WASHINGTON — A large local school district that cannot issue the qualified school construction bonds the Internal Revenue Service allocated to it will lose the allocation unless it transfers it to the state, which can then carry it forward indefinitely, an IRS attorney said last week.

The remark was made by ­Aviva Roth, an attorney in the IRS’ associate chief counsel’s office for the financial institutions and products division, at the National Association of Bond Lawyers’ Bond Attorney’s Workshop meeting in Phoenix. The comment led some market participants to wonder if ­Congress intended to deprive school districts of the ability to carry forward their QSCB allocations, or if the law contains a glitch that needs to be corrected in follow-up legislation.

“I would be surprised if Congress intended to prevent the large [school districts] from carrying forward their allocations,” said Linda Schakel, an attorney with Ballard Spahr LLP. “This is the first statute that gave them their own allocation without having to go to the state with their hat in hand.”

Roth told those attending the NABL event that, under the American Recovery and Reinvestment Act, states can carry forward QSCB volume cap indefinitely, whereas allocations the IRS made directly to the 100 largest local school districts will expire at the end of the year unless transferred to the state.

According to attorneys, the ARRA also permits tribal governments — which are to receive a total of $400 million in QSCB allocations from the Interior Department for their schools — to carry forward those allocations if they remain unused at the end of the year, but is silent on whether local school districts have that ability.

As a result, local school districts stand to lose their $4.4 billion share of the $11 billion 2009 tranche if they do not issue the bonds by the end of the calendar year, unless they give the allocations off to the states. The states were allocated the remaining $6.6 billion of the tranche.

If the problem is a glitch in the law, lawmakers could fix it in legislation expected to be introduced later this year to make a number of technical corrections to stimulus act.

Spokespersons for the House Ways and Means and Senate Finance committees, which will be drafting technical corrections legislation, could not be reached for comment.

In February, $22 billion of QSCBs were authorized as part of ARRA to allow states and localities to finance the construction, rehabilitation, or repair of public schools, as well as to purchase equipment for those schools or acquire land for school construction. In April, the Treasury Department allocated the first $11 billion tranche to the states and the 100 largest school districts in the country, with the second tranche to be allocated in the future by the IRS.

The ARRA requires the Treasury to allocate 40% of the $22 billion authorization directly to the 100 largest school districts, with the remaining 60% going to the states, which then sub-allocate that bond authority to localities.

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