The Internal Revenue Service is likely to extend its COVID-19 related relief allowing TEFRA hearings to be held over the phone even beyond its recently extended March 31, 2022 deadline, tax lawyers say.
Under the 1982 Tax Equity and Fiscal Responsibility Act (TEFRA), a public notice and hearing are required for the issuance of most types of private activity bonds. Citing the pandemic, the IRS moved in May 2020 to provide temporary relief to issuers of PABs by allowing TEFRA hearings to be held via telephone. That was subsequently extended a few weeks ago to March 31, 2022.
But given most IRS employees are still not back in the office due to COVID-19 concerns, this is likely to be moved to a further date, or even, indefinitely.
“I suspect the pandemic is not going to be completely resolved [by March 31] and the IRS has been very good about revisiting these deadlines,” Carol Lew, a shareholder at Stradling Yocca Carlson & Rauth and a former National Association of Bond Lawyers president said. “They haven't fully opened up all the IRS offices so they completely understand that there's not going to necessarily be public meetings yet.”
The IRS extension to hold telephone hearings until March 31, just like its initial guidance allowing such remote meetings in the first place, follows NABL’s recommendations on the matter, and has been an unexpected success.
“Not only is the extension still needed because we have all these variants and we're all still in varying degrees of lockdown but I think it's actually working well,” Richard Moore, tax partner at Orrick, Herrington & Sutcliffe and another former president of NABL said.
“It feels like more people participate with these new options than when the only way to participate was in person,” he added. “It's just a lot more of an ask for people to physically attend something than just dial in.”
Moving the date past the slated March 31 deadline could be a quick fix, depending on the state of the public health crisis, lawyers say. But making it so municipal bond issuers can always hold TEFRA hearings virtually would require a lot more.
Many states and localities require public hearings by law in order to give the public a chance to respond. Changing those laws to fit a uniform IRS policy would be difficult.
“I don't know if something like this could be made permanent in all situations under state law,” Lew said. “We have 50 states, and local jurisdictions and they each may have their own unique requirements but one has to accommodate reality.”
NABL and other related groups, while they may offer guidance for further extensions in the future, are also focused on many other issues, including continued improvements to the guidance regarding transitioning from LIBOR to new indexes without giving rise to a reissuance, Moore said. Other TEFRA related suggestions may come as the March 31 deadline gets closer.
“A decision has been made not to muddle the waters with the temporary relief we have to have, with requests for a long term change to the rules,” Moore said.
“We're all observing how well TEFRA is working within this program and at some point, there will be suggestions made to the effect that maybe this should be a permanent change in law.”
