CHICAGO - Treasury Department and Internal Revenue Service officials said Friday that they plan to quickly finalize recently proposed regulations on the public approval requirements for private-activity bonds, so that issuers can take advantage of the new rules.
John J. Cross 3d, tax legislative counsel for the Treasury office of tax policy, said on a panel that in order to allow issuers to use the new rules, which would update, streamline, and simplify the current 25-year old rules, the department will try to finalize them as soon as possible.
Cross said that "in a perfect world," the proposed regulations would have included a provision allowing for issuers to opt to use them before they were finalized instead of the rules that are currently in place. However, since that provision was not included, the "more likely scenario is to try and finalize them quickly," he told lawyers at the National Association of Bond Lawyers' annual Bond Attorneys' Workshop here.
Mark Norell, an attorney with Sidley Austin LLP in New York, suggested that the Treasury adopt temporary regulations, which would expire a few years later, thereby giving attorneys the opportunity to "live with [the new rules], and see where the technical difficulties are."
James Polfer, chief of the tax-exempt bond branch in the associate chief counsel's office, said while that idea would work in a "theoretical vacuum," the difficulties that come with issuing temporary regulations versus proposed ones would make that tough to implement.
Apart from the effective date, another area of the regulations that needs attention or "fleshing out" pertains to one of the safe harbors for issuers under the proposed rules. The regulations state that after the bonds are issued, if the cost of the project changes by less than 5%, then the change is considered "insubstantial" and the issuer will not have to seek public approval for the bond financing again.
Polfer said they have received a "myriad of questions" on this provision, such as whether facilities that were not included in the original publicly approved could be financed, so long as the costs do not exceed the 5% threshold.
"This is an area where we need to spend some time," he said.
Cross added that this particular provision is a "great candidate" for public comments, which are due by Dec. 8 of this year.