LAS VEGAS Andrew Kintzinger, a partner with Preston, Gates & Ellis in Seattle, said after the National Association of Bond Lawyers panel session that the following is one example of draft disclosure language that bond counsel could attach to bond opinions in the face of the dilemma created by Circular 230.
That draft states, in part, Bond counsel expects to deliver an opinion that contains the same overall conclusion regarding the exclusion of interest on the bonds from gross income for federal income tax purposes, but which differs from the form set forth in the appendix to the preliminary official statement.
The draft disclosure language also states that if the changes to 230 are adopted, bond counsel expects to add to its tax opinion the following: The opinion set forth herein with respect to federal income tax may not be sufficient for an owner of the bonds to use for the purpose of avoiding penalties relating to a substantial understatement of income tax under section 6662(d) of the Internal Revenue Code of 1986. Owners of the bonds should seek advice based on their individual circumstances with respect to any material federal tax issue relating to the bonds from their own tax advisers.
The federal tax opinion represents bond counsels best judgment, based on the matters referred to herein, that there is no federal tax issue for which the Internal Revenue Service has a reasonable basis for a successful challenge and the resolution of which could have a significant adverse impact on the opinion regarding federal tax treatment of interest on the bonds.
The draft language also said, There can be no assurance that final regulations will be promulgated with provisions that are similar to those included in the proposed regulations. Bond counsel expects that its opinion will be delivered to conform with the requirements of the final regulations if applicable to the bonds.
