WASHINGTON — The National Association of Bond Lawyers urged the Treasury Department and Internal Revenue Service to provide guidance in the coming year on matters ranging from President Obama's health care reform law to the definition of a political subdivision.
The IRS and Treasury use an annual guidance plan to identify and prioritize tax issues that they should address through regulations and other documents. The 2014-2015 plan will identify projects that Treasury and the IRS intend to actively work on from July 1, 2014 to June 30, 2015.
Many of the items NABL recommended in an April 24 letter are ones that the organization has suggested be on the guidance plan previously, and many of the recommended items are on the plan for 2013-2014.
Among items that NABL would like to see added to the list of priorities for 2014-2015 is guidance on whether and how the private business-use test applies to accountable care organizations and other arrangements entered into under the Patient Protection and Affordable Care Act.
ACOs are health care organizations where doctors, hospitals and other providers can work together to coordinate care for Medicare patients. They can include both taxable and tax-exempt participants, including hospitals and other organizations that are issuers or borrowers of tax-exempt bond financings.
Under federal tax law, facilities financed with governmental or 501(c)(3) bonds generally are subject to restrictions on the amount of private business use occurring in the facilities. There is uncertainty as to whether public and nonprofit hospitals can join together with private parties in ACOs without exceeding private use limits, NABL said in a request to the IRS and Treasury last year.
NABL would also like to see the IRS and Treasury issue guidance on the definition of a political subdivision on the priority guidance plan. This item was also on the most recent version of the 2013-2014 guidance plan.
The political subdivision issue has become a particular concern since the IRS issued a technical advice memorandum last year arguing that the Village Center Community Development District in Florida is not a political subdivision that can issue tax-exempt bonds because its board does not and will not include elected officials.
Additionally, NABL wants the IRS and Treasury to re-propose guidance on the definition of issue price. The IRS and Treasury released proposed rules on the topic in September that were criticized by market groups as unworkable. NABL was among the groups that have called for the proposed rules to be withdrawn.
When the IRS and Treasury released the proposed issue price rules, they also released proposed regulations relating to working capital, grants and qualified hedges. NABL suggested that the IRS and Treasury review, revise and finalize those proposed rules, as well as proposed regulations about public approval for private-activity bonds, allocation of accounting proceeds and projects for PABs and yield computation in connection with certain qualified hedges.
Other items that NABL would like to see on the guidance plan are an update to management and service contract safe harbors, which are important in determining that certain governmental and 501(c)(3) bonds remain tax-exempt, and guidance concerning the reissuance of debt obligations.
