BNY Mellon is introducing a new service to help municipalities entitled to federal cash subsidies track projects and report information to the Internal Revenue Service.
Certain newly created direct-pay classes of municipal bonds, such as Build America Bonds and recovery zone economic development bonds, impose on the issuer “a complex range of IRS requirements” to remain eligible for the federal subsidy, BNY Mellon said in a statement Tuesday.
This can mean aggregating reports and calculations from multiple places, BNY Mellon said, such as bond counsel or firms specializing in arbitrage rebate.
The bank said this new service will enable it to provide to issuers a comprehensive range of documents, schedules, reports, and calculations ensuring compliance with IRS requirements, both during and after the issuance of direct-pay subsidy bonds.
“We’re able to provide all of that in one place, instead of putting the onus on the municipality,” said Alex Tsarnas, managing director and head of the corporate and public finance group within BNY Mellon Corporate Trust. “Clients are having to deal with the changes that are occurring at a pretty rapid pace. … Where we think we’re adding value is we’re bringing it all to one place for the client.”
Tsarnas said the additional compliance services will be available for a “nominal” fee. According to Thomson Reuters, BNY Mellon was the top trustee bank for newly issued municipal bonds last year, acting as trustee on 1,173 deals with $90.18 billion in par value.
Tsarnas said for some of the bank’s clients the difference between issuing bonds established under the American Recovery and Reinvestment Act or selling tax-exempt bonds is being comfortable with reporting to and compliance with the IRS.
Municipalities have sold $125.88 billion of direct-pay bonds under the BAB and RZEDB programs, according to Bloomberg LP.
Under the Hiring Incentives to Restore Employment Act, certain types of tax-credit bonds are now also eligible for a direct-pay option.
