attorneys said they need more guidance on the definition of issue price, especially in terms of what constitutes a “bona fide public offering.”
The tax rules state that “the issue price of bonds that are publicly offered is the first price at which a substantial amount of the bonds is sold to the public” and that “10% is a substantial amount.”
They also state that the issue price “does not change if part of the issue is later sold at a different price” and that if there is a bona fide public offering of the bonds, the issue price can be determined “as of the sale date based on reasonable expectations regarding the initial public offering price.”
Issue price has been a point of controversy for BABs in recent weeks, as the Internal Revenue Service has begun asking issuers if they use the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system to track the trading and pricing of their BABs.
NABL also asked the agencies to issue guidance on other BAB-related issues, as well as general guidance on recovery zone economic development bonds and recovery zone facility bonds.
In addition, the group recommended the Treasury modify the definition of a state or local bond opinion under Circular 230 regulations to cover BABs and recovery zone economic development bonds.
Circular 230 governs the practice of tax lawyers that come before the IRS.
“If there were one thing that needs to be addressed in order for … municipal bond issuers to participate fully in the market, it would be all the questions surrounding BABs,” said Michela Daliana, a partner at Hawkins, Delafield and Wood LLP and vice chair of NABL’s tax committee.
The group also would like to see the Treasury finalize three pieces of guidance that have already been proposed on bond-financed solid-waste disposal facilities, public approval requirements for private-activity bond financed projects, and allocation and accounting rules.
“There are a number of items that are in proposed form and it would be nice to get them tied up,” Daliana said.
The bond attorneys also said they need guidance on how refundings should be handled for bonds issued under special provisions of the American Recovery and Reinvestment Act that are due to expire at the end of the year.
In addition, they asked for guidance on another ARRA provision that allows banks to deduct 80% of the cost of buying and carrying tax-exempt bonds from borrowers that issue less than $30 million of bonds a year, and also allowed that issuance limit to apply to conduit borrowers instead of issuers.
Specifically, NABL is looking for guidance on how 501(c)(3) charitable organizations should be treated.
Record retention was another area in which the group asked for guidance.
